Buying — Covered Calls

A is a strategy where you sell the right to buy stock you already own to someone else in exchange for an immediate cash payment called a premium . It is "covered" because if the buyer exercises their right, you already have the shares to deliver. 1. How the Strategy Works

You can either sell calls against stock you already own or execute a (buying stock and selling the call simultaneously). Covered Calls Strategy: Generate Income and Manage Risk buying covered calls

: You generate instant income (the premium), but you cap your potential profit if the stock price skyrockets above the strike price. A is a strategy where you sell the

To execute this, you must own at least of the underlying stock for every 1 call option contract you sell. How the Strategy Works You can either sell

: You use this when you expect the stock to stay flat or rise only slightly.

: The Option Premium is yours to keep regardless of whether the stock is "called away" or the option expires worthless. 2. Steps to Buy (Set Up) a Covered Call