A covered call sells a call against 100 shares you own to collect premium income. It caps upside at the strike in exchange for a cushion and steady yield — a favorite of income investors.
Open the Covered Call calculator →Sell a covered call when you own at least 100 shares, expect the stock to stay flat or rise only modestly, and are willing to sell at the strike. The premium gives you income and a small downside cushion.
Strike selection sets the trade-off: a closer (lower) strike collects more premium but caps your upside sooner, while a further (higher) strike collects less but leaves more room to run.
The covered call does not protect against a large decline — you still own the shares, just with a small premium cushion. The other cost is opportunity: in a sharp rally your shares are called away at the strike and you miss the rest.
If the stock approaches your strike and you want to keep the shares, you can roll the call up and out for more time; if you are happy to sell, simply let it be assigned.
Use the free OptionProfit Covered Call calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.
Your shares are assigned (sold) at the strike. You keep the premium and the gain up to the strike, but miss any further upside.
It is one of the more conservative options trades, but your downside is still essentially owning the stock minus the small premium cushion.
They are equivalent at the same strike. Sell a covered call if you already own the shares; sell a cash-secured put if you want to buy in lower.
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