Pre-trade workflow
Covered call trade checklist
Before selling a covered call, write down the income, cap, downside, and assignment plan.
- Basis: share cost, tax lot, and desired holding period.
- Strike: price where selling shares would be acceptable.
- Premium: credit relative to share basis and days to expiration.
- Upside cap: profit you give up above the strike.
- Downside: target loss if the stock drops below breakeven.
- Assignment: dividends, expiration, broker process, and whether delivery is acceptable.
- Exit: roll, close, hold, or accept assignment under prewritten conditions.
Primary reading: OIC covered call strategy overview · OIC options pricing overview · FINRA options overview · Investor.gov options overview · OCC options disclosure document