The Best Covered Call Stocks for Beginners
The Best Covered Call Stocks for Beginners
If you’re just starting with covered calls, choosing the right stocks is half the battle. Beginners often chase the highest premiums—only to get stuck with thinly traded, volatile names. Instead, focus on liquid, stable stocks that offer predictable income and flexibility.
What Makes a Stock “Beginner-Friendly” for Covered Calls?
- Liquidity: High daily trading volume and strong open interest in option chains (OI ≥ 500 preferred).
- Stability: Large-cap or defensive companies with smoother price action (less likely to gap 20% overnight).
- Reasonable ROO (Return on Option): Aim for 2–3% per month—enough income without excessive risk.
- Balanced Delta: Strikes with delta between 0.20–0.35 give income without constant assignment.
- No Earnings Landmines: Avoid expiries within 30 days of earnings announcements.
Examples of Beginner-Friendly Stocks
- Blue-chip tech: AAPL, MSFT — liquid chains, stable demand.
- Consumer staples: KO, PEP — defensive, predictable returns.
- Canadian banks: RY, TD, BMO — consistent option flow, great for income portfolios.
- Defensive healthcare: JNJ, PFE — lower volatility, decent premiums.
Common Beginner Mistakes
- Chasing high ROO (>5%). Often thinly traded or high-risk names.
- Ignoring open interest. Low OI = hard to fill orders.
- Writing calls into earnings. One surprise report can wipe out a year of income.
- Skipping exit rules. Always plan roll/close triggers before selling the call.
⚠️ This article is for informational purposes only and is not investment advice. Options involve risk and are not suitable for all investors.
