What is a Covered Call?

A covered call is one of the most popular options strategies for generating income from stocks you already own. It involves selling a call option against shares you hold in your portfolio.

How It Works

For every 100 shares you own, you can sell 1 call option. You collect the premium upfront, which is yours to keep regardless of what happens.

Example

You own 100 shares of XYZ at $50. You sell a $55 call expiring in 30 days for $1.50.

• Income received: $150 (premium)
• If stock stays below $55: Keep shares + $150
• If stock rises above $55: Sell shares at $55 + keep $150

Best Practices

• Choose strikes you'd be comfortable selling at
• Consider 30-45 day expirations for optimal time decay
• Avoid earnings announcements
• Monitor ex-dividend dates