Earnings season is volatile. Many investors hold tech stocks like $NVIDIA(NVDA)$ or $Apple(AAPL)$ —sell them and risk missing the rally, keep holding and it feels like wasted time.
That’s when the Covered Call strategy shines: keep your shares, sell calls, and collect steady premiums—like rent from a house even if prices don’t rise. Perfect for sideways markets.
📘 The principles of the Covered Call strategy were explained in detail in the previous post. Focusing on practical use, The Options Handbook also highlights key things to watch—
▶ What Is a Covered Call? 🤔
It involves owning at least 100 shares of a stock and selling a call option on those shares. You could agree to sell your shares at a predetermined price for premium.
If the stock price stays below the strike price, you could keep both the premium and your shares.
▶ What's the Catch? ⚠️
You give up your upside. If the stock unexpectedly takes off, you don't get to ride the whole rally, you're selling your shares at the strike price, and that's it.
If the stock drops fast and you want to cut your losses, you can't sell your shares freely without closing the call option first. That adds complexity and potential extra cost.
▶ When to Exit the Strategy? ⏳
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If the option is close to expiration and the stock is still below the strike, let it expire and pocket the full premium.
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If the stock climbs near the strike and you're not ready to let go, you can buy back the call early. It might cost more than you sold it for, but it protects your shares.
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If your outlook changes, there's no shame in closing or rolling the trade.
▶ Bottom Line 🎯
Covered calls are one of the easiest ways to squeeze more value out of the stocks you already own. Whether you want to lower your cost basis, generate extra income, or define an exit price, this strategy turns passive holding into active income.
💡 More practical insights on options strategies can be found in The Options Handbook—now available in the Tiger Coin Center! 🐯
>> Redeem Options Handbook Now <<
>> Click here for the Simplified Chinese version <<
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