Fairmark.com

When someone owning shares of stock sells an option that would allow someone to buy those shares, the seller of the option is using a covered call strategy. The option is a call because it’s an option to buy, not an option to sell (which would be a put option). And because the person selling the option owns shares that can be used to meet the obligation to deliver stock if the option is exercised, the option is covered. Many people using this strategy believe they don’t have to worry about the complex tax rules that apply to straddles — and many of them are wrong. (more…)