Covered Call

A covered call is a strategy where you sell (write) a call option against an asset you already own, collecting the premium upfront. If the asset’s price stays below the strike at expiry, the call expires worthless, you keep the premium, and you still hold the underlying asset — that’s the “yield” that covered-call vault products advertise. If the price rises above the strike, you’re obligated to sell the asset at the strike price, capping your upside on that asset even if the price runs well past it.

The “covered” part matters: because you already hold the underlying asset, your loss on the position as a whole is bounded relative to simply holding it — you don’t have the open-ended downside of an uncovered (naked) short call. You can still underperform just holding the asset outright, though, in two specific ways: giving up upside beyond the strike if the price rallies hard, and the premium collected not fully offsetting a sharp drop in the underlying’s price.

This is the mechanism behind most onchain “options income” vault products — see our Rysk review for a live example. Depositing into a covered-call vault makes you the option writer by default, which is a different risk than simply holding the asset, even though the product is often marketed primarily around the yield it generates. See The Complete Guide to Onchain Options for how writer-side risk compares to buyer-side risk more generally, and our options vs perps guide for how this compares to a leveraged perp position.