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 premium from our example isn't a one-time thing. You can sell a new covered call roughly every month. The honest question is: how much does that actually add up to?
Our backtests, run against three years of historical option chain data with all the engine's defensive rules active (earnings blackouts, profit targets, conservative strike selection), put the realistic answer at 4-8% annual yield on the underlying stock positions.
On a $20,000 AAPL position, that's roughly $1,500/year in premium income — a 6.2% annual yield, on top of any stock appreciation.
Scale that to a diversified $100,000 portfolio across several names, and the same backtests showed roughly $10,000-11,000/year at an 8.1% blended yield. Stretch to a $250,000 diversified portfolio, and you're looking at about $18,000/year at 5.6% — meaningful supplemental income, mortgage-payment money, early-retirement-fund money, even if it isn't salary-replacement money.
That's real, repeatable, and grounded in how the strategy actually performs over multi-year periods. If you've seen articles claiming 20%+ annual yields from covered calls, you've seen the version that sells through earnings, ignores liquidity filters, and assumes nothing ever goes wrong. We don't publish those numbers because our backtests don't produce them.
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.
You tell us what stocks you own. Every month, we tell you:
No options chain to decipher. No greeks to memorize. Just clear instructions you can act on in minutes at your broker.