Derivatives Strategies
Covered Call
Definition
What is Covered Call?
A strategy that owns the underlying assetThe asset, rate, index, or reference on which a derivative's value is based. and sells call options against it.
Example in practice
How This Looks in Practice
An investorA person or organisation that commits capital with the expectation of a financial return. holds 1,000 shares and writes calls on those shares.
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Related Terms
Derivatives Strategies
Protective Put
A strategy that owns an asset and buys a put to limit downside.
Derivatives StrategiesCollar
A strategy combining a protective put with a written call, often to reduce hedging cost.
Derivatives StrategiesLong Straddle
Buying a call and a put with the same strike and expiration to benefit from a large move in either direction.
Option GreeksDelta
The estimated change in an option's price for a small change in the underlying price.