Covered Call: The Investor's Strategy
Generating monthly rental income from your long-term stock portfolio.
How it works
Pre-requisite: You must own the stock (e.g., 1 Lot of Reliance shares).
- You hold Reliance shares (bullish long term).
- You think Reliance won't cross ₹3,000 this month.
- You Sell the 3,000 CE for ₹50.
Outcome
- Reliance stays flat: You keep the ₹50 premium (Income). share price same.
- Reliance falls: The ₹50 premium buffers your loss.
- Reliance rockets up: You have to sell your shares at ₹3,000. You miss the rally above 3,000 but keep the profit up to 3000 + premium.
AlgoStraddle Insight: This is the safest option strategy in existence because it is fully backed by assets.
*Disclaimer: NSE/BSE frequently revise Lot Sizes and Expiry Days (e.g., SEBI Circulars 2024/2025). Always check the latest circular on nseindia.com before trading.
Standard Disclosure: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The content provided here is for educational purposes only and does not constitute financial or investment advice. AlgoStraddle Academy is not a SEBI registered investment advisor. Trading options involves high risk and capital can be lost.