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Covered call / covered call writing

a strategy that is established by writing an equity call that is "covered" by an equivalent number of underlying shares that are currently owned (one call for each 100 shares of stock). Premium received from the call's sale provides limited stock price protection on the downside, and provides income in addition to any dividends paid. To the upside, profit on the stock is capped by possible assignment on the short call and sale of the long shares at the strike price. On the downside the loss potential from the long stock is substantial. See also Buy-write.