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Covered call

Owning 100 shares and selling a call against them to collect premium.

OptionsIntermediate

Definition

The premium adds income. In exchange the seller gives up gains above the strike, because shares are called away if the price is higher at expiry. It reduces the effect of small declines but does not protect against large ones.

Watch out for

You still carry almost all the downside of owning the stock, and you cap the upside.

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