The Covered Call: Simple Income from Stocks
Dec 31, 2025One of the first options strategies many investors learn is the covered call — and for good reason. It’s a simple way to earn extra income from stocks you already own.
Here’s how it works:
You buy or already own 100 shares of a stock. Then, you sell a call option with a strike price above the current stock price. In return, you collect a premium — and keep it no matter what happens.
If the stock stays below the strike price, you keep your shares and the premium. If the stock rises above the strike, your shares get called away — meaning you sell them at the strike price.
The biggest benefit? Steady income.
The biggest downside? You limit your upside if the stock takes off.
Still, for many investors, the covered call is a great place to start.