Covered Call

A covered call is a strategy where you own shares of a stock and sell someone else the right to buy those shares from you at a set price by a certain date. You keep any dividends and stock price gains up to that set price, but you give up profits if the stock soars higher. In return, you pocket a small upfront payment from the buyer. You'll encounter this when income-focused investors want to squeeze extra returns from stocks they already hold. For example, if you own 100 shares of TechCorp trading at $50, you might sell the right to buy them at $55 next month, pocketing $200 in premium income. It's called "covered" because you own the underlying shares, so you can actually deliver them if the buyer exercises their right.