What Is a “Covered Call” and How Is It Used for Hedging?

A covered call is an options strategy where an investor who owns the underlying asset (e.g. Bitcoin) sells a call option against it.

The ownership of the asset "covers" the obligation to sell if the call is exercised. It is used as a mild hedge to generate income (the premium received) and slightly reduce the cost basis of the underlying asset.

The trade-off is that the potential upside profit is capped at the call's strike price.