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. Donât 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! Iâve 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 â 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 oneâs 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. Iâm 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 canât 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). Teslaâs 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.
Iâve followed your posts about covered calls for a while Captain, and Iâve 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. Itâs pretty simple to me now; generate income based on level of risk Iâm willing to take, and use that income to acquire more shares.
I have two accounts that I use, one with slightly lower beta âMag 7â type stocks, and another with much more volatile positions. The first Iâve 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 Iâve read online recommends 20 - 30 delta as the sweet spot, and Iâve found thatâs usually where I land as well. I enjoy being more âactiveâ 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? Iâm assuming that isnât all of your holdings. Besides TSLA, any chance youâre willing to share what some of your favorite positions are?
Since my objective is income I use Dollars per Day, $$$Day, Premium / Days to expiration. This allows me to compare not just options in an option chain but across multiple option chains.
As to DTE, AI says it better than I can;
Key Aspects of Time Decay (Theta):
Non-Linear Acceleration: Time decay does not occur in a straight line. It is slow when the expiration date is far off, but accelerates rapidly in the final weeksâand especially the final daysâbefore expiration.
In practice this means using short term weeklies under 45 days. The shorter time to expirarion the higher $$$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 âDown from ATHâ 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 youâve mentioned before that you pretty much always roll correct? Iâve tried to watch positions closer during the week and will close/roll early if the time left isnât worth the premium (for example 80% profit after 2 days on a weekly call isnât 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 doesnât 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 isnât much of a concern, but I have considerably more funds in taxable accounts so Iâm 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 donât 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 Iâm reminded and kick myself. For want of a nailâŠ
In general, you should ALWAYS get a net credit when rolling out at the same strike price. Thatâs because an option with N days left always has less time premium than an option with N days + Y days (if you do monthly, Y is 28 or 35 days). For example as I described in great detail in an earlier post, Iâve been rolling Disney options monthly (mostly) for a year and my net credit has always been between $0.92 and $2.60.
Heh, I just did that for my April 17th expiries about 15 minutes ago! In some cases this month, my lowball order is to buy them back at $0.05 (I would prefer $0.01, but my broker doesnât seem to accept that in most/many cases, so I just use 0.05 for all of these types of orders).
One of my orders just executed! I always feel kind of stupid buying (back) options for $0.05 when they are going to expire worthless over the next weekend anyway. But I think in times of volatility, where big moves can happen anytime, it is probably the prudent thing to do. Instead of earning $2.30, I earned $2.25, big deal!
Hey Captain.
I have been doing similar for just over a year and half and still learning my way through. Thought I was the only one headed into short timeframe options and weeklies have been my go to for this whole experiment.
Want to add more to the conversation in a bit, hopefully, but need to ask if you are using margin? You are playing in much more rarefied air than I can in my âplayâ money portfolio. (My main retirement is in brokerage account so that safe from my grubby little hands.)
Examples of my stocks:
ACHR - $5.58 - was good for a while due to volatility, now kinda flat no good returns
RIVN - $16.15 - is pretty decent over time, down pretty good on stock price right now
RKLB - $72.76 - volatility tends to make this one pretty good
SHOP - $116.30 - my priciest option stock and my steadiest in last year or so for returns
LMND - $60.11 - my most speculative as I try not to have financials in my longer term holdings, but volatility is good here.
Others have faded out due to volatility drying up and premiums being too lowâŠTDD, SERV, SMCI, SâŠ
So, I am still in the shallow end of the pool. I would love to run options on bigger stocks as it would allow me to have less trades each week to hit my income goals. At higher times I have 11 to 12 positions each week going.
My goals with this experiment are similar to yoursâŠsteady income stream each week. I have started now, about 7yrs out from retiring as a test. See if this is a task that I can use into retirement as extra income. Can this last through good and bad times and what are my pivots as economy changes over time. The worst I have found are the times when all of the market is calmâŠthose times are hard to make good money in.
This whole approach for me is based on covered calls or cash secured puts. If I need more cash for good premiums I will pull it from my MELI, MSFT or AVGO. Those are the stocks I am using to âstoreâ my money, but those and things like NVDA and SHOP are where my current âincomeâ is going when I have left overs from each weekâs trades.
