Selling your first covered call

The single highest-leverage habit a stock holder can pick up is selling covered calls. You already own the shares. The downside risk is no different from owning the shares outright. You get paid premium each cycle. The only thing you give up is upside above the strike, which most months never gets touched.

The setup

1. You own 100 shares per contract.
2. Pick an expiration 30 to 45 days out.
3. Pick a strike at delta 0.20 to 0.30 (the option chain shows delta).
4. Sell the call at the mid or better.

That is it. The credit is yours immediately. Your obligation is to deliver the shares at the strike if the stock closes above it on expiration.

The math, plainly

100 shares of AAPL at $190 is $19,000 of stock. A 30-DTE 0.25 delta call might pay $145. That is 0.76% in 30 days, or roughly 9% annualized if you keep doing it. Add the underlying appreciation and the dividends and you are running a meaningfully better book than buy-and-hold.

Most retail investors holding 100 shares are leaving 8 to 15% annualized on the table by not writing calls.

What can go wrong

The stock rallies above your strike and gets called away. Two responses:

1. Let it. You sold above your cost basis and collected premium. The trade was profitable. Re-enter the stock and start again.
2. Roll up and out. Close the threatened call and sell a new call at a higher strike, further out in time, ideally for a small additional credit. See when-to-roll-a-covered-call.

What to do next

Open the portfolio page. Import your positions. The audit will flag every long stock position with no covered call against it and suggest a strike. Read the suggestion, decide whether the upside cap is acceptable, then place the trade.