A strategy where a trader holding shares sells a call option against them to generate additional income.
A covered call involves selling a call option against a stock position that the trader already owns, in a quantity that matches the option’s lot size. It generates additional income from the premium collected but caps the upside if the stock rises sharply past the strike, since the shares may be called away at that price. It is a popular income strategy for traders who are moderately bullish or neutral on a stock they already hold long-term.
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