How Does a “Covered Call” Strategy Work?

A Covered Call is an options strategy where an investor holds a long position in an asset (e.g. 100 shares of stock) and simultaneously sells (writes) a Call Option on that same asset.

The call is "covered" because the investor already owns the underlying asset, limiting the risk. The goal is to generate income from the option premium, but it caps the potential profit if the asset price rises sharply.