Covered Call

A covered call is a financial strategy where an investor, who already holds a long position in a particular asset, sells call options on that same asset. This strategy involves selling call options to generate income, with the investor’s existing ownership of the asset “covering” the potential obligation created by selling the call options. The term “covered” indicates that the investor has the underlying asset to fulfill the obligation if the call options are exercised. Covered calls are commonly used for income generation and can provide a level of downside protection compared to selling uncovered call options.