An investor sells (i.e. writes) covered call options for 3 reasons:
1. To increase his cash flow. The money he receives for the options is money he would not have if he had not sold the option.
2. To lower the net price he paid for the stock. As soon as an investor sells an option, his investment in the stock is lowered by the amount he receives for the option.
3. To protect his stock on the downside, or hedge against inflation.
Arizona Financial Software has designed a program to help you write, analyze, and track the writing of covered call options. This program describes a very conservative use of options because it deals with options in a covered call strategy.
In their booklet "The Value Line to Option Strategies", the esteemed investment service Value Line states:
"Curiously, the most attractive option strategy when returns are concerned in relation to risk is covered call writing. It provided profits over 20% a year with relative consistency and it is only about half as risky as holding a portfolio of common stocks."