What do you mean by selling covered calls anyway?

As quoted by the relevant wikipedia entry, selling covered calls is a process in which one owns shares of a stock or other securities, and then sells (or “writes”) a corresponding amount of call options. By selling a call, an investor is selling a right to the “buyer” for being able to purchase the underlying stock till a future date (strike date) at a pre-determined price (strike price). For this, the buyer pays a premium to the seller.

The return curve looks like (image from http://www.optionseducation.org/strategy/covered_call.jsp)

As indicated by the above graph, selling a covered call lowers the break even point a bit by letting go of possibility of infinite gains in the upward direction.

Advantages:

1. Lowered break even point. In case of stock price movement in the southern direction, the investor is better protected compared to just holding the stock. The premium received from selling the call serves as an additional buffer.
2. Lowered initial investment. Again, the premium received from selling the call lowers the initial investment compared to that required for just buying and holding the stock.

Disadvantages:

1. Cap on maximum gains. If the underlying stock happens to surge beyond the strike price of the call option, then the investor will not realize any profit beyond the strike price (which he/she would have realized in case of just buying and holding the stock)
2. Higher commissions. More individual legs to the overall transaction means higher commissions. These eat into the profits.
3. More complex taxation rules. The rules are definitely more complex compared to those for simple stock based transaction. Search for these on the Internet if you are interested.

Fair amount of material is available on the Internet for those who wish to learn about these further.