Covered Call
Hold underlying stock shares and sell an OTM Call option against them to generate consistent recurring monthly cash income.
Interactive Payoff Curve & Greeks Simulation
Visualize the theoretical profit & loss at expiry vs T+0 immediate day curves. Drag the simulation slider to stress-test your trade.
Option Payoff Curve & Greeks
Net Option Greeks (Sensitivity Profile)
Values per 1 Lot standard unitMulti-Leg Position Structure (2 Legs)
| Action | Instrument / Strike | Type | Expiry | Approx Delta | Est. Premium | Qty Ratio |
|---|---|---|---|---|---|---|
| BUY | 250 Shares Delivery | STOCK | Long Term | +1.00 | ₹2900 | 1x |
| SELL | 3,050 CE (OTM) | CALL | Monthly Expiry | +0.30 | ₹45 | 1x |
How the Structure Works
Converts stock capital gains into immediate monthly cash flow via positive Theta (+θ).
The Covered Call is the world's most popular equity income strategy. If you hold shares of a stock (e.g. 250 shares of Reliance), you sell an OTM Call (e.g. 3,050 CE) every month. You collect ₹11,250 in cash premium every 30 days. If the stock stays below 3,050, you keep the cash and repeat next month (generating 15-20% annual yield). If the stock rallies past 3,050, you sell your shares at ₹3,050 for a massive capital gain plus the premium.
Institutional Strike Selection Rules
Phased Execution Blueprint
Follow this structured sequence to eliminate emotional hesitation during order entry, lifecycle management, and final exit.
Stock Ownership
Hold 1 lot of shares in demat account.
Interactive Margin & Position Size Calculator
Calculate exact lot sizing based on the 1-2% risk rule to preserve capital against Black Swan events.
Options Position Size & Max Risk Calculator
Total net liquid equity in your brokerage account
Recommended: 1.0% - 2.0% for disciplined longevity
Wing width max loss or defined mental/system SL
Rigorous Risk Rules & Adjustment Protocols
Non-negotiable parameters for stop-loss triggers, portfolio caps, and firefighting adjustments when market tests your strikes.
- Roll call up if challenged.
Zero additional margin required when shares are pledged.
RELIANCE Covered Call Trade Walkthrough
Held 250 shares of Reliance at ₹2,900.
Sold 3050 CE @ ₹45 (Credit = ₹11,250)
- Stock closed at ₹2,980; kept shares and collected 100% premium.
Common Mistakes to Avoid
Why it happens: Locks in a loss if assigned.
Solution: Always sell strike above your buy price.
Institutional Pro Tips
Covered Call FAQs
What happens if the stock price surges way above the strike?
Your shares will be sold at the strike price. You achieve maximum profit (capital gain + premium) but miss out on gains beyond the strike.
Alternative & Complementary Strategies
Replace owning 100 expensive stock shares with a deep ITM LEAPS Call (>80 Delta), then continuously sell short-term OTM Calls for recurring income.
Sell a Put option to collect upfront premium income, willing to buy the underlying stock at a discount if assigned.
Hold stock shares, buy a protective OTM Put, and sell an OTM Call to create a 100% zero-cost, fully protected investment envelope.