Stock Option Investment Advice

When is the best time to sell Covered Calls?

In my experience, the best time to sell a covered call is really based on the performance of the stock. For example, I have a few low priced stocks that are trading around the $6.00 range. I cannot sell the 7.5 strike calls as there is little or no premium, and I do not want to sell the 5 strike call as I do not want to get it called away.

I have to wait for the stock to move up to $7.00 or $7.25 before it makes sense to sell a 7.5 strike call. This may happen in the first week of the month, the day after expiration, or towards the end of the current expiration.

Q. When is the best time to sell covered calls? In the last week before the next option month? Why? In the first week of the new option month? Why?

A. Again, I feel that the best time is Dependant on the stock price and the option premium. I could sell a the week before the next option month, if and only if the premium matches my desired goals and returns.

Q. Are there any disadvantages when I sell covered calls in the last week before the next option month?

A. Well, if you sell an option in the last week before expiration for the upcoming expiration you may be able to generate a quick income, but it will be a small return as the time value has already evaporated. If you sell the call the week before expiration but sell the next month out, you might increase your time premium on the position by a small margin because you gain the weekend time. Also, most investors roll their covered call from month to month, therefore, there is a great deal of sellling pressure the first few days of the expiration month, which creates slightly lower premiums.

Q. Have you any tip about the best timing of selling covered calls?

A. Over the years, as with most covered call traders, I find myself following the expiration cycle. I hold the open calls to as close to expiration as I can to get the most time value out of the position (assuming that I did not close the call earlier in the month to roll the position if the stock had moved up or down significantly). Therefore, I am typically opening new positions the Monday or Tuesday following expiration as my calls have expired, been bought back, or cash has been freed up due to assignment and I am looking to get into new positions. It goes without saying that the highest returns are obtained by writing month to month as opposed to 2, 4, or 6 months out in time.

That being said, there are some situations (as mentioned with the $6.00 stock above) where I may have to wait to sell a call as there are no beneficial premiums at the near term strike prices. I might have to wait three weeks before the stock makes a significant move, and then I may be selling a call further out in time than I had initially planned.

As a general rule I find it best to sell calls after the expiration date to maximize time value. To maximize the annual return, I only sell calls that are less than 45 days out in time, but typically more than 15 days to exp.


  1. Frank C

    You say: “As a general rule I find it best to sell calls after the expiration date…”

    I’m confused. How do you sell a call after its expiration date? Can you provide an example of this? The only example I can think of is impossible, i.e. selling the March 17th expiration call on March 23rd. How is this possible?

    1. admin Post author

      Hi Frank! The comment could be re-phrased as: “We find it best to sell new covered calls after the Previous expiration date.” For example, if we had a short call expiring on March 17th, we would likely wait for the option to expire. Then, the following Monday or Tuesday after expiration, (MAR 20th or 21st), sell the March 24th call. This allows us to maximize the time value decay in the previous option that expires on MAR 17th, while still gaining time value for the new write that expires 7 days later.

      That being said, if you have decided to roll your existing call prior to expiration due to the stock price and your expectations going forward, than anytime may be a good time to roll the call position forward.

      This article is also related to Standard expiration dates on the 3rd Friday of each month, and was written prior to the ‘explosion’ of available Weekly options.

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