Covered Call
Sell a call against stock you already own to earn extra premium income.
Definition
A covered call is an income strategy in which you hold the underlying stock (or one lot of it) and sell a call option against it. The call is “covered” because if it is exercised, you can deliver the shares you already own rather than buying them in the market. You collect the premium upfront in exchange for agreeing to sell your shares at the strike if the price rises above it.
Why it matters
It is one of the most common ways to generate steady income from a holding you intend to keep. The premium lowers your effective cost and provides a small downside cushion. The trade-off is a capped upside: if the stock rallies past the strike, your gains stop there because the shares get called away. It works best when you are neutral to mildly bullish and expect the stock to drift sideways.
Example
You own 1,000 shares of a stock trading at 500 and sell the 540 call for a premium of 12. If the stock stays below 540, you keep the 12 premium and your shares. If it closes above 540, your shares are sold at 540, so your total gain is the 40 of appreciation plus the 12 premium per share.
See it live
Use the TradePulse option chain to scan live call premiums and pick the strike for your covered call.