The Covered Call



Do you think the only way to make money on a stock you own is by price appreciation or dividends? If so, you would be wrong. Covered call writing can allow you to generate income from stocks you hold in your portfolio by selling someone the right to purchase your stock at a certain price. Let me explain.


Description:

A call is written against a long position in a security on a one-to-one basis and is for a defined period defined by the expiration date. Maximum gain is limited to the premium received, plus the increase in the security price up to the call's strike price. Maximum loss is substantial (premium received less the strike price).


Why use this strategy: