Covered Call

A covered call is a strategy where you own shares of a stock and simultaneously sell the right (called an option) for someone else to buy those shares from you at a fixed price by a certain date. You're essentially agreeing to sell your stock at that price if the buyer wants to exercise their right. You "cover" the call because you already own the shares, so you can deliver them if needed. Investors use this to generate extra income from stocks they already hold, though it caps your upside if the stock soars. For example, you own 100 shares of TechCorp and sell someone the right to buy them at $50 per share next month—you pocket a fee upfront, but can't profit if TechCorp jumps to $75.