A conservative income strategy where you sell a call option against shares you already own. You collect the premium upfront but cap your upside potential at the strike price. If the stock stays below the strike at expiration, you keep the premium and the shares.
Premium received + (Strike Price - Stock Price) if assigned
Stock price to $0 minus premium received (substantial)
Stock purchase price - Premium received
Long 100 shares + Short 1 ATM/OTM Call
Limited profit (premium + any stock appreciation up to strike), substantial but reduced risk (stock decline minus premium received)
When you own stock and want to generate additional income. When you're willing to sell the stock at a higher price (strike price). Best in sideways to mildly bullish markets.