covered call writing

An investing strategy using options. A call option provides the owner with the right, but not the obligation, to purchase a firm's shares at a fixed price known as the strike, or exercise, price. The writer, or creator, of the option has the obligation to deliver the stock at this price if the purchaser exercises the option. The option writer earns a premium for selling the option to the purchaser and, if the option is exercised, also receives the strike price in return for delivering the stock. The option premium is a function of the current stock price, the strike price, interest rates, time to expiration and the stock's implied, or expected future, volatility. A covered call strategy involves writing a call option against shares already owned.