| Lee Lowell
Author of “Get Rich with Options”

• Selling covered calls means you sell someone else the right (but not the obligation) to buy your stock at a set price (strike price) by a set date.
• You already own the shares — ideally 100 shares per contract.
• You collect a premium upfront for selling this call option.
• If the stock stays below the strike price, you keep both the shares and the premium.
• Think of it like renting out your stocks—you keep ownership, but someone pays you for the option to buy them.

• You monetize time: Instead of waiting for dividends or hoping for capital gains, you get cash flow now.

• You lower your cost basis: Premiums collected reduce your effective purchase price, cushioning downside risk.

• You capitalize on volatility: Higher implied volatility = fatter premiums.
  
  The big advantage? You’re not gambling on direction—you’re making money from time decay and market chop, while still owning the underlying asset.
  
  

• Don’t Sell Too Close to the Money in High Momentum Runs – You’ll get called away faster than a Tesla in Ludicrous Mode.
• Don’t Sell Long-Dated LEAPS Calls – Time decay works more slowly
• Don’t Ignore Earnings Dates

• Roll the Call – If price nears your strike before expiry, buy it back and sell a later-dated or higher strike call
• Sell OTM Strikes calls 5–10% above current price to give room for upside while still collecting premium. 
• Sell Short-Duration – 7– 21 day expirations reduce exposure to big move
  
  

Trade Setup:

• Stock Price on Aug 6 (Post-Earnings): $425
• Shares Owned: 1,000 shares (10 option contracts)
• Covered Call Sold: Aug 15th $425 strike
• Premium Received: $11.80 per share = $1,180 per contract × 10 contracts = $11,800 total

Trade Outcome by Aug 11 Close:

• Current Option Price: $0.54 per share = $54 per contract × 10 contracts = $540 total

• Option Profit: $11.80 – $0.54 = $11.26 per share

  Total Option Income: $11,260

  % Return on Option Side: 95.4% of premium captured in 5 trading days

Stock Movement:

• Stock Price Change (Aug 6 → Aug 11): $425 → $408
• % Change in Stock: -4.0% (down $17,000 in unrealized value)
• Relative Return: Covered call income of $11,260 reduced the net loss to $5,740 on the overall position, effectively cushioning 66% of the stock’s decline in just one week.
  
  

As part of his investment strategy, Warren Buffett often writes covered calls on his positions. This earns him a cash premium in exchange for giving another investor the right to buy away Buffett’s stock shares at a higher price.”

| Nasdaq on Buffett's covered call strategy