Covered Call
5paisa Research Team
Last Updated: 07 Apr, 2025 03:05 PM IST

Content
- What Is A Covered Call?
- Understanding Covered Calls
- What Is The Objective Of Covered Call Strategy?
- Features of the Covered Call Strategy
- Benefits Offered By Covered Call Strategy
- How Does The Strategy of Covered Call Work?
- Covered Call Strategy: Maximum Profit and Maximum Loss
- Advantages and Disadvantages Offered By Covered Calls
- When To Use The Strategy Of Covered Call Option?
- Example of a Covered Call
- How To Make Use Of LEAPS In A Covered Call Write?
- Do Covered Calls Offer Investors With A Profitable Strategy?
- How Much Risk Is Associated With Covered Calls?
- Can One Make Use Of Covered Calls In Their IRA?
- Is There Anything Known As A Covered Put?
- Conclusion
The covered call strategy allows investors to generate income from their existing stock holdings, offering downside protection. The strategy is used both by institutional as well as retail traders and is considered to be a conservative strategy.
This article will focus on covered call meaning, strategies, features, advantages, and disadvantages. So if you are looking for detailed information on the covered call strategy, you have come to the right place. All you need to do is hold your patience and read till the end.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.
Frequently Asked Questions
Selling the underlying stock before the covered call expires can be risky, as it exposes the investor to potential losses if there is a decline in the stock price.
The risk involved in a covered call is that upside potential is limited even if the price of the stock rises.
The significant benefit of a covered call is that it offers the investor some additional income in the form of the premium received.