If you own 100 shares of Apple, you could collect $300-$500 per month in extra income — without selling your shares. That's what covered call writing does.
The concept in 60 seconds
You own stock. You sell someone the right to buy it from you at a specific price (the strike price) by a specific date. They pay you cash upfront for that right. That cash is called the premium.
If the stock stays below the strike price, the option expires and nothing happens. You keep the premium and your shares. You can do it again next month.
If the stock goes above the strike price, you sell your shares at that price — which was already higher than where the stock was when you sold the call. You keep the premium on top of the stock gain.
The word “covered” means you already own the shares. You're not speculating — you're renting out upside you were going to hold through anyway.
A real example with AAPL
Say you own 100 shares of Apple at $230. You sell the $240 call expiring in 30 days and collect $4.20 per share — that's $420 deposited into your account today.
Now there are two possible outcomes. Both are good — one is just better than the other.
Two possible outcomes
AAPL at $230 · Sell the $240 call · Collect $4.20/share ($420)
Option expires worthless
- You keep:
- 100 shares of AAPL
- You keep:
- $420 premium collected
- Net result:
- +$420 income, shares unchanged
The option expires, you keep the premium, and you can sell another call next month.
Notice that in both scenarios, you collected $420. The difference is whether you still own the shares afterward. That's the core tradeoff of covered calls: consistent income in exchange for capping your upside.
Is this safe?
Covered calls are one of the most conservative options strategies. Many brokerages approve them at the lowest options trading level, and they're allowed in IRAs.
The risk isn't in the option — it's in the stock declining. If you're already comfortable owning the stock, selling covered calls actually reduces your risk by lowering your effective cost basis. You're strictly better off than holding the stock alone.
You might be worried about “getting assigned” — having your shares called away. But assignment means you sold at a price you chose, at a profit you agreed to, and you kept the premium on top. It's not a loss. It's the best-case scenario you planned for.
Who this is for
Covered call writing works best for investors who already own stocks and want extra income without adding risk. You don't need to be a trader. You don't need to watch the market all day. You need about 30 minutes a month.
If you own quality stocks — the kind you plan to hold for years — and you're comfortable with the idea of occasionally selling at a profit, this strategy is built for you.
Frequently asked questions
Are covered calls safe?+
Covered calls are one of the most conservative options strategies. The primary risk is the stock declining more than the premium you collected — which is the same risk you already take by owning the stock. Selling covered calls actually reduces your downside by lowering your cost basis.
How much can you make selling covered calls?+
Most covered call sellers target 1-3% monthly return on their stock position. On a $23,000 position (100 shares at $230), that's roughly $230-$690 per month in premium income. Actual returns depend on the stock, strike price, implied volatility, and time to expiration.
Do you need to own 100 shares to sell covered calls?+
Yes. Each options contract covers 100 shares, so you need at least 100 shares of a stock to sell one covered call. For a stock at $230, that's about $23,000 invested. You can start with less capital using lower-priced stocks or ETFs like SPY or IWM.