• Covered Call   Covered Call

    A covered call is a short call position combined with a long position in the underlying stock. The risk from the short call is "covered" by ownership of the underlying shares.

    A covered call takes advantage of stock already in a portfolio - it never makes sense to buy stock just so you can sell covered calls against it - as well as the fact that in selling the call the trader immediately receives cash in the form of option premium from the call option purchaser.

    See the OptionMath.com Covered Call Cheat Sheet