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Covered Call
A covered call combines ownership of the underlying asset with a short call against that position. A common equity implementation is: Own 100 shares Sell 1 call where the contract multiplier corresponds to 100 shares.
Why it matters to you
A covered call generates option premium while retaining underlying ownership, but it gives up some upside beyond the call strike because the short call creates an obligation. Risk profile The premium provides only limited downside offset. The trader still carries substantial downside risk from owning the underlying. This is important: Covered does not mean risk free.
Terms that sit next to this one
Short Call, Option Premium