Yes, you will buy the stocks on margins. Your premium may or may not cover the margin interests. Then if the stock goes down, there is margin call. If the stock goes up, the up side is capped. As I said a few years ago, I found out quickly that there was no free lunch. Writing covered calls in general do not generate extra income. Now, there are two situations I write calls: 1. I want to sell, the price is right but timing is not. I may get a little extra for my holding if I write a call. But to protect the down side, I also buy an OTM put, just in case.... Still no free lunch. 2. It is a long term hold but recently I think it is way over priced, I will sell calls to get some extra upside and to ease the downside. Maybe a small free lunch?