The return is higher when the stock gets called away because we factor in the profit from the sale of the underlying shares too. Since a single option contract usually represents shares, to run this strategy, you must own at least shares for every call contract you plan to sell. The trader buys or already owns the underlying stock. When it comes to covered calls, you have two approaches: The first is a hedging strategy if you think a stock may be selling off, but you want the security in your portfolio. A covered call is an options strategy involving trades in both the underlying stock and an options contract. Covered calls that generate enough volatility to create a 1.
