Covered Call
A covered call strategy involves owning an asset and selling call options against it. You collect premium in exchange for limiting your upside if the asset rises above the strike price.
Understanding the Concept
Covered calls generate income from stocks or crypto you already hold. If price stays flat or rises slightly, you keep the premium and your shares—pure profit. If price moons above your strike, shares get "called away" and you miss gains above that level. If price crashes, you still own the falling asset (but kept the premium as a small cushion). It's conservative income generation, popular among long-term holders who want yield. Works best in flat or slowly rising markets. In volatile crypto, premiums are high but so is the risk of getting called.
Real-World Example
You own 100 shares of Tesla at $200. You sell a $230 call expiring in 30 days for $5. If Tesla stays under $230, you keep shares plus $500 premium. If Tesla hits $250, you sell at $230 (miss $20 upside) but still made $30 profit plus $5 premium.
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