| You (Stock Owner) | An Option Buyer |
|---|---|
| 1) Agree to sell your stock at a price (strike price) for a specific amount of time (option expiration month).
2) Receive a premium from a buyer for their right to buy your stock, you keep this premium no matter what happens. 3) If the covered call option is assigned at expiration, you realize a profit or loss depending on the price you bought the stock and the strike price of the option. 4) If the covered call option is not assigned at expiration, you keep your stock and can sell another option for more cash income. |
1) Has the right to buy your stock (at the strike price, for the specified time, and
2) Will pay you a premium (price paid for the purchase right). 3) If the stock price is above the strike price of the option, your stock will be bought from you at the strike price of the option, this is called assignment or exercising the option. 4) If the stock price is below the strike price of the option, the option expires worthless, the buyer loses the premium that was paid for the right to buy your stock. |
