How do you write a covered call ?

If a covered call is assigned, then the stock must be sold. For a covered call writer, the total dollar amount received is the sum of the strike price plus the option premium less commissions. In the example above, in which the 40 call is sold for $0.90 per share, not including commissions, the effective selling price is $40.90.

How do you execute a covered call?

To execute a covered call, an investor holding a long position in an asset then writes (sells) call options on that same asset. Covered calls are often employed by those who intend to hold the underlying stock for a long time but do not expect an appreciable price increase in the near term.

What is the purpose of a covered call ?

A covered call involves a seller offering buyers a call option at a set price and expiration date on a security that the seller owns. Professional market players write covered calls to boost investment income.

What are the risks of a covered call?

The main drawbacks of a covered call strategy are the risk of losing money if the stock plummets (in which case the investor would have been better off selling the stock outright rather than using a covered call strategy) and the opportunity cost of having the stock "called" away and forgoing any significant future gains in it.