What is a Covered Call?

Definition of Covered Call: This can be defined as an option plan in which a shareholder has large number of valuable assets like commodity, currency and security and auctions the call strategies on that similar asset for creating extra income. The plan is perfect if the investor considers that in a short term horizon, the value of his asset will remain neutral and flat. For instance, you may be involved in a specific stable currency since a long time period. If you start selling the calls at a hit cost over the existing value, it will be regarded as extra income. Moreover, you have capped the profit potential at the strike price level. The plan can also be utilized for writing short plans. An enclosed call is also popularly known by the name of “buy-write”.