Covered call
Hold the shares of one lot and sell a call against them. The premium adds income; gains above the strike are given up.
How it is built
- Hold shares equal to one lot of a stock that has F&O on NSE.
- Sell 1 lot of an out-of-the-money call on that stock.
- Stock options on NSE are physically settled: if the call ends in the money, the shares are delivered.
A structure for a shareholder who is willing to sell at the strike and wants premium in return.
Risks
- The shares can still fall; the premium only cushions a small part of a fall.
- Upside above the strike is given up.
- If the call is exercised, the shares are delivered at the strike, with STT on the settlement.
How the Greeks behave
- Delta
- Positive, lower than holding the shares alone
- Theta
- Positive
- Vega
- Negative
Worked example
| Leg | Price / premium per share | Cash flow |
|---|---|---|
| Hold shares (1 lot) | ₹1,000.00 | −₹5,00,000 |
| Sell 1 lot 1,080 CE | ₹4.58 | +₹2,289 |
Profit and loss at expiry
For the whole position, before charges.
Premiums are theoretical Black–Scholes values from round, illustrative inputs, not market prices. Charges and margin are not included.Price a single leg with your own numbers.
Frequently asked questions
Can I write a covered call on Nifty?
Not in the same way: index options are cash-settled and you cannot deliver the index. Covered calls in India are written on stocks with F&O, using shares as cover.
Do the shares count as margin?
Brokers let you pledge shares as collateral for the sold call, subject to haircuts and the rule that part of the margin must be in cash. Check your broker's terms.
What happens at expiry if the call is in the money?
The position is physically settled: your shares are delivered at the strike price.