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A covered call is an options trading strategy where an investor holds a long position in an asset (such as stocks) and sells call options on that same asset. The call options sold are "covered" by the underlying asset held in the investor's portfolio.

Here's how the covered call strategy works:

1. Buy the underlying asset: The investor buys shares of a particular stock.

2. Sell call options: The investor then sells call options on those shares. Each call option represents the right to buy a certain number of shares at a specified price (known as the strike price) within a certain time frame (until expiration).

3. Receive premium: In exchange for selling the call options, the investor receives a premium, which is the price paid by the buyer of the call option.
Obligation to sell: By selling the call options, the investor is obligated to sell the underlying asset at the strike price if the buyer of the call option chooses to exercise their right before the option expires.
The goal of the covered call strategy is to generate income from the premiums received by selling the call options, while still benefiting from any potential increase in the price of the underlying asset up to the strike price of the options. If the price of the underlying asset remains below the strike price until expiration, the options will typically expire worthless, and the investor can keep the premium received as profit. If the price of the underlying asset rises above the strike price, the investor may be required to sell the asset at the strike price, potentially missing out on further gains but still profiting from the premium received.

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