An options trading strategy where an investor buys stock and sell call options against it is known as a buy write. Also known as covered write. To learn more about buy write, see covered call writing.
Payoff summary
Maximum profit: Call strike price minus the stock purchase price, plus the call premium received.
Maximum loss: Stock purchase price minus the call premium received, if the stock falls to zero.
Breakeven
Stock purchase price minus the call premium received, provided that price is at or below the call strike.
Amounts are per share before fees. Multiply by the shares covered by the position; standard equity options usually cover 100 shares per contract. If a maximum profit or loss calculation gives a negative amount, use zero. These figures assume matching contracts held to expiration and do not include financing or early assignment.
Financial mechanics reviewed:
Sources: OIC strategy reference; OIC assignment guidance. Formulas use the stated payoff assumptions; examples are illustrative, not market quotes. Editorial standards and corrections.