Writing (selling) a covered call is a more conservative strategy and is a way of generating income on a stock position owned by the investor. A covered call is typically written when an investor is neutral to bullish on a stock, but does not expect its price to change much for the duration of the options contract.
While the reward is generally limited to the premium received minus trading costs, an investor who writes a covered call continues to own the underlying stock. By still owning the stock, the investor maintains the benefits of receiving dividends and the right to vote.
The risk of writing a covered call is the loss of the underlying shares if the seller (writer) of the call is assigned an exercise notice. If assignment occurs, or the strike price is in the money at expiration, then the writer is obligated to sell the shares of the underlying stock at the option contract's strike price. Keep in mind, the seller of the call receives the proceeds of the sale (minus any assignment charges).
Please note: Options involve risk and are not suitable for all investors. Before investing in options, please read the Characteristics and Risks of Standardized Options.