What Makes a Great Covered Call Candidate on the TSX?
What Makes a Great Covered Call Candidate on the TSX?
Covered calls are a powerful income-generating strategy — but success depends heavily on **stock selection**. Picking the wrong stock can leave you overexposed, assigned early, or stuck with low premiums. So what actually makes a great covered call candidate on the Toronto Stock Exchange?
1. Consistent Liquidity & High Open Interest
You want options that trade regularly — with tight bid/ask spreads. Look for open interest above 100 and volume that confirms activity. Illiquid contracts can eat your premium through slippage or make it tough to close early.
2. Solid Return on Option (ROO %)
ROO % is the ratio of premium earned relative to the stock price, annualized. Great candidates typically offer 2–3% monthly ROO without excessive risk. You can screen this on Optrader by sorting by ROO %.
3. Reasonable Delta (0.25–0.45)
Delta tells you the probability your option will finish in-the-money. Covered call writers often prefer 0.30–0.45 delta range — not too aggressive, not too conservative. It gives a good premium with moderate assignment risk.
4. No Earnings Before Expiry
A surprise earnings report can blow up your trade. Make sure the stock’s next earnings date is **after** your option expires. Optrader’s built-in earnings filter makes this easy.
5. Neutral or Positive News Sentiment
Even with good fundamentals, negative headlines can drag a stock down. Optrader scans financial news and uses AI to flag bullish or bearish sentiment. Favor stocks with neutral to positive news outlooks.
6. Historical Performance Stability
Optrader also lets you see how a stock typically performs in the current month over the past 20 years. Avoid names that have underperformed during the same season historically.
The bottom line? The best TSX covered call candidates are **liquid, consistent, and stable** — with strong premiums and minimal risk. Optrader.ca is built specifically to help Canadian investors screen for these setups with speed and confidence.
