An equity option is a contract.
The call contract conveys to its holder the right, but not the obligation, to buy shares of the underlying security at a specified price (the strike price) on or before a given date (expiration day).
The put contract conveys to its holder the right, but not the obligation, to sell shares of the underlying security at the strike price on or before a given date (expiration day).
After this given expiration date, the option contract ceases to exist. If assigned, the seller of an option is obligated to sell (in the case a call) or buy (in the case of a put) the shares at the specified price.
In a covered call, the investor sells a call option contract while at the same time owning an equivalent number of shares of the underlying stock. If an investor is assigned an exercise notice on the written contract, they sell an equivalent number of shares at the call's strike price.
Your broker might have concerns about selling a put option while long the underlying stock. If the investor is assigned an exercise notice on the written contract, they buy an equivalent number of shares at the put's strike price, effectively getting longer the underlying stock.
For more strategy related questions, visit our Strategies & Advanced Concepts section.