What is the risk of writing covered call?

Can someone please explain all the possible risk of writing covered call option?

When we write call option is because we think the price will go down or will not reach certain level.

But even if the price goes up above strike price ...so what ?

is this cash settled or we have to deliver the stock we have?
2 scenarios

1) Portfolios has stocks lying and we have no intention of selling... Want to get ' Rent on the investment'
1) Sell a OTM call ... Just collect the Premium .. Hold till expiration
a) Stock falls .. Just take profits
b) Remains where it is .. Just take profits
c) Shoots up : Portfolio will increase and Call will make losses.. Just sell at the Strike and book losses on call and take profits in portfolio .. Net will be profit
2) You buy stock for short term and then write calls against ( This is tricky situation )
1) Sell a OTM call again .... Just collect the preimuim.. Cannot hold till expiration .. You have to be alert always
a) Stock stays where it is ... Just take profits from call .. You can hold this to expiration as the call loses value
b) Stock falls ---- Beyond the call premium profit .. you lose on the stock bought .. Better to cut the losses
c) Stock rises --- Stock will gain value and call will lose.. Carefully monitor the positions and cut the call.. Move stop losses up and track your stock

Similar threads

Zerodha – Open Paperless Account

Open online account with Zerodha. Free delivery trading and Max Rs 20 for Intraday, F&O, Currency and Commodity Trading. Intraday High leverage with MIS, CO and BO.

Are you a day trader?