Why I Love Trading Covered Calls

If you’ve been trading options for any time now, you no doubt have heard of covered calls.

It’s a great trading strategy to generate instant cash for options traders.

The trade is simple.

First you buy 100 shares of stock.

Second, you sell one call option and collect the premium.

Simple right!

Yes it’s simple, but like all things, there are many nuances to the trade.

Factors to Consider in a Covered Call Trades

You need to first pick the right underlying stock. You don’t want to be sinking your hard earned money into a stock that’s falling like a sharp knife!

Then you need to sell the right option.

What strike price? What expiration? How much Premium?

All good questions you need to take into consideration, before picking that one call option to sell.

Once you’ve identified the right stock, and sold the right premium… you need to manage the trade. You need to know what to do if the stock goes up or god forbid – falls. What if nothing happens?

Having a plan is critical.

But I’m preaching to the choir.

All good options traders know these things. So I won’t bore you with those details.

What I will share is WHY I LOVE Covered Call trades.

Reasons to Love Covered Call Trade

First – the strategy is simple.

Like I said, you buy 100 shares of a stock, then you sell a call option against that stock.

The only thing you need to do is keep holding the stock until the option expires. THat’s it. No fancy calculations or advanced strategies.

I do this regularly with my core holdings to create a nice steady stream of cash flow.

Second – this isn’t day trading.

When I place the trades, it takes a few minutes – but that’s all – Minutes.

I don’t have time to sit in front of my computer all day long. I’ve got other things to do. So, I like a trade I can establish once, and spend about 20 seconds a week monitoring and managing.

Then the next step is easy… it’s the third reason I love covered calls…

Third – trading covered calls is repeatable.

Seriously, you can do these covered call trades over and over and over again.

Heck, I have a few trades I’ve been trading for upwards of 6 or 9 months! Yep, I bought the stock and sold the option… when the option expired, I sold another option… When that expired I sold another option.

Like I said – it’s a repeatable trade… that I can do over and over again.

And that creates reason number four I love covered call trades…

Fourth, and lastly, they create instant cash.

Instant Cash?

Yes, instant cash. I can log into my brokerage account and sell a few covered calls and the money shows up like magic.

There’s no long wait for the market to move, or not move. The cash shows up fast – so I can use it.

There you have it. Covered calls are a simple strategy that everyone can use to create instant cash in their trading account!


  • Atul Thakur

    How can one trade covered calls for an expensive stock like QQQ or SPY without having to purchase 100 shares of the stock

    • For a true covered call, there is no way around buying the shares, regardless of the price. You have to buy the shares to make it a Covered Call. Now there are options spreads (such as a poor man’s covered call) you can put on to directionally capture gains- but you won’t benefit from any dividend payments when you only hold long options. Hope that makes sense!



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