Using options for income

 Some investors use call options to generate income through a covered call strategy. This strategy consists of owning an underlying stock and at the same time writing a call option or giving someone else the right to buy your stock. The investor collects the option premium and hopes that the option expires worthless (below the exercise price). This strategy generates additional income for the investor, but it can also limit the potential for profit if the underlying stock price rises sharply. Covered calls work because if the stock rises above the strike price, the option buyer will exercise their right to buy the stock at the lower strike price. This means that the option writer does not benefit from the stock movement above the strike price. The option writer's maximum gain from the option is the premium received.