---
title: "Covered Call — options strategy"
type: "options-strategy"
topic: "Options strategies (Indian markets)"
category: "Income"
outlook: "Neutral / range-bound"
complexity: "basic"
risk: "defined"
slug: "covered-call"
url: "https://learn-derivatives.tapetide.com/strategies/covered-call"
markdown_url: "https://learn-derivatives.tapetide.com/strategies/covered-call.md"
source: "DeltaDesk by Tapetide"
---

# Covered Call

> **In plain English:** You own the stock and rent it out. You sell someone the right to buy it from you at a higher price, pocketing a small fee now. If it stays flat or rises gently, you keep the fee. If it rockets past the price, you miss the extra upside.

**Category:** Income · **Market view:** Neutral / range-bound · **Complexity:** basic · **Risk:** Defined

## Structure

- Buy underlying (futures)
- Sell ATM+2 strikes call

## Summary

Hold the underlying (or futures) and sell an OTM call against it to earn premium income.

## When to use it

You own the stock/future, expect mild upside or sideways movement, and want to harvest premium. Best when IV is elevated.

## Profit & loss

- **Max profit:** Capped at (short strike − entry) + premium received. You give up the upside above the short strike.
- **Max loss:** Substantial — the underlying can fall; the premium only cushions a little.

## Net Greeks profile

Positive delta (long underlying), negative vega and positive theta from the short call.

## Margin

Margin-intensive (you sell options).

## Common mistakes

- Selling a call too close to spot and capping all your upside.
- Forgetting that the downside risk of the long underlying is still large.
- Selling calls when IV is very low (premium not worth the capped upside).

## India example

Long RELIANCE futures + sell the 2-strikes-OTM monthly call when IV rank is high.

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**Build it live in the [DeltaDesk Strategy Lab](https://learn-derivatives.tapetide.com/tools/strategy-lab)** — tune strikes and see payoff + net Greeks update instantly.

*Educational content only — nothing here is investment advice. Derivatives carry significant risk of loss. Tapetide is not a SEBI-registered research analyst or investment adviser.*