Covered call — income from shares you already own

Sell a call against 100 shares you hold to collect premium. The premium cushions small drops, but upside is capped at the strike if the stock rallies.

A covered call is a strategy where you sell a call against 100 shares you already own. The shares “cover” the call — hence the name. It’s the most basic way to generate extra income (premium) from a stock you hold.

Walk through how selling the call changes your payoff.

What you get and what you give up

• ·You get: the premium, immediately. A small drop in the stock is cushioned by it, so your break-even sits below your cost.
• ·You give up: upside above the call strike. If the stock rallies past it, the shares are “called away” at the strike and your gain is capped.

When to use it

• ·When you expect the stock to trade sideways or rise mildly.
• ·When you want some downside cushion plus steady premium income.
• ·Not ideal if you expect a strong rally — capping the upside works against you.

In NOSKA

NOSKA backtests combinations of call strike, expiry, and entry conditions, comparing which covered call produced better risk-adjusted returns than simply holding the shares.