Covered Calls Explained — A Smart Way to Earn Income with Stocks You Already Own

Imagine collecting extra money just for agreeing to sell your stock at a higher price. That’s exactly what a covered call allows you to do.

A covered call is when you own 100 shares of a stock and you sell a call option on that same stock.

You collect a premium — upfront cash — and in return, you agree to sell the shares at the strike price if the option gets exercised.
Let’s walk through an example.

🔍 Example:

You own 100 shares of Apple at $180.
You sell a call option with a strike price of $190 for $2.00.

• You collect $200 right away 
• If Apple stays below $190 → the option expires worthless → you keep your shares + premium
• If Apple rises above $190 → you sell your shares at $190 → you still keep the premium → total gain = sale profit + option income

✅ Why Covered Calls Make Sense

• You want to generate income on stocks you already hold
• You’re okay selling the stock at a certain price
• You want to reduce risk slightly by collecting income to offset market drops
• You want to learn options with less complexity

⚠️ But There Are Limits

• If the stock goes much higher than your strike price, you miss out on those gains
• If the stock crashes, you still lose — just a little less than without the call
• You need to own 100 shares to sell 1 covered call

This is a great strategy for calm investors — especially if you’re looking for a smart, simple way to start with options.

And now, you can learn it all — in Yiddish.