Covered calls are best used when you are confident the stock will stay flat or mildly appreciate. If the stock jumps up, you miss out on all of that extra upside. If the stock drops, you have to buy back the call at a loss and sell your stock at a loss (unless you want to "tough it out"). You *are* speculating on the direction of the stock with covered calls: flat to mildly rising. Anything other than that, there is a better option play available. Better could mean not playing at all. It's definitely not automatic income. If you get paid $100 to write a call, but the underlying assets drop by $400 in value, that's not exactly income. Don't buy into the "ownership society" line where you are the big cheese because you own the stock, so you are renting it out to poor underlings. Renting an apartment out in the real estate market, you have the upper hand. Renting out the stock, no way. You are no higher or lower on the food chain because you decide to write a covered call. You simply are speculating that the share price of a particular stock will stay flat or mildly rise over a particular duration. And to put your speculative plan into motion, you need to own the underlying asset.