In the trading deal between Long and shorty, Shorty adds the short call because it allows him to take in a credit — he can make money on his stock without doing anything. This is referred to as Covered Calls. The strike price is very important in any trading deal. If a trader wants to go in the money and get assigned, he can choose a near‐the‐money strike price, or maybe even an in‐the‐money strike price. If the trader is not bullish on the stock long term, so, it would wise for the trader to just take the credit and have the stock go away. The strike price that a trader chooses depends pretty much on how bullish he or she is about the stock. A trader should also consider the time frame factor — the longer the time frame, the better the chances that the strike will go in the money and that the trader will be assigned — forcing him to sell his shares. This chapter discusses the covered call – its cost basis and the formal ways for calculating risk and reward.