Why I Use Covered Calls Instead of Chasing Price
On 22 December, my focus is not on predicting whether NVDA will explode higher or suddenly crash lower. My focus is on consistent, repeatable income while still participating in upside. That is why I use a covered call strategy, which requires me to already own the underlying stock.
This is important to state upfront:
A covered call can only be done if I own the stock.
I am not speculating with naked options. I am not over-leveraging. I am simply monetising time and volatility on shares I already hold.
My cost basis for NVDA is around $99.30. This gives me a strong foundation. From this position, I sell short-dated call options to generate income, reduce my effective cost, and let the market pay me for waiting.
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What Is a Covered Call (In Simple Terms)
A covered call is a strategy where:
• I own 100 shares of NVDA
• I sell 1 call option against those shares
• The call option gives the buyer the right (but not obligation) to buy my shares at a fixed price (the strike) before expiry
• In return, I receive a premium upfront
Because I already own the shares, my position is “covered.”
There is no unlimited risk on the upside like a naked call.
This strategy works best when:
• I believe the stock will move slowly, consolidate, or rise modestly
• I am happy to sell my shares at a higher price if assigned
• I want to generate short-term income while holding long-term
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Why NVDA Is Suitable for Covered Calls
I choose NVDA deliberately for covered calls because of several reasons:
1. High Liquidity
NVDA has one of the most liquid option chains in the market. Tight bid-ask spreads mean:
• Better fills
• Lower slippage
• More flexibility to roll or adjust
2. Consistent Volatility
NVDA’s implied volatility is usually elevated compared to slower stocks. This is crucial because:
• Higher volatility = higher option premiums
• Even short-dated options can pay meaningful income
3. Strong Long-Term Thesis
I am comfortable owning NVDA. That matters a lot.
Covered calls only work psychologically if I am happy holding the stock even during pullbacks.
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My Specific Trade Setup (22 December)
Here is exactly what I am doing:
• I own NVDA shares
• My average cost: ~$99.30
• I sell a 5-day call option
• Strike price: $102
• Premium collected:
• About $0.15 per share
• Or $15 per contract
• Potential capital gain if assigned:
• $102 – $99.30 = $2.70 per share
• Or $270 total
• Total potential outