A covered call is therefore most profitable if the stock moves up to the strike price, generating profit from the long stock position, while the call that was sold expires worthless, allowing the call writer to collect the entire premium from its sale.

How much money can you make selling covered calls?

In general, you can earn anywhere between 1 and 5% (or more) selling covered calls. How much you earn depends on how volatile the stock market currently is, the strike price, and the expiration date. In general, the more volatile the markets are, the higher the monthly income you’ll earn from selling covered calls.

What is the downside to selling covered calls?

Cons of Selling Covered Calls for Income The seller’s profit is limited to the premium received plus the difference between the stocks purchase price and the options strike price. … A significant drop in the price of the stock (greater than the premium) will result in a loss on the entire transaction.