Covered Call

A Covered Call ( German " covered call option " ) is an option strategy that involves combining securities with options. Occasionally buy-write strategy is used for this variant the name.

In a covered call acquires (buy ) you a baseline and sold ( write) at the same time a call option on these. Thus the open position in the call is "covered" by the Underlying. The yield of the strategy comes solely from the sale of the option. But the underlying at the exercise date is not below the strike price of the call option minus its value at the time of the sale fall ( break-even price ). For this reason, Covered Calls is formed rather then, when one of an approximately unchanged price goes to the end of the term, ie only slightly rising or falling price of the underlying.

The covered call has an asymmetric payoff profile: profits are basically limited to the exercise price of the call, whereas losses in the underlying asset, from the break-even price, the full amount will be supported.

A more conservative strategy to limit the risks of the underlying, the protective put.

Certificates that implement a covered call strategy, hot discount certificate in the banking environment.