A Flexible Weekly Covered Call Routine for Investment Stocks

Summary

The document discusses how to choose a covered call’s strike and expiration and when to close or roll it. It does not give an objectively optimal rule; instead, the answer offers a personal routine for shares held as an investment over weeks to months. The trader sells calls on a weekly schedule with expiration the following week, accepting less premium than longer-dated calls in exchange for more frequent opportunities to reassess.

The strike is chosen at a price where the seller would be comfortable selling the shares, without setting it higher simply to avoid assignment. If a call expires, the seller can choose a new strike based on current circumstances. This is a qualitative, preference-based approach rather than a tested strategy: the document supplies no performance evidence, quantitative selection criteria, or systematic close and roll rules. It also distinguishes shorter-term investment holdings from positions intended to be kept for decades, for which the contributor would not use the routine.

Key ideas

• There is no universally optimal covered call strike or expiration independent of an investor’s goals and risk tolerance.
• A weekly schedule with calls expiring the following week offers frequent chances to reassess the position.
• The strike should be at a level where the investor is willing to sell the shares.
• The suggested routine is personal guidance and provides no quantitative evidence or explicit roll rule.

Tags

# Optimal Covered Call Strategy


# Optimal Covered Call Strategy












How do I compute the optimal strike / expiry / when to close or roll for a covered call strategy on a highly liquid underlying (e.g. SPY)?

## Answer by AllBlooming (score 2)

https://quant.stackexchange.com/a/54792

As the comments suggest, there is no "objectively" optimal strategy, and it depends on your goals and risk tolerance.

I personally like to sell covered calls on a weekly schedule, for calls that expire the week after. Of course, the collected credit is lower than with expiration dates further in the future, but it gives me more flexibility. I can let them expire (worthless, hopefully) and then decide from scratch, possibly at a different strike price.

As for the strike price, I set it high enough that I wouldn't mind having to sell, but not higher.

I use it for stocks I bought as an investment (not a short-term trade), but only for stocks I feel I want to keep for a few weeks to months, and not for the ones that I want to keep for decades.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.