What Is a Write-Covered Call? How It Works

When you write a covered call, you sell someone the right to buy your shares at a specified price, called the strike price, by the option’s expiration date; in return, you receive a payment called a premium. The call is “covered” because you own the shares you may have to deliver, typically 100 shares for one standard equity options contract.

If the option is exercised, you must sell the covered shares at the strike price, even if the market price has climbed higher. If the option expires without being exercised, you generally keep the shares and the premium, though the shares may have gained or lost value while you held them.

You might consider a covered call if you already own shares, would be comfortable selling them at a chosen price, and want to receive a premium for taking on that obligation. Before placing a trade, you should understand the contract’s expiration date, strike price, premium, and your brokerage’s options requirements, as well as any tax consequences relevant to you.

In options trading, “writing a call” means selling an options contract; in marketing, writing a call to action means asking your audience to take a next step. Our How to Write a Call-to-Action That Actually Works guide addresses the marketing meaning, so our team would not use it as a guide to trading covered calls.