Covered Calls Explained

Review covered-call stock risk, strike selection, capped upside and assignment before selling a call.

Covered Calls Explained is a 4-page PDF field guide. Stock risk, strike selection, assignment and capped upside.

• Own the downside: The option premium only offsets a small part of the stock's downside; the position remains primarily long stock.

• Choose the obligation: A short call can require sale at the strike. Select a price and date you can honor without regret.

• Measure the tradeoff: Premium received is visible; capped upside, taxes, dividends and early assignment can be less obvious.

• Plan every exit: Compare closing, rolling, assignment and expiration using the same net-position math.

Action checklist: Confirm 100 shares per standard contract; Write the maximum acceptable sale price; Check earnings and ex-dividend dates; Compare bid/ask spread with expected credit; Define roll rules before expiration week; Record stock and option results together.

Educational only. Options involve risk and are not suitable for every investor.