Short options
What is a Covered Call (Buy-Write) strategy and how does it generate consistent portfolio yield?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A covered call involves owning at least 100 shares of stock and selling a call option against them to collect premium income, generating cash flow while slightly capping the stock's upside potential above the strike price.
How it works
It is considered a conservative income strategy because the stock position partially offsets assignment risk, though the investor still bears full downside risk of owning shares minus the premium collected.
An example
An investor holding 100 shares at $50 might sell a $55 call for $1.50, collecting $150 in premium while agreeing to sell shares at $55 if assigned before expiration.
Risk & limitations
OIC materials note covered calls do not protect against significant stock declines and can require selling shares below their current market value if the stock rallies sharply.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.