What is a Covered Call Strategy?

A “covered call” is an options strategy in which an investor:

• Owns shares of a stock 

and 

• Sells a call option on those shares. 

The investor receives the option premium as income. Now, there could be two different potential scenarios:

Note: A covered call options strategy may generate potential additional income from an existing stock holding, but it limits the potential gain from a sharp rise in the stock price.

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