A covered call = owning 100 shares of stock + selling 1 call option against those shares.

You collect the option premium upfront. In exchange, you cap your upside at the strike price until expiration.

Real example: - You own 100 shares of AAPL at $185/share ($18,500 position) - You sell the $190 call expiring in 30 days for $2.50/share collect $250 premium - If AAPL stays below $190: option expires worthless, you keep $250. Do it again next month. - If AAPL rises above $190: your shares are called away at $190. You gain ($190 $185) × 100 + $250 premium = $750 total profit. You miss any gains above $190. - If AAPL drops: premium cushions the loss by $250, but you still face the full downside of the stock.

Covered calls generate steady income on stagnant or slowly rising stocks.