Covered Call Management
Income from a holding you will not sell
A concentrated stock position that pays no dividend earns nothing while it waits. We turn its volatility into weekly cash, without ever giving up the shares.
Case study
USD 8m in one stock, earning nothing
A private investor holds about USD 8m of one large-cap US stock, trading a little below the average cost. It pays no dividend, selling is not an option, and the shares sit at a retail custodian with no trading API.
The brief: income in every week the market allows it, the shares never called away, a few minutes’ work a week, and no leverage, no new capital, no change of custodian.
How it works
Sell the upside one week at a time. Keep the shares.
Weekly calls
Each covered week we sell calls about 5–8% above the price, at 0.20 delta or less, and never below your average cost. Most weeks they expire worthless and you keep the premium.
Only when it pays
Calls are sold only while the stock’s 30-day implied volatility is 30% or higher, and never across an earnings release. Below that level the premium does not pay for the rallies.
Never called away
Every open call is bought back before the close on expiry day, whatever it costs. Assignment never happens by accident. That buy-back is the whole price of keeping the shares.
What the research found
Maturity decides everything
We replayed three years of the stock’s daily history from every possible start day, charging every buy-back in full. Weekly calls were the only maturity that made money in every start phase. Monthly calls, the textbook covered call, lost money at every strike. The volatility gate doubled what the weekly programme kept; skipping earnings weeks removed many of the expensive buy-backs.
| Programme | Kept, last year | Kept a year, 3 years | Cycles with a buy-back | Worst cycle |
|---|---|---|---|---|
| Weekly, 20 delta, vol gate, no earnings weeks | +9.9% | +6.9% | 1 in 6 | −11.8% |
| Weekly, 20 delta, no earnings weeks | +8.3% | +3.5% | 1 in 5 | −11.8% |
| Quarterly, 20 delta | +3.5% | +3.6% | 1 in 10 | −25.4% |
| Monthly, 20 delta, every month | −1.0% | −2.1% | 1 in 6 | −39.9% |
What to expect on USD 8m
USD 30–40k
Premium collected in each covered week
7–10%
Of the position kept a year after every buy-back (USD 570–820k, modelled)
4 in 5
Covered weeks that end with the whole premium kept
15 minutes
About 30 Fridays a year, two limit orders each. Nothing to do in the other weeks.
The honest cost. In weeks when the stock rallies through the strike, you hand back part of the rally through the buy-back. Eight weeks in three years each cost USD 0.5–1m against 40k of premium; they are already in the figures above. The premium cushions a fall only by its own size: a 10% drop still costs USD 800k.
Who it suits
- Founders, executives and early employees holding company stock, within their trading policy
- Families with legacy holdings and a low cost basis, where a sale means a large tax bill
- Conviction holders waiting for a recovery or a re-rating
- Anyone holding a volatile large-cap that pays no dividend
It needs a stock with liquid listed options. It does not suit investors who want every dollar of a sharp rally.
How we work with you
- Research on your stock: three years of data, every maturity and strike, including the variants that lost money.
- The rules in writing, agreed with you before the first trade.
- A weekly decision sheet from live exchange data, with the exact orders and the reasons for them.
- Execution at your existing custodian. You place the orders from the sheet; the shares never move.
- A ledger and monthly statement: premium collected, buy-backs paid, net kept, against the model.
Important information
All figures are modelled, not a live record. They come from a replay of three years of one stock’s history; expired option prices cannot be downloaded, so premiums were modelled from the exchange implied-volatility index and the call skew observed on the research date. The results rest on about ten large rally weeks in three years and will differ in future, possibly by a lot.
Writing covered calls gives up the stock’s upside above the strike while a call is open, in exchange for the premium, and does not protect against a fall. A single buy-back can exceed many weeks of premium. Option premiums have tax consequences that vary by jurisdiction, and some shareholders face restrictions on writing options against their shares. This page is for information only and is not an offer, a recommendation, or investment, tax or legal advice. Investors should take their own professional advice before acting.