Options strategies
Covered call
Definition
A position of at least 100 shares plus one short call per 100 shares on the same stock. The seller collects the premium and must sell the shares at the strike if assigned.
Example
Say you own 100 shares bought at $48 and sell one $52 call for $1.20, collecting $120. If you are assigned at expiration, you sell at $52 for a total gain of $520: $400 on the shares plus the premium. Even if the stock jumps to $60, $520 is your maximum, and on a drop the $120 cushions only $1.20 per share.
Hypothetical numbers, for illustration only.
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