Importance of News Sentiment in Selecting Covered-Call Options
Importance of News Sentiment in Selecting Covered-Call Options
When writing a covered call, most Canadian investors check metrics like ROO %, implied volatility, and open interest. But one powerful filter is often overlooked — news sentiment.
What Is News Sentiment?
News sentiment analysis uses AI to gauge whether recent news articles about a stock are positive, neutral, or negative. It’s based on the language used by financial journalists, earnings reports, and media coverage.
Why It Matters for Covered Calls
- Positive sentiment can boost stock price and increase the chance your option is assigned.
- Negative sentiment may lead to declines — eroding your stock’s value despite premium income.
- Neutral or mixed sentiment may indicate stable conditions — ideal for conservative trades.
Real-World Example
Suppose you’re screening a TSX stock offering 2.8% ROO — great on paper. But recent headlines suggest an earnings miss or SEC probe. Without sentiment analysis, you'd be flying blind into risk.
How Optrader.ca Helps
Optrader.ca uses AI-powered tools to analyze news sentiment for every stock in your screener. It flags red signals and lets you sort by bullish sentiment — helping you avoid high-risk setups and focus on high-conviction trades.
