Avoiding Over-trading: How Many Covered Calls Should You Really Manage?
If you’ve ever felt like your covered call book is running you, you might be overtrading. The goal isn’t “as many trades as possible”—it’s a manageable number of quality positions you can monitor, adjust, and roll without stress.
🧭 The Real Constraint: Your Attention
Overtrading happens when position count outgrows your ability to track news, earnings, IV shifts, and early-assignment risk. Even strong setups suffer if you miss alerts or forget to roll. Think of capacity in terms of time per position and your cadence (weekly vs. monthly).
📏 A Simple Capacity Formula
Use this to set an initial cap and then fine-tune from experience:
- Max Positions ≈
⌊ (Weekly hours you can spend on options) / (Avg. minutes per position per week / 60) ⌋ - For many investors: 10–20 min/position/week if monthly; 20–40 min if weekly.
Example: If you can spare 3 hours/week and spend ~20 minutes per monthly position, a good starting cap is 9 positions.
💼 Portfolio Sizing Rules That Keep You Sane
- Core cap: Allocate 30–60% of equity to covered-call names; keep the rest in cash/ETFs for flexibility and risk control.
- Per-position size: Aim for 5–10% of equity per ticker (1–3 contracts for most accounts), adjusting for price and volatility.
- Sector/issuer diversification: Cap any single sector at 30–35% and any single issuer at 10–15% of equity.
- Volatility-aware count: High-IV names “use up” more attention—treat one high-IV position as two normal positions in your capacity math.
🗓️ Choose a Cadence—Then Stick to It
- Monthly writer: Fewer decisions, lower maintenance. Great for bandwidth. Target 5–12 positions to start.
- Weekly writer: More premium, more touchpoints. Target 3–8 positions unless you have strong routines/alerts.
- Mixed cadence: Keep a core monthly book; add 1–3 tactical weekly positions when time permits.
🧰 A Lightweight Workflow
- Screen → shortlist → confirm earnings (avoid writing through earnings unless intentional).
- Tag each position with: strike, expiry, roll plan, stop/exit conditions.
- Set alerts for: price near strike, IV spikes, ex-div dates, and early-assignment risk.
- Weekly review: roll decisions, add/remove exposure, rebalance sector weights.
🚩 Red Flags You’re Overtrading
- Missing rolls or ex-div dates; scrambling on Fridays.
- Holding many tiny positions that don’t move the needle.
- Concentration creep in one hot sector (tech, energy, etc.).
- IV-driven gaps make you anxious—suggesting too many high-beta names.
✅ A Practical Starting Point by Account Size
- $25k–$50k: 3–6 positions (monthly), 1–3 positions (weekly).
- $50k–$150k: 5–10 positions (monthly), 3–6 positions (weekly).
- $150k+: 8–15 positions (monthly), 5–8 positions (weekly), with sector caps.
Adjust down if you’re using higher-IV names or trading across earnings; adjust up only after 6–8 calm weeks of consistent execution.
🧠 Final Tip
Set a hard cap on positions, write it down, and let new ideas compete for a slot. Fewer, better-managed covered calls usually beat an oversized, neglected book. Tools like Optrader.ca help you filter for clean setups so you can stay within your bandwidth.
🛡️ Try Optrader's Free Screener
⚠️ This article is for education only and not investment advice. Confirm details with your brokerage and consider consulting a professional before trading.
