Covered call (against futures)
Also called: Buy-write, Futures + short call
Hold long futures and sell an out-of-the-money call against them: the call premium cushions small falls, and the upside stops at the strike.
Payoff sketch (per unit, index points)
Credit 108 pts
+277 pts (₹18,010 per lot)
Large as the price falls
24,923
How it works
The futures carry the full downside of the underlying; the call premium earned lowers the effective entry. Above the call strike, gains on the futures are paid away to the call buyer.
At expiry the combination has the same payoff as selling a put at the call's strike (put-call parity), although the margin and charges differ.
With shares instead of futures, the same idea applies to stock options; physical settlement then delivers the shares against the call if it finishes in the money.
When traders use it
- Earning extra income on a long position the holder expects to rise slowly, if at all.
- Lowering the breakeven of a futures position at the cost of the large-rally upside.
Greeks
| Delta | Positive: 1 minus the call's delta. |
| Gamma | Negative (from the short call). |
| Theta | Positive. |
| Vega | Negative. |
Profit, loss and margin
| Max profit | (Call strike − futures entry + call premium) × quantity, above the call strike. |
| Max loss | Large: futures entry − call premium, if the underlying fell to zero. |
| Breakeven | Futures entry − call premium. |
| Margin | The futures margin; the short call adds little because the futures cover it. |
In India
- Futures are marked to market daily and need SPAN plus exposure margin; STT is charged on the sell side (0.05% from 1 April 2026 in Arthfy's cost model). Index futures expire monthly.
- STT is charged on the premium when an option is sold (0.15% of premium from 1 April 2026 in Arthfy's cost model). A short option left to expire, in or out of the money, is not charged STT again at settlement.
- Stock options and stock futures are physically settled: an in-the-money stock option held through expiry becomes a delivery of shares (taxed and margined like a delivery trade, on the full value), so brokers often square such positions off in expiry week or raise margins. Index options are cash-settled.
Arthfy numbers
At expiry this has the same payoff as a short put at the call's strike; Arthfy's history of that shape is on the short put page. See Short put (naked).
