What is covered call? Back to list

Member SinceMar 07, 2022

Posts 263

Agaricy96

Oct 31, 2022 a 15:23
A covered call occurs when a trader sells (or writes) call options on an asset in which they have a long position. They are also referred to as buy-writes.

Selling a covered call allows you to profit from an asset you already own, but only if the asset's price does not exceed the strike price of the option you sold before it expires. In this case, the option will be worthless, and you will profit from the premium.

If the asset's price rises above the strike price, your profits are limited to the difference between the strike price and the purchase price. At this point, you can buy an option with the same strike price and expiration date to offset the amount of potential profit you've lost.

An uncovered call is the sale of an option on an asset that you do not own.

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