Popular Terms
A trading strategy that involves buying a security and then writing a call option on it. For example, an investor buys 100 shares of stock at $20 a share and then sells call options on the shares with an exercise price of $25. If the price of the stock stays below $25 until the options mature, the investor keeps the premium and does not have to sell the shares. If the price goes above the exercise price, the investor will have to sell the shares at $25, but will still make $5 a share on the sale.

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