If you are using margin here, then I will adjust what I take away from this conversation. (Apologies if I missed it in your posts, my 'tism is making me have to scan and jump around a lot as there are times too many words is too many for me⊠)
This is the big difference in our approaches. I play in stocks that are so volatile that I have to let options get assigned because there is no way to roll them to the next weekly. I have let my calls go if there is no positive gain on rolling. I have accepted less than my 1% return on capital at rolls, but that limits my overall income that next week. Most volatile times rolls on either puts or calls would have me losing multiple percentage points on my capital at risk.
If the stock is volatile enough, I am just in and out over time and not worried about the âholdingâ. Things like LMND, UPST, CRWV are stocks that I have let go or accepted the positions. Even SHOP has gotten called from me once or twice and that is one of my main long term hold pillars for me.
In addition to positive return roll premiums being hard to find, it would also add more work to my investing process. I do all investing work on Mon or Tues and then just research rest of week. That means if I am away from my desk for multiple days in a week, I am not worried about my options being assigned.
Thanks for the feedback. Nothing rarefied, just arithmetic. Finding the highest yielding calls but donât go to extremes. I think you misunderstand the term weekly, excuse me if Iâm wrong. Itâs an accident of history. Initially there were only four annual option chains, January, April, July, and October. Then it grew. Weekly options are just the latest addition. Weekly does not mean I trade every week, too much work for little extra profit. Most of my calls tend to be 30 to 60 days to expiration.
Google AI:
Yes, when exchange-listed options first began trading at the Chicago Board Options Exchange (CBOE) in 1973, there were only four expiration months available at any given time for a specific stock. Stocks were assigned to one of three quarterly cycles, and the cycle you mentioned (January, April, July, and October) was the very first.
The Original Expiration Cycles
Initially, every optionable stock was assigned to one of these three distinct cycles:
Cycle 1 (JAJO): January, April, July, and October.
Cycle 2 (FMAN): February, May, August, and November.
Cycle 3 (MJSD): March, June, September, and December.
Evolution of the âFour Monthâ Rule
The structure has significantly expanded since the 1970s to provide more flexibility and liquidity:
1984 Shift (The âTwo Near-Term Monthsâ Rule): Regulatory authorities decided that every stock should have the two nearest months available regardless of its cycle. For example, if itâs January, a Cycle 2 stock (FMAN) would list January and February, then jump to its next cycle months: May and August.
Modern Complexity: Today, heavily traded stocks and ETFs offer much more than four choices. They often include:
Weeklies: Expirations every Friday.
0DTE: Same-day expirations (common in indices like SPX).
LEAPS: Long-term options that can extend up to 39 months
As for using margin, most cautiously!. I limit it to around 5% of portfolio with an utter top limit of 10% and watch it like a hawk!.
As noted above, I donât trade week to week, usually 30 to 60 days to expiration.
Expect for stocks that pay dividends itâs unlikely to be called. I do try to keep the strike price near the current stock price.
So almost al my orders slowly executed throughout the week. Except one of them. And I was mystified why not, I mean it is almost sure to expire worthless, and here I am willing to pay $0.05 for them. So I looked a bit more closely and apparently the ENTIRE open interest is ⊠me. I guess nobody else is even looking at those options, but Iâm still surprised that the market maker didnât bother taking the nickel for free. If it doesnât execute by tomorrow noon, Iâll probably cancel the order and let them expire worthless.
Are you planning on selling calls on this stock? If so, selling on Friday instead of on Monday adds three days of time value. The contrary argument is that on Mondays prices tend to fall, before noon but recover after investors return from lunch. (I wonder what Ai has to sayâŠ).
Google AI:
Your feedback helps make AI Mode better for everyone, including you.
Response A
The question of whether to sell calls on Friday or Monday is a classic traderâs debate, balancing theoretical time decay (theta) against practical weekend risk and market anomalies.
Friday vs. Monday: The Core Trade-Offs
Factor
Selling on Friday
Selling on Monday
Time Value (Theta)
Captures 3 days of decay (Sat/Sun/Mon) while markets are closed.
Misses the weekend decay; premium may already be lower by Monday morning.
Market Risk
Exposure to weekend news(geopolitics, earnings, tweets) that can gap the stock against you.
You can react to weekend news beforeentering the trade.
Pricing Reality
Market makers often **âprice inâ**weekend decay by Friday afternoon, potentially lowering the premium you collect.
Prices are âfresh,â reflecting current sentiment after any Monday morning volatility.
