Definition of "Covered Call Option"

You own the underlying stock but are willing to forgo price increases in excess of the option strike price in return for the premium. You should be prepared to deliver the necessary shares of the underlying stock (if assigned) at any time during the life of the option. Short call option position is when the investor owns the underlying security or a security convertible into the underlying security. For example, an investor owns 500 shares of XYZ and writes (sells) 5 XYZ call options. The 500 shares cover the call options sold-that is, if the writer is assigned (the option is exercised), the 500 shares will meet the obligation of the option contract. The writer does not have to go into the market to obtain the shares to deliver to the option exerciser.