Covered calls are for the long-term stock investor that is looking for a steady or slightly rising stock price for at least the term of the option. This is generally a capital intensive strategy because you have to be long at least 100 shares of stock to sell a covered call. The trading setup consists of selling an OTM call option against your stock position for a credit. This credit is then used to reduce the cost of owning the stock by that same credit. If the stock never rallies beyond your strike price then you keep the credit as a profit against the position. However, if the stock rallies beyond that strike price of the short call, you would give up your stock at that price and bank any profit between your net purchase price and the strike price. As you can see, a covered call is a good strategy because it keeps some upside potential in the stock but also reduces the net cost of owning the stock.