How to Generate Income Using Call Options

Stock markets are looking overvalued, and investors looking to squeeze some extra value from their stocks should consider a covered call option strategy. 

A covered call is just a share of stock that's covered by an option you've sold to someone else. If the option expires above the strike price, the other party exercises the option, and you get the strike price and the premium paid to you when you sold the option. 

The better news comes when shares end below the strike price, leaving the option worthless at expiration. You still get to keep the premium paid for the option, which is cash in your brokerage account. 

In the video below, Fool contributor Travis Hoium covers a few interesting stocks for covered calls, and three pointers investors should always keep in mind.