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Covered Call- from investopedia:
For example, let's say that you own shares of the TSJ Sports Conglomerate and like its long-term prospects as well as its share price but feel in the shorter term the stock will likely trade relatively flat, perhaps within a few dollars of its current price of, say, $25. If you sell a call option on TSJ for $26.00, you earn the premium from the option sale but cap your upside. One of three scenarios is going to play out:

a) TSJ shares trade flat (below the $26 strike price) - the option will expire worthless and you keep the premium from the option. In this case, by using the buy-write strategy you have successfully outperformed the stock.

b) TSJ shares fall - the option expires worthless, you keep the premium, and again you outperform the stock.

c) TSJ shares rise above $26 - the option is exercised, and your upside is capped at $26, plus the option premium. In this case, if the stock price goes higher than $26, plus the premium, your buy-write strategy has underperformed the TSJ shares.


Let me see if I've got this right, again with our $20 stock. I put out a covered call for $25- if the stock gets to $25 I was "called" and my shares sell for $25/share. If it doesn't get to $25, I get to keep some sort of "premium?" So I get money for selling a covered call? What prevents me from selling a covered call of $30, or $100? The fact that there won't be a buyer?

It seems that if you're patient and don't need to sell right away, a covered call is a good idea since you'll make money if the stock doesn't go up and you make money if the stock goes up... Again- this is assuming I've interpreted all of this correctly...
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