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Covered Call
Options
A covered call means selling one call option for every 100 shares you own.
You collect the premium as extra income; in exchange, if the stock rises above the strike, you give up the gains beyond that point because the shares can be called away at the strike. The downside risk largely remains, softened only by the premium received.
Example
With the stock at $100, you sell a $110 strike call for a $2 premium. If the stock is at $120 at expiration, your shares go at $110, and your total gain is capped at $12 per share ($10 of price gain plus the $2 premium).
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