Covered call overwriting can give investors the benefit of premium income and upside potential — to an extent.
Investors can generate portfolio income and benefit from price appreciation in their stock holdings with an options strategy — provided they do it right. An investor who is already holding a certain stock can sell a call option against it — that is, the right to buy an asset at a specified or "strike" price by a certain date — to another investor. This move, known as covered call overwriting, provides portfolio income in the form of call premiums.
The firm thinks these names could see upside of at least 6% by that date and command attractive premiums. Bank of America highlighted a call option with a strike price of $220 against Constellation Energy . That is about 16% higher than where the stock closed Friday. Back in 2023 , the company signed an hourly carbon-free energy managing agreement with Microsoft to help support one of the tech giant's data centers in Virginia. Constellation also has a dividend yield of 0.7%.
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