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Covered call option strategies 101

Besides dividends and stock price movements, how can you increase your return from stock investments?

		Covered call option strategies may help you achieve that! Covered call option allows you to earn monthly premiums, at the same time, gives you the opportunity to earn higher returns from stock investments in the long run*.

Looking for more information? Call us on 

+852 2822 5001 (Hong Kong) 
+86 40011 95525 (Mainland)

Trading example

Suppose I own one lot of HKEX (SEHK: 388), bought at HK$185, how can I use covered call option strategies to increase my potential gains?

If you think that the price of HKEX will not rise above HK$190 in June and it will remain stagnant or will even drop in the short term, you can sell a call option on HKEX for a strike price of HK$190 or above. Afterwards, you transfer your HKEX shares to an option account. This allows you to hedge your position and earn a premium, exemplified in the table below.

Based on one lot of HKEX bought at HK$185 and one lot of call option on HKEX for a strike price of HK$190 sold, the return of investment is shown below:

Stock Price of HKEX (SEHK: 388)	Profit	Loss	Total P/L	Trading Details on the settlement day in June
HK$190 or above	Premium: HK$400 Increase of stock price: HK$500		HK$900	HKEX is priced at HK$190 or above. Your covered call option is exercised and one lot of HKEX stock needs to be sold at HK$190 per share. The returns are the option premium of HK$400 and HK$500 from stock price increase.
HK$187	Premium: HK$400 Increase of stock price: HK$200		HK$600	HKEX is priced at HK$187. Your covered call option is not exercised. The returns are the option premium of HK$400 and HK$200 from stock price increase.
HK$185	Premium: HK$400		HK$400	HKEX is priced at HK$185. Your covered call option is not exercised. The return is the option premium of HK$400.
HK$180	Premium: HK$400	Decrease of stock price $500	-HK$100	HKEX is priced at HK$180. Your covered call option is not exercised. There is a loss of HK$500 from stock price decrease; on the other hand, a return from the option premium of HK$400. The total loss is reduced to HK$100.

*Option is a derivative product. It involves significant risk and may not be suitable for all investors. Please click here for relevant Risk Disclosure Statements.

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Looking for more information? Call us on

+852 2822 5001 (Hong Kong)
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Learn before you invest

Covered call option strategies 101

Besides dividends and stock price movements, how can you increase your return from stock investments?

Covered call option strategies may help you achieve that! Covered call option allows you to earn monthly premiums, at the same time, gives you the opportunity to earn higher returns from stock investments in the long run*.

Looking for more information? Call us on +852 2822 5001 (Hong Kong) +86 40011 95525 (Mainland)

Suppose I own one lot of HKEX (SEHK: 388), bought at HK$185, how can I use covered call option strategies to increase my potential gains?

Based on one lot of HKEX bought at HK$185 and one lot of call option on HKEX for a strike price of HK$190 sold, the return of investment is shown below:

Looking for more information? Call us on

+852 2822 5001 (Hong Kong)
+86 40011 95525 (Mainland)