What is Covered Call Strategy?
A covered call is selling a call option against shares you already own, generating premium income in exchange for capping your upside above the strike price. The most common income-oriented options strategy in US markets.
Formula
How to Interpret
Best in flat or modestly rising markets. Each call sold equals 100 shares of underlying. Popular in US retirement accounts for income generation. ETFs like JEPI, QYLD, and XYLD industrialize this strategy at scale. Major risk: shares get 'called away' at the strike price, missing further upside in a strong rally, and you still bear all the downside if the stock drops.
Typical Ranges
Sell 30–45 day, ~0.30 Delta calls (about 2–4% out-of-the-money) for the best premium-to-risk balance. Annualized yields of 8–15% are realistic in normal markets.