GLOSSARY · INVESTING
Covered call
Selling a call option on shares you own: you collect the premium now and agree to sell the shares at the strike price if the buyer exercises. It adds steady income and a small cushion against falls, but gives up any gain above the strike. Combined with a protective put on the same shares, it forms a collar.
Also called: buy-write, call writing
FORMULA
Most gain per share = (strike price − purchase price) + premium received
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · ADVANCED INVESTMENT STRATEGIES · DEEP DIVEOptions as Protection: Puts, Covered Calls and CollarsRELATED TERMS
SOURCES
- Characteristics and Risks of Standardized Options. The Options Clearing Corporation.