Covered Call
Owning the underlying asset and selling a call option against it to generate premium income.
Covered call: long stock + short call. The investor caps upside at K + premium but reduces effective cost basis to S − premium. Maximum profit = K − S + premium (if stock rises above K). Maximum loss = S − premium (if stock falls to zero). Breakeven = S − premium. Used by investors who are neutral to mildly bullish and want yield enhancement. The short call is 'covered' because the stock can be delivered if assigned. CFA notes the payoff is equivalent to a short put (same shape by put-call parity).