Dopex-Essentials

# How Does a Covered Call Strategy Work?

## Executing a covered call strategy

1. Purchase the underlying asset.
2. Sell call options against the underlying asset that you’ve purchased.
###### With a covered calls, the worst-case scenarios are:
1. You have to sell all the “shares” that you own.
2. The “shares” you own lose all of their value minus the premium you earned.

# Key Takeaways

• To execute a covered call, an investor holding a long position in an asset then writes (sells) call options on that same asset.
• A covered call is a popular options strategy used to generate income in the form of options premiums.
• Covered calls are low-risk because you own the “shares” involved in the option.
• This strategy is ideal for an investor who believes the underlying price will not move much over the near-term.
• In the worst-case scenario, you lose out on potential gains past the strike price of the call contract.

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