What is a covered call? How this options income strategy works.

Covered: Covered indicates the option writer owns the underlying securities. Writers typically sell covered calls to generate income or to secure a target selling price for the stock. Covered calls risks and downsidesSelling covered calls can affect your investing flexibility, gain potential, and tax bill. Covered calls vs. cash-secured putsCovered calls are related to another type of collateralized options strategy called cash-secured puts. Selling covered calls does generate premium income, which the option writer keeps regardless of the underlying stock's performance.