Covered call
Own the underlying, sell someone the right to take it from you above a set price, and keep the premium either way.
The view: Flat to mildly up, and you are content to sell at the strike.
Construction
| Leg | Qty | Strike at 100 spot |
|---|---|---|
| Long underlying | 100 | — |
| Short call | 1 | 105 |
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- Max profit
- +617
- Max loss
- -9,883
- Breakeven
- 98.83
- Net cash
- -9,883
When it fits
You hold the asset, you would be happy selling at a particular level, and you want to be paid for the wait. Popular as an income trade, and reasonable when you genuinely mean the sell.
What goes wrong
- You keep the entire downside and cap the upside — the payoff is the opposite shape to the one people assume they are buying.
- A sharp rally means you sell at the strike and watch it keep going.
- The premium is small compensation for a large move in either direction.
Try it properly
The chart above is the real pricing model, limited to three sliders. To change strikes, add legs, switch to futures, or price it against your own volatility assumption, open it in the options P&L calculator — the link under the chart carries this exact position across.
Education, not advice. Payoffs ignore commission, bid-ask spread, assignment risk and financing.