Covered Call

A covered call is an options strategy where a call contract is sold (or written) against long stock with the same number of shares represented in the contract.  For example, if you own 100 shares of a stock, you could sell one call contract (which represents 100 shares) against the stock.

If the stock price goes above the call strike price, the stock would be ‘called’ away from the owner at the strike price, regardless of the increase in the stock price above the strike price.

Covered calls are generally used to create periodic (monthly) income for the owner of a stock.