---
name: skill-covered-calls
description: Short call against shares already held. Use for strike and expiry selection, rolls, or assignment-aware income on stock that is already owned.
skill_family: options-strategy
last_updated: 2026-09-30
---

# Covered calls

## When to use

- Shares of a liquid underlying are already held.
- The goal is call premium with upside capped at the short strike.

## Setup

- Covered means one short call per 100 shares already owned. No share inventory, no covered call.
- Typical illustration: out-of-the-money calls about 3–10% above spot, weekly or bi-weekly expiry.
- State spot, strike distance, expiry, and contracts before premium.

## Rules of thumb

- Do not suggest a naked call.
- State the assignment path and the roll or close criteria before expiry.
- State the downside if the shares fall: premium collected does not remove share risk.
- Breakeven on the shares moves down by the premium received, and upside above the strike is given up.

## Pitfalls

- Selling through an event or a level the holder wanted to keep.
- Early assignment into a rally, then no shares left for the move.
- Calling the position covered when the share count is short of 100 per contract.

## Disclaimer

Options involve risks and are not suitable for everyone. Read *Characteristics and Risks of Standardized Options* at OptionsEducation.org, or from your broker or the Options Clearing Corporation, before using this structure. Examples omit commissions, fees, margin, interest, and taxes. This is a structured playbook for education. It is not a signal, a recommendation, a solicitation, or a broker order.