If you own 100+ shares of a stock, you're sitting on a source of income most investors never tap. It's called a covered call, and it's the most widely used options strategy in the world — used by pension funds, endowments, and millions of individual investors.
5 minute read · No jargon · No prior options knowledge needed
You own shares of Apple. They sit in your brokerage account, and unless the price goes up, they don't do much for you.
A covered call lets you sell someone the right to buy your shares at a higher price by a specific date. In exchange, they pay you cash today — called the premium.
If the stock stays below that price? The contract expires, you keep your shares AND the premium. If the stock goes above that price? Your shares get sold at the agreed price — you keep the premium plus the gains up to that point.
The $350 from our example isn't a one-time thing. You can sell a new covered call every month. On a $25,000 position, collecting $300-500/month in premium is realistic — that's $3,600-6,000 per year, or a 14-24% annual yield, on top of any stock appreciation.
Scale that to a $200,000 portfolio with 5-8 stocks, and you're looking at $15,000-35,000 per year in covered call income. That's real money — mortgage payments, early retirement contributions, or simply compounding faster.
Covered calls have one tradeoff, and it's important to understand: you cap your upside above the strike price.
In our AAPL example, if the stock rockets to $300, your shares are still sold at $265. You miss the move from $265 to $300. You kept the $350 premium and the $1,500 gain to $265, but you didn't get the extra $3,500.
This is why covered calls work best when you're happy to own the stock at its current price and you'd be comfortable selling it at a higher price. It's income-first investing: you're choosing consistent monthly cash flow over the possibility of catching a rare big move.
Covered calls are the simplest options strategy. They're approved for IRA accounts. They've been used by institutions for decades. But most retail investors don't use them because the execution feels intimidating:
These are real questions with real answers — but figuring them out on your own means wading through options chains, greek letters, and broker interfaces designed for traders. That's the gap Income Factory fills.
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