Standard Bank | Online Share Trading

Covered Calls

What is a Covered Call?

Covered Calls are one of the most commonly used option strategies and are used by a wide range of investors and traders to enhance the returns of their portfolios.
A Covered Call is a strategy whereby an investor writes (sells/ shorts) a call option over shares they already own to a buyer (in this case The Standard Bank of South Africa Limited). The call options are considered “covered” because the underlying shares fully collateralise (cover) the obligation created from writing the calls. The investor in return receives an option premium (income) for selling the calls which is immediately credited to their Online Share Trading (OST) account. This income boosts a portfolio’s cash flow and performance.

Who should trade Covered Calls?

Covered Calls are best suited to investors who hold shares in a company and:

  • would like to generate additional yield or cash flow into their portfolio
  • have a neutral to mildly bullish view on the share
  • are willing to sell their shares at or give up any upside above a predetermined share price. In return for foregoing potential upside in their shares, investors will receive cash in the form of option premium.

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South Africa: 0860 121 161

International: +27 11 415 5000

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