Definition
A buy-write is a strategy in which an investor purchases shares of a stock and, in the same order or moment, sells a call option against those shares. It is the act of establishing a covered call position from scratch rather than writing a call against stock already held.
The name describes the two simultaneous actions: buying the stock and writing the call. The premium received reduces the effective purchase price of the shares.
Why it matters
How it works
When a buy-write is placed as a single combination order, the trader controls the net price paid for the package, reducing the risk that the stock moves between the two legs. After entry the position behaves like any covered call: if the stock stays below the strike, the call expires worthless and the investor keeps the premium and the shares. If the stock rises above the strike, the shares are likely called away at the strike, capping the gain. The buy-write is closely related to the covered call and to protective structures such as the collar.