Covered Call Strategy

A Covered Call involves owning the underlying stock and selling (writing) a call option against those same shares. You are "covered" because you already own the shares needed to fulfill your obligation if the option is exercised.

• Step 1: You hold at least 100 shares of a stock.
• Step 2: You sell a Call Option (usually OTM) against those shares.
• Step 3: You collect the premium immediately.
• The Outcome: If the stock stays below the strike price, you keep your shares and the premium. If it rises above the strike, you sell your shares at the strike price, keeping the premium as extra profit.

The Trade-Off: You limit your potential upside. If the stock rallies to the moon, your profit is capped at the strike price. In exchange, you get immediate cash flow—a trade-off investors often make in sideways or slightly bullish markets to boost annual returns.