Covered Call

A covered call is a strategy where you own shares of a stock and simultaneously sell the right for someone else to buy those shares from you at a set price by a certain date. You're essentially agreeing to sell your stock if the buyer wants it—in exchange, they pay you upfront for that option. You'll encounter this when income-focused investors want to generate extra cash from stocks they already hold. It matters because it can boost returns in sideways or slowly rising markets, though it caps your upside if the stock soars. For example, if you own 100 shares of TechCorp trading at $50, you might sell the right to buy them at $55 next month, pocketing a premium immediately. The tradeoff: if TechCorp jumps to $70, your shares get called away at $55.