A covered call is an options strategy where you own at least 100 shares of a stock and sell a call option against those shares. The call gives the buyer the right to purchase your shares at a set strike price before expiration. Because you already hold the shares, the position is "covered" — you can deliver them if assigned without buying at market price.

When you sell a call option, you collect a premium upfront — this is the income. You keep that premium regardless of what happens to the stock. If the option expires worthless, you keep your shares and the full premium, and can repeat the process to generate recurring cash flow on top of any dividends.

Beyond premium, consider the stock's quality and outlook, implied volatility, liquidity of the options chain, the strike's distance from the current price, upcoming earnings or events, and your downside risk. A high premium often signals higher risk, so balance yield against the chance of a large stock decline or early assignment.

The best candidates are typically stable, liquid stocks or ETFs you're comfortable holding long term, with active options markets and moderate-to-healthy implied volatility. Many investors favor large-cap names and broad index ETFs because they offer reliable premiums without the extreme swings of speculative stocks.

Use a covered call screener to filter by yield, expiration, strike distance, and downside protection. Screeners rank opportunities by annualized return and let you compare risk-adjusted premiums across hundreds of stocks quickly, instead of checking option chains one by one.

It depends on your strategy. Many income investors sell calls on a weekly or monthly cycle, rolling into a new contract after each expiration. Shorter durations capture faster time decay and more frequent income, while longer durations require less management. Your choice should match your time commitment and market view.

Strike price determines your trade-off between income and upside: closer-to-the-money strikes pay more premium but cap gains sooner, while further out-of-the-money strikes leave more room to grow. For expiration, 30–45 days is popular because time decay accelerates in that window. Align both with your outlook and how willing you are to have your shares called away.

A covered call screener is a tool that scans the market for covered call opportunities and ranks them by metrics like premium yield, annualized return, downside protection, and probability of assignment. It saves time by surfacing the trades that best fit your income goals and risk tolerance.

The two main risks are capped upside and downside exposure. If the stock rallies far above your strike, your gains are limited to the strike plus premium. If the stock falls, the premium offers only modest cushion — you still bear most of the loss on the shares. Covered calls reduce, but do not eliminate, the risk of owning the stock.

If your call is assigned, you sell your 100 shares per contract at the strike price and keep the premium. This usually happens when the stock closes above the strike at expiration. You realize the gain up to the strike plus the premium, but miss any further upside. You can then redeploy the cash or buy back in.

Rolling means buying back your current call and selling a new one with a later expiration and/or different strike. Investors often roll when the stock approaches the strike and they want to keep their shares, to collect more premium, or to avoid assignment before a dividend or event. Roll up for more upside, or out for more time and income.

Selling calls before earnings can pay larger premiums because implied volatility rises ahead of the report. The trade-off is sharply higher risk: a big earnings move can push the stock through your strike or cause a steep drop. Only sell into earnings if you accept that elevated volatility and are comfortable with the possible outcomes.