How does call option works? Trying to understand how QYLD ETF generate monthly dividend. Explain as simple as possible. Thanks

According to QYLD fund info:

Global X Nasdaq 100 Covered Call ETF (QYLD)

QYLD is an ETF that buys stocks in Nasdaq and sell Covered Call option on those stocks.

Here is how selling Covered Call option works:

1. You bought and owned some shares, lets say 100 shares of AAPL (Apple Inc) at $100 previously.

2. AAPL closed at $124.97 last night (13 May 2021).

3. You sell a 18 Jun 2021 Call Option with strike price $135 for $1 premium.

4. If AAPL didn't rise above $135, the call option buyer won't exercise the option to buy AAPL from you, therefore the call option will expire worthless and you pocket the $1 premium collected when you sell the option.

5. If AAPL rise above $135, the call option buyer will exercise and pay you $13.5k for the 100 AAPL shares you owned (1 option contract represent 100 shares). You pocket the capital gain $35 and the $1 premium collected.

The ETF will sell Covered Call option every month and they generate monthly dividends from the premiums collected.

A call option is a an agreement between the option buyer and the option seller. The buyer pays a premium to the seller, whigh grants the buyer the option (but not the obligation, to purchase 100 shares of a particular stock (underlying) by a particular date (expiry) at a specified price (strike price).

Take an example, John buys a call option from Tom for AAPL expiring next Friday (21/5) at a strike of 130. John pays Tom a premium for this option. By next Friday, if AAPL trades above 130, John will likely exercise his option, meaning that Tom effectively sells him 100 shares of AAPL at $130. If AAPL trades under 130 by next Friday, John will be unlikely to exercise, since the current share price is lower than 130. Hence, the option expires worthless. Note that in either case, Tom keeps the premium that is paid to him.

If Tom owns the shares when he sells the option, this is called a covered call. Regardless of how high AAPL goes to by next Friday, he will at most lose "potential gains" and will not have any cash outlay from his pocket. On the other hand, if he sells the call without holding the shares, this is a naked call and can lead to serious losses.

So for QYLD, they hold shares from the Nasdaq 100. They then take the role of the seller of covered call options, selling them on shares that they own. The premiums received for their sold options form the dividend issued by the ETF.