Covered Call
A covered call is an options strategy that involves both the purchase of a stock and the sale of a call option on the same stock. The call option is sold at a strike price that is higher than the current market price of the stock. The strategy is used to generate income from the sale of the call option, while also providing some downside protection in the event that the stock price falls. The investor will keep the premium received from the sale of the call option, regardless of whether the stock price rises or falls.
History of Covered Call
The covered call strategy has been around for many years, but it has become increasingly popular in recent years as investors look for ways to generate income from their portfolios. The strategy is often used by investors who are looking to generate income from their portfolios without taking on too much risk. It is also used by investors who are looking to protect their portfolios from downside risk.
Comparison Table
| Strategy | Risk | Return |
|---|---|---|
| Covered Call | Low | Moderate |
| Uncovered Call | High | High |
Summary
The covered call strategy is a popular options strategy that is used by investors to generate income from their portfolios while also providing some downside protection. The strategy involves the purchase of a stock and the sale of a call option on the same stock. The investor will keep the premium received from the sale of the call option, regardless of whether the stock price rises or falls. For more information about this strategy, investors can visit websites such as Investopedia, The Options Industry Council, and The Motley Fool.
See Also
- Uncovered Call
- Protective Put
- Bull Call Spread
- Bear Put Spread
- Long Straddle
- Short Straddle
- Long Strangle
- Short Strangle
- Long Call Butterfly
- Short Call Butterfly
