Covered calls are an options strategy in which an investor who owns a stock (the underlying security) sells (or “writes”) a call option against it. The call option gives the buyer the right, but not the obligation, to buy the underlying security at a specified price (the strike price) on or before a specified date (the expiration date).
Covered calls can be a good way to generate income from a stock portfolio, as the investor receives a premium from the sale of the call option. However, it is important to remember that covered calls are also a form of leverage, and the investor could lose more money than they originally invested if the stock price falls below the strike price.