Revisiting the Covered Call Selector and the Covered Call Roll Selector

[captainccs]

Conventional Wisdom

I now have a year’s history rolling covered call options and it’s pretty darn good. More important, it trashes the accepted wisdom about covered calls. Just three years ago we had a thread discussing the accepted wisdom:

CC10: Before you sell a covered call

Before you sell a covered call make sure you understand the risks involved and how to mitigate them. While selling covered calls is the least risky option trade nothing in the market is risk free. One Fool already alluded to it by saying that you are better off just holding the stock. True in some but not all cases. What if the stock goes down? That risk exists any time you buy a stock but by selling covered calls you actually reduce the risk by the premium collected. The one difficulty is t…

And a cautionary tale:

Options, A cautionary tale

Options, A cautionary tale. My son was visiting me this weekend. He told me that he had had 1000 shares of Bank of America, and it had been inactive for a long time and was at about $21. As I understand it, my son decided to sell a covered call, but to be safe he went up $5 to $26. He figured he had nothing to worry about because it hadn’t moved that much in ages. He only got paid $100 for his call because it was so far out of the money. He thought it was an easy $100, and that there was no dow…

Once you combine picking the best stocks to sell covered calls on with the best roll trades the above the conventional wisdom no longer applies.

The history of the Covered Call Selector

It started with a simple spreadsheet and over the years it developed into a WebApp to pick the best covered calls from dozens of stocks and their lengthy options chains. The ability to compare so much disparate data required a new metric, SSS Per Day, which finds the calls that produce the largest income stream and, more important, it finds them not just in individual option chains but across option chains.

As useful as it was it did not challenge the conventional wisdom.

The history of the Covered Call Roll Selector

I found myself rolling a few covered calls and it seemed logical to add a Roll Selector to the WebApp. Once it was online the further question was the possibility of not just rolling Up and Out but rolling Up or Down and Out! In other words, never sell the stock, just milk the options over and over again. If one can there is no reason not to sell covered calls on LTB&H positions.

o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o

TSLA

Tradition says not to sell covered calls on LTBH stocks so as not to lose them. I was a believer until I figured out rolling the calls. TSLA was my largest position and just sitting there… On December 18, 2024 with TSLA at around $440 I sold Jan 17 strike $510 for $21.60 per call. A 4.9% premium, playing it safe before learning to roll the calls. TSLA had a very volatile year

Note: all the charts cover 1.5 years

As TSLA crashed I rolled the calls out and DOWN. The lowest strike price was $265 on March 18, 2025. As TSLA bottomed the rolls became out and UP. After 12 calls over 15 months the strike price is now back to $410 and the accumulated premium is 18% based on the initial $440 price which comes to a CAGR of around 15%.

PLTR

PLTR also had a wild ride but up instead of down and it was getting away from my calls.

But what goes up comes back down. After eight calls over 12 months, all rolled up and out, the strike price is now $135

The net premium is close to 24% based on a starting price of $122.50 plus a small profit on the share price.

SMCI

SMCI is the wildest ride where I have a serious capital loss having bought the shares at an average of $49.05 now $33.60. The flip side is the incredible 39% in premiums with 16 calls over 12 months.

The premiums exceeded the (unrealized) capital loss for a 9% new profit.

With the stock down to support levels I bought some more and sold calls expiring in 24 days with a 6.77% premium. Annualized that’s 102.96%.

Summary

The four position together in one year add up to 22% in premiums and a net profit (including unrealized losses) of 14.75%

The more important feature is that one no longer needs to buy and sell shares with the inherent risks, realized gains or losses, commissions, and tax consequences.

Caveat

Buy only stocks that bounce back which means that stock picking is as important as ever.

The Captain