💰 Make Your Own Machine Part 4: What Is a Covered Call? (Plain English Edition)

Alright, now we’re getting to the good stuff.

You’ve got a brokerage account. You’ve bought your first stock (maybe even RUM). You’re feeling like a grown-up investor.

Now it’s time to do something that most investors never do:

Make money from your stock every single week — without selling it.

Welcome to the magical world of covered calls.

🛠️ So What’s a Covered Call?

Here’s the simplest version:

A covered call is when you “rent out” your stock to someone else, and they pay you for the privilege.

You’re not giving up your shares (unless they hit a certain price), and you get paid just for agreeing to sell them if that happens.

It’s like this:

“Hey, I’ll let you maybe buy my stock from me for $10 next week — but only if it hits that price. Pay me $15 upfront just for the option.”

If the stock never hits $10? You keep your shares and the $15.

If it does? You sell it for $10 and still keep the $15.

Either way, you win.

🧀 Real-World Analogy: Cheese and Rent

Imagine you own a block of cheese (just go with it).

Your neighbor says:

“Hey, I might want to buy your cheese next Friday for $10. But I’m not sure yet. Here’s $1 just for the option.”

If cheese never hits $10, you keep it — plus the dollar.
If cheese shoots to $12, he can buy it from you for $10 — but you still keep the dollar.

That $1 is your premium. That’s the covered call income.

Now replace “cheese” with RUM stock and boom — that’s what we’re doing.

🧠 Why It’s Called a “Covered Call”

Let’s break it down:

Call option = a contract giving someone the option (not obligation) to buy your shares at a set price.
Covered = you already own the shares you’re selling the option on.

It’s safe. It’s conservative. It’s not some naked YOLO gamble. You’re the landlord, not the tenant.

💸 Why This Is Awesome

Here’s what makes covered calls perfect for normal people like you and me:

You get paid weekly or monthly, even if the stock doesn’t move.
You reduce your cost basis (you’re getting paid back over time).
You can reinvest the premium to buy more shares.
You’re not betting — you’re managing risk and building ownership.

This is the heart of the FIRE Engine — we’re stacking shares and making weekly income to grow our position over time.

🧮 Example: Let’s Say You Own 100 Shares of RUM

RUM is trading at $7.80.
You sell a $9 call that expires next Friday.
You get $15 in premium up front.

What happens next?

Scenario	Outcome
RUM stays under $9	You keep your shares + the $15
RUM hits $9+	You sell your shares at $9 (profit!) + keep the $15

Either way, that $15 is yours no matter what.

🧠 Bottom Line

A covered call lets you rent out your stock for weekly income.
You’re not day-trading. You’re not gambling.
You’re building a passive income engine — one share, one premium at a time.

👉 Up Next: [Post 5: How Covered Calls Actually Make You Money (with Real Numbers)]
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