The covered call
1In one sentence
You own 100 shares and sell a call on them. You get paid now, and in return you agree to sell your shares at the strike if the stock rises above it.
It's a way to earn income on shares you already own. The trade-off: your upside stops at the strike.
2Try it: drag the dot
Example: you own 100 NVDA shares bought at $215. You sell the $230 call for $4 a share and collect $400.
33 words to know
Covered100 shares
You already own the shares, so if the call is exercised you hand those over. Nothing to buy.
Call you sell$230
The strike you agree to sell at. Above it, your gains stop.
Premium you collect$400
Paid to you right away. You keep it whatever happens.
4Watch out
- Your upside is capped. If NVDA jumps to $280, you still sell at $230 and miss the rest of the rise.
- You still own the stock risk. The $400 only softens a drop a little. If the stock falls a lot, the shares lose a lot.
- Your shares can be called away. If the stock is above the strike at expiration, expect to sell the shares at the strike.
5Quick check · 3 questions · optional
Now try it for real
See what the Co-Pilot says today about NVDA, TSLA and 8 more stocks, then drag the dot on a real price.
Common questions
What is a covered call?
A covered call is owning 100 shares of a stock and selling a call option on them. You collect the premium right away and agree to sell your shares at the strike if the stock rises above it by expiration.
What is the most you can make on a covered call?
The rise in the stock up to the strike, plus the premium. Above the strike, gains stop because you're obligated to sell at the strike.
What is the risk of a covered call?
The same as owning the stock, softened slightly by the premium. If the stock falls sharply, the shares lose value.
Education only. Examples use illustrative numbers. Not financial advice; you make your own decisions.