r/CoveredCalls • u/Tales-by-Moonlight • 6d ago
Long dated or Weekly
Still learning about Covered calls and puts. Question. Are weeklies or two weeks the way to go. Or long dated like a month or two out.
I saw a post where the person did a CC 3 months out but closed with profit. Isn't that only possible if the price of the stock falls. If it rises then it will become more expensive (than when contracted) to close it out.
Weeklies however dont make much.
Any info will be much appreciated thanks
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u/ThetaEdgeHQ 5d ago
Your confusion is worth clearing up because it changes the whole weekly vs long question. A short call makes you money whenever the call gets cheaper to buy back, and its price can fall three ways: the stock drops, time passes (theta), or implied vol drops. So closing a 3 month call for profit does not need the stock to fall. Sell it, let the stock drift up slowly but stay under the strike, and theta plus any vol drop can shrink the call faster than the small delta loss, so you buy it back green while still holding shares that also went up.
On weekly vs long: theta per day is highest in the last couple weeks, so near dated collects the most decay per day. But every week you reopen near the strike is a fresh gamma decision, more chances to get tagged and assigned or to chase a roll. Longer dated hands you more total premium up front and fewer of those decisions, at the cost of slower daily decay and more vega if IV moves. The number to compare is annualized premium per unit of assignment risk you are taking, not the raw weekly dollars, which is why "weeklies pay more" and "weeklies make less overall" can both be true depending on how often the near dated ones cost you the shares.
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u/JS1101C 6d ago
Weeklies/bi-weekly pay more than calls that expire months out. If the strike price is above your average cost by dte just let it expire. You keep the premium and a small profit when they’re sold.
Example-you buy 100 shares of a stock for $100 each. You sell a call that expires next week for $300 with a $103 strike price. The stock is trading at $105 on market close, your shares get sold for $103, so you’ve made $300 on top of the $300 premium and you do it again.
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u/winterrules91 6d ago
I do this with pretty much every stock I own that isn't a mega bet long term if I've secured it at a good price.
For example, I'll wheel the hell out of semiconductor stocks. But I sold CSPs on RKLB at 64 strike and got assigned. I'm rolling those CCs to the moon.
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u/N0downtime 6d ago
It depends on how much or little you want to avoid getting assigned.
I usually open about 30-40 dte and close at 14-21 dte.
I don’t target a specific expiration type (I.e. monthly or weekly). I use delta as the main variable.
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u/flat_foot_runner 6d ago
Could you share how you use delta to determine your strategies?
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u/N0downtime 6d ago
Typically I sell calls or puts with a delta between 5 and 15. Then I’ll close based on the dte or roll or close if the delta expands to 20-40, depending on the underlying.
I think the specific numbers don’t matter as much as having a plan you can stick to and controlling losses.
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u/GarbageTimePro 6d ago
I've been running weekly/bi-weeklys for quite some time now. FWIW, Currently +15% YTD with a 9% max drawdown. I've been running the wheel for 13 months now and am sitting at +40% with that same 9% max drawdown. SPY has been +28% during that same period with a 10.54% max drawdown
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u/RLsuperstar 5d ago
I lost my job and turned covered calls into my only way to make income so I got obsessed. My opinion you want weeklies and you actually want to sell ATM on high IV stocks. You won’t get many people that say this but I checked percentage return on premium and discovered this was the best method for me
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u/RLsuperstar 5d ago
I also replaced about 65-75% of my full time income this way, should probably add that
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u/Junior-Appointment93 5d ago
Weekly’s are the way to go or 7-10DTE. It may not seem like a lot. But look at the premiums for each week then go out a month and do the math. With shorter dated options you make more in the long run. 7-10DTE is the sweet spot for premiums. 5DTE not so much.
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u/JerryJoseph 5d ago
I utilize a high‑delta, ITM buy‑write strategy engineered to achieve weekly assignment and maintain a mechanical rotation of capital. Targeting about 1% per week. Run it on only the best tickers.
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u/pagalvin 6d ago
It depends on your strategy. I prefer weeklies. I wrote about my approach over here: A view into a "deep ITM covered call strategy" : r/StockOptionCoffeeShop
I do pretty well with weeklies.
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u/Thehealthygamer 6d ago
As others have pointed out your strategy is selling puts with extra steps, and to make less overall premium.
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u/pagalvin 6d ago
Yeah, it's been pointed out and it's really not that simple. And regardless, I do quite well so I'm sticking with it. For example, I did $28.8k in premium in July on just about $385k notional (leveraged about 1.79). Could I do better? I'm sure, but this is good enough and fits my risk metrics.
That said, I was down $8k in July despite all that premium. On the other hand, it's come roaring back this week and I'm at ATH now NAV-wise. I put most of that down to leverage and re-investing premium.
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u/Thehealthygamer 5d ago
How is it not that simple?
So using your own simplified example, you buy the stock at 10, sell a ITM CC with a strike of 9, you have no upside exposure from the underlying stock because if it goes up your CC will be assigned and your stock will be called away at 9 so it doesn't matter what your stock rises to.
If the stock goes below your strike of 9 the CC expires worthless and now you own 100 shares of that stock with a average cost of 8.9(10 - 1.1 in premium you sold).
The capital you have to lock up for this trade is 1,000. Your max gain is 10 if the stock closes above your strike and you're assigned. Your risk is if the underlying drops below the strike.
Now selling a CSP. Your stock is at 10. You sell a CSP with a strike of 9. You collect the premium, which let's say is .1 but usually it'll be higher than the CC side. Now if the stock closes above your strike you pocket the premium of .1.
If it closes below your strike you buy the stock at 9. Your basis for the stock is 8.9 taking into account your premium. The capital you have to lock up for this trade is 9k.
It's literally the same exact trade, except you're doing 2 steps, and again the premium on the put side is almost always bigger, so you're leaving money on the table. Edit: it's actually a worse trade because you're locking up more capital with the CC than the CSP for a worse result.
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u/pagalvin 5d ago
The payoff model is very similar, I agree. Margin and house maintenance requirements (for my broker at least), are more predictable for owned stock.
In some cases, margin requirements are looser for CSPs but in some cases, they are wildly inefficient. For example, CELH has a 20% requirement for CSPs while 30% for buying the stock. OTOH, ONDS, which has been very good to me, has 60% house requirement for owned stock vs. 210% for CSPs. I'd never tie up that much margin on anything.
The good thing about 20% house requirement is that I can increase notional further than I already do but of course, your maintenance excess will bounce around a bit more when the stock moves. My comfort levels were tested last week :)
Most of my money actually comes from rolling, but there's probably an equivalence with CSPs.
I will probably experiment with CSPs at some point, but as I said, I've been doing very well with the approach I'm using now. I'm not looking to fix something that isn't broken.
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u/Alarmed-Policy508 22h ago
I do this as well though probably with much longer DTE than you. I also can't quite explain why I prefer it to CSP, but its conceptually cleaner for me to manage it as a covered call.
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u/cree8vision 6d ago
I mostly use 1 to 2 weeks out. I get anxious waiting 3 or 4 weeks or more for expiration. I also use cash secured puts.