I now have 16 months of reliable performance data using my Covered Call Strategy. The numbers seem outlandish but they are real. To recap the strategy, the objective is to get income by selling covered calls instead of growing the portfolio by traditional methods. In other words, all the stocks in the portfolio have to generate call option premiums. The stocks are never sold, just keep adding any time there is cash available. In effect dollar cost averaging.
Of course there is no cure for volatility and to make the system work the calls have to be rolled up or down as the market dictates. This might sound controversial but selling short term options, usually under 60 days, one can keep the strike price close to the market price reducing the risk of the stocks being called. So far no call option has been assigned.
Stock picking is very important. Volatility is not a problem, the higher the volatility the higher the option premiums. The risk is the underlying business failing. One can fine tune the risk by picking stocks that match your risk tolerance. Mine is rather high. Stocks line VISA, Mastercard, and Ross Stores inc. are low yield and low risk. Tesla is much higher risk and more profitable. TSLA shares produced 24.5% in net premiums in 16 months based on the 12/24/2024 price. A wild rollercoaster ride. One has to get used to the downdrafts
For best results never sell your stocks, just keep adding as cash becomes available. To lower risk, diversify. Donāt buy hype, buy cash flow. Cash is king!
The risk of the price falling is unrelated to using the stock to sell covered calls but if you never sold covered calls on the stock your loss is greater! Iāve mentioned SMCI, it fell on me twice.
Bought at an average of $49.05 in three tranches during the first half of 2025
Rolled the strike price down from $55 to $32 by 1-28-2026 over 15 calls
Collected $17.57 per share by 2-27-2026
Net cost basis by per share by 2-27-2026, $31.48
Share price that day $32.39
Profit per share $0.91
The second time: 02-09-2026 ā present
Bought more at an average of $33.92
SMCI crashed to $20.53 on 03-20-2026
Collected $2.76 in call premiums, net cost basis $27.12
Close 4-7.2026 $22.43
Loss per share $4.69
Should recover that in a couple more call trades
One needs to trust oneās shares. Lose the trust, close the position
All my positions are now used for covered calls! TSLA is the only truly LTBH position, the rest are good companies that have high call option yields. Iām adding to this list as cash permits. I have cash in Portugal for my usual expenses. My next transfer to Portugal should be in June.
Avoid churn as much as possible! Tesla is a fixture. One of my costliest mistakes in the dot-com bust was investing in technology qua technology. Now I invest in technology with good cash flow. You canāt go broke as long as you can pay your bills. Tesla has huge investments but it has the cashflow so it does not need to go to market, hat in hand, to fund them. It also has well coordinated, integrated expansion plans. Most people think of Apple as phones and computers but the real product is the User Interface (which they are destroying now that Jobs is no longer around - Apple is getting Microsofted). Teslaās two products are energy and AI present in most if not in all its physical products.
Cars
Trucks
Semis
FSD
Chargers
Batteries
Storage
Robots
Taxis
Remember the musical Chorus Line, T&A? Same with Tesla E&AI.
I am looking at IMKTA. All the open interest is in the $90 strikes. The premiums for the August and November $95 and $100 strikes look nice, might have to sharpen up the pencil. Have to take into account that share price has jumped up more than 20% in just a few months.
Iāve followed your posts about covered calls for a while Captain, and Iāve come to the same conclusion on my own after trading options consistently over the last couple years. I had tried various strategies in the past, and was also burned many times greedily chasing premiums, but have now settled into strictly selling covered calls on positions that I intend to hold indefinitely, as long as the underlying continues to perform well. The only difference in my strategy is that I do utilize leaps once in a while to add to positions if I feel like a stock is oversold with significant upside potential, and then sell covered calls on those leaps as well. I try to keep long options a small % of my portfolio. Itās pretty simple to me now; generate income based on level of risk Iām willing to take, and use that income to acquire more shares.
I have two accounts that I use, one with slightly lower beta āMag 7ā type stocks, and another with much more volatile positions. The first Iāve been returning a comfortable 0.3% - 5% per week, the other closer to 0.5% - 1% per week (but with much more volatility) - note these are just returns from options premium, not total account returns.
I am curious (you may have mentioned before), but is there a DTE that you prefer to use, and any rule of thumb for delta? Almost everything Iāve read online recommends 20 - 30 delta as the sweet spot, and Iāve found thatās usually where I land as well. I enjoy being more āactiveā so I sell weekly covered calls, there are some downsides as compared to a 30 or 60 DTE, but in almost all scenarios the total % return is better with shorter expiries.
Is that list of stocks in your original post only the positions that are down from ATH? Iām assuming that isnāt all of your holdings. Besides TSLA, any chance youāre willing to share what some of your favorite positions are?
Since my objective is income I use Dollars per Day, $$$Day, Premium / Days to expiration. This allows me to compare not just options in an option chain but across multiple option chains.
As to DTE, AI says it better than I can;
Key Aspects of Time Decay (Theta):
Non-Linear Acceleration: Time decay does not occur in a straight line. It is slow when the expiration date is far off, but accelerates rapidly in the final weeksāand especially the final daysābefore expiration.
In practice this means using short term weeklies under 45 days. The shorter time to expirarion the higher $$$Day becomes.
That list is a relic of my old way of investing in growth stocks. Back then I was looking for the fastest technology growth stocks.
Note: All stocks are āDown from ATHā except when they hit ATH.
I no longer have favorites beyond the best stocks for selling covered calls, the ones with high $$$Day and low probability of going broke. One needs to learn to love volatility. These days my favorites are profitable, free cashflow technology companies with low enough price to be able to diversify.
If you are strictly looking at Premium $ per Day, how often are you managing/rolling positions? I think youāve mentioned before that you pretty much always roll correct? Iāve tried to watch positions closer during the week and will close/roll early if the time left isnāt worth the premium (for example 80% profit after 2 days on a weekly call isnāt worth waiting 3 days for that remaining 20%, so I will roll to a later expiry/different strike). It can be difficult watchin closely as I have a fairly busy/stressful job, but so far this strategy has helped increase my returns slihtly.
Do you ever wait on opening a new short call position depending on market movement? Or do you try to keep all of your positions covered 100% of the time so they are always collecting premium (always harvesting theta). Sometimes I will wait to see how the market is moving Monday morning before I open new weekly positions, most of the time it probably doesnāt make much of a difference but once in a while I get lucky and will ride out a good green day to get better premiums when I open my short calls.
How do you manage positions on weeks like this where things rebound heavily, since you are using more volatile stocks? I had to roll several positions that were well in the money today, but was able to manage net credits on them all. Once in a great while something will get away from me and I might be stuck rolling my way out for several weeks (or even months in one instance). In tax advantaged accounts this isnāt much of a concern, but I have considerably more funds in taxable accounts so Iām also trying to avoid realizing significant gains on some long term positions.
Picking the best calls to trade without such a tool is very difficult.
I place low-ball GTC orders a week or so before the expiration date.
I calculate the remaining $$$/Day which can be very high because the remaining days are so few. Time value drops fastest close to expiration which is why a lot of trades happen late on Fridays. By delaying you squeeze the old call and shorten the new one if you roll. The last days, the last hours are the best.
Sometimes but I prefer to keep all of my positions covered 100% of the time so they are always collecting premium.
As a non-resident alien I donāt pay capital gains taxes. Option premiums are capital gains/loses.
One of the best pieces of advice I have heard is that squeezing the last penny of a trade can be very expensive. Far too often Iām reminded and kick myself. For want of a nailā¦
