A covered call owns the underlying stock and sells an OTM call against it. You collect premium as income; if the stock rises past the strike, your shares get called away at a profit (strike + premium). Downside is uncovered below cost basis. It is a conservative income strategy, not a directional bet.
For Nifty-heavy portfolios, sell OTM calls when IV rank is elevated (richer premium) and the model sees range-bound action. The filter avoids selling calls into a strong upside breakout (oi_buildup bullish + vix_z rising). Size by shares owned; never sell naked calls without the stock.
Q: What is a covered call?
A: Own stock, sell OTM call; collect premium, cap upside at strike.
Q: Why sell when IV is high?
A: Higher IV rank means richer premium income.
Q: What is the downside?
A: If the stock drops, the premium softens but does not prevent loss.
Q: Can I sell naked calls?
A: No — naked calls have unlimited risk; always cover with stock.
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By Shakti Tiwari · Options AI research pillar. NISM XII certified. Educational only, not investment advice; verify before acting.