For affluent investors seeking to enhance portfolio income without completely abandoning their core holdings, covered calls offer an appealing strategy. When executed properly, this options strategy can add a consistent stream of income while still allowing for potential capital appreciation–albeit with some trade-offs. Let’s break down how covered calls work, their risks, and how they can be integrated into a well-balanced portfolio. What Is a Covered Call? At its core, a covered call strategy involves two components: Owning shares of a stock outright – This is your long position in a company you believe in. Selling call options against those shares – This means you are agreeing to sell your stock at a predetermined price (the strike price) if the buyer of the call exercises their option. By selling the call option, you collect a premium upfront. If the stock stays below the strike price through expiration, the call expires worthless, and you keep both the stock and the premium. If the stock rises above the strike price, you may be forced to sell your shares at that agreed-upon level, missing out on further upside