Want to get paid on a stock you already own?

You don’t have to sell it, be right about where it goes next, or watch it every day.

Somebody hands you cash today, in exchange for the right to buy your shares at a price you picked, on a date you picked.

If they never come for the shares, you keep the cash and do it again.

If they do come, you sell at a price you already agreed was fine, and you keep the cash on top of it.

It’s called a covered call, and most investors never touch it.

I’ve run this on positions for years. One of them was B2Gold (BTG). In November 2024, I sold the January 2026 $4 calls for between $0.40 and $0.50, with $0.40 as the floor, and told the War Room not to take a penny less.

Fourteen months later we closed it out. That premium was in the account the entire time.

What A Covered Call Really Is

You own at least 100 shares of a stock, and you sell one call contract against them.

A call gives the buyer the right to purchase your shares at a set price, called the strike, before a set date, called expiration. They pay you for that right, and the payment is called the premium.

It’s “covered” because you already own the shares you might have to hand over.

The reasons are usually one of the same three…

1. They think every option is a lottery ticket
2. They’re chasing price appreciation and can’t be bothered with a few hundred dollars of income
3. They hate the idea of capping their upside.

Only the last one holds up.

What The Premium Does To Your Entry Price

Buy a stock at $50 and sell a call for $2, and your cost basis drops to $48.

The stock drops to $45, and you’re down $3 instead of $5. The stock goes nowhere for a month, and you made $2 that you would not otherwise have made. The option expires worthless, and you sell another one.

Lower your entry, collect cash whether the stock moves or not, then do it again.

Where you set the strike changes the trade completely.

There are three versions of a covered call, and they do entirely different jobs.

1. Sell a strike above the current price when you’re bullish. Stock at $100, sell the $105 call for $2, cost basis $98. You keep the premium and the shares still have five dollars of room to run before anybody takes them. Best of both worlds, and the smallest cash payment of the three.
2. Sell a strike at the current price when you think the stock goes sideways. Stock at $100, sell the $100 call for $5, cost basis $95. The premium is much larger because time value peaks right at the money, and that premium is your entire profit. The shares are going nowhere from here.
3. Sell a strike below the current price when you want protection. Stock at $100, sell the $90 call for $12, cost basis $88. Now the stock can fall ten dollars and you still walk away with $2, because you collected so much cash that your real entry was nowhere near $100.

That last one trips people up. You’re agreeing to sell your stock for less than it’s worth today and you’ll almost certainly have it called away, and the trade buys you the largest cushion of the three.

Beware Of Two Things

The premium is a buffer, and a buffer is a long way from a parachute. That $2 you collected does nothing if the stock falls from $50 to $30.

And you will get called away sometimes. The stock will run past your strike, your shares will go, and you’ll watch the rest of the move from the sidelines. You pay for the income that way, and if it would bother you, sell a higher strike or skip the trade.

YOUR ACTION PLAN

On B2Gold I sold a strike above the money and let it sit for fourteen months. My cost came down the day I sold that call and it never went back up.

We place these trades in the War Room every day. The ticker, the strike, the expiration, and the limit price I want for the premium, which on B2Gold meant not taking a penny under $0.40.

Come see how we run them.

P.S. Watching one stock at a time is only half the job. But sign up for the Wake-Up Watchlist, and you’ll get a text every morning with a specific stock worth watching, no digging required. As a special treat, Chris “CJ” Johnson goes live every Monday morning before the bell with a pre-market stream breaking down exactly what he’s watching for the week. Start your week the right way. Join here for free.

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FUN FACT FRIDAY

The Chicago Board Options Exchange (CBOE) opened on April 26, 1973 with call options on just 16 stocks, and puts didn’t exist yet. In the beginning, there were only a few strategies utilized by most traders: call buying, bull or bear spreads, and covered call writing. So the strategy I taught you today, selling a call against stock you own, is essentially one of the original three moves in modern options trading, predating puts by four years.