A covered call is an options strategy in which an investor holds a long position in an asset and writes (sells) call options on that same asset in order to generate income. This strategy is used to generate income from an existing asset while limiting the downside risk of the position.
A covered call is an options strategy that involves both the purchase of a stock and the sale of a call option on the same stock. The strategy is used to generate income from the stock while limiting the potential upside of the stock. The strategy is also known as a buy-write or a covered write.
The strategy involves buying a stock and then selling a call option on the same stock. The call option gives the buyer the right to buy the stock at a predetermined price, known as the strike price, before the option expires. The seller of the call option receives a premium for selling the option. The premium is the amount of money the buyer pays for the option.
The strategy is used to generate income from the stock while limiting the potential upside of the stock. The income generated from the sale of the call option offsets the cost of buying the stock. If the stock price rises above the strike price, the option will be exercised and the seller will be obligated to sell the stock at the strike price. This limits the potential upside of the stock.
The strategy can be used in a variety of market conditions. It is most commonly used when the investor expects the stock price to remain relatively flat or to decline slightly. The strategy can also be used when the investor expects the stock price to rise, but not to a level that would make the option profitable.
The strategy can be used to generate income from stocks that are held for the long-term. It can also be used to generate income from stocks that are held for a shorter period of time. The strategy can be used to generate income from stocks that are held for a variety of reasons, including income generation, capital appreciation, and hedging.
The strategy can be used to generate income from stocks that are held for the long-term. It can also be used to generate income from stocks that are held for a shorter period of time. The strategy can be used to generate income from stocks that are held for a variety of reasons, including income generation, capital appreciation, and hedging.
The strategy can be used to generate income from stocks that are held for the long-term. It can also be used to generate income from stocks that are held for a shorter period of time. The strategy can be used to generate income from stocks that are held for a variety of reasons, including income generation, capital appreciation, and hedging.
The strategy can be used to generate income from stocks that are held for the long-term. It can also be used to generate income from stocks that are held for a shorter period of time. The strategy can be used to generate income from stocks that are held for a variety of reasons, including income generation, capital appreciation, and hedging.
In summary, a covered call is an options strategy that involves both the purchase of a stock and the sale of a call option on the same stock. The strategy is used to generate income from the stock while limiting the potential upside of the stock. The strategy can be used in a variety of market conditions and for a variety of reasons, including income generation, capital appreciation, and hedging.