A covered call is a strategy used by investors who already own shares of the underlying asset and believe it has potential for medium- to long-term growth, while expecting moderate bullishness in the short term. In this strategy, the investor writes (sells) a call option on the underlying asset they hold, generating a premium as income. The profit increases as the underlying asset price rises, but it is capped once the underlying asset price reaches the strike price, beyond which any additional gains from the underlying asset are offset by losses on the call option. If the underlying asset price moves above the strike price, the call option will result in losses, and the total payoff will be limited. This strategy can be an effective way to generate income in a neutral or slightly bullish market.