Analyzing the âMonday Effectâ
The theory that prices fall on Monday (often called the Monday Effect or Weekend Effect) suggests Monday is a poor day to sell calls because lower stock prices generally mean lower call premiums.
Historical Context: This was a documented trend in the early 1970s, where Fridays often saw gains and Mondays saw drops.
Modern Reality: Most recent research suggests this effect has significantly waned or disappeared due to algorithmic trading and 24/7 news cycles.
Intraday Timing: Your point about prices recovering after lunch aligns with some observations that Monday mornings are volatile as traders digest weekend news, though this is not a guaranteed rule.
Practical Strategies for Selling Calls
For Weekly Options: Selling on Friday (roughly an hour before close) is popular because the percentage of time decay is highest on short-duration contracts.
The âWait and Seeâ Approach: Many traders prefer to sell Monday morning (approx. 1 hour after the open) to avoid being âgappedâ by a major weekend event that could make their sold calls immediately underwater.
Condition-Based: If the stock had a strong run-up on Friday, call premiums might be inflated, making it an attractive time to sell before a potential Monday âcool offâ.
Which stock are you looking at specifically? Some sectors (like high-volatility tech) are much more prone to weekend âgapsâ than others.
AI responses may include mistakes. For financial advice, consult a professional. Learn more
Response B
Deciding between Friday or Monday to sell call options involves balancing âfreeâ time decay against the risk of weekend news. While I am an AI and cannot trade or provide personal financial advice, here is an analysis of how traders generally view this strategy:
Selling on Friday: Capturing the Weekend âThetaâ
Time Value Advantage: Selling on Friday allows you to collect three full days of time decay (theta) while the market is closed.
Priced-In Decay: Many professional traders argue that weekend decay is already partially priced in by Friday afternoon. This means premiums may already be lower before the close to account for the upcoming weekend.
The Risk: You are exposed to âweekend riskââmajor news (geopolitical, corporate, or economic) that happens while you cannot trade. If a stock gaps up significantly on Monday morning, your short call could move deep into the money before you can react.
Selling on Monday: Managing the âMonday Effectâ
The Monday Effect Theory: Historically, markets sometimes open lower on Mondays as they process negative news from the weekend. If the stock price falls Monday morning, it could be a poor time to sell calls because the lower stock price will decrease the call premiums you receive.
The âLunch Hourâ Recovery: As you noted, some traders observe a âLunch Effectâ where the market often finds its direction or recovers after the early-morning volatility settles and European markets close.
Wait for Information: Waiting until Monday (specifically an hour after the open) allows you to see how the market reacts to weekend news, which can prevent you from selling a call right before a massive gap or trend.
Strategic Considerations
Strategy
Pros
Cons
Friday Close
Collects âextraâ theta; good for stable, low-volatility stocks.
High âgapâ risk; premiums may already be depressed.
Monday Morning
Avoids weekend uncertainty; lets you sell into ârecoveryâ strength.
Misses 3 days of decay; risk of lower premiums if the stock stays down.
Traders often find that the âsweet spotâ is roughly one hour after the market opens on Monday, once the initial âMonday morningâ noise has settled.
Would you like to look at the implied volatility levels for a specific sector to see if the weekend risk is currently being priced highly?
AI responses may include mistakes. For financial advice, consult a professional. Learn more
In this case, it was a stock (actually an ETF) and it was puts (not calls). It is something that I am willing to increase my position in ⊠at the right price. So I sell puts each month IF (and only if) I can get a good price for those puts AND the strike price minus the premium is at my desired purchase price. Right now, this ETF is up 10% or so over the last few weeks and there are no puts at strike prices that I want. I will wait and see if any appear and then I will sell new puts.
My covered calls are all rolled to May, and I already have GTC orders rolling them to June, but none have executed yet.
Wondering if earnings season impacts choices for anyone when placing or rolling option?
I find (in a very limited sample of two years) that the volatility around earnings makes it much easier to make my basic $$ value while derisking a bit.
Example todayâŠa company many people own, Corweave, was paying huge returns (>3%) with strike prices well past the ±10% change depending on calls or puts. This is first time I have opened an option on Coreweave. That is on a weekly. (I have also only just earned enough in premiums to start looking at more of the pricier stocks so that was a good coincidence.)
Does earnings volatility play into any of your moves?
Yes! I avoid selling calls over earnings day because the stock can have giant moves. Steady as she goes is the way to navigate selling calls. You want volatility when you sell the call (high price), not when you buy it back (low price).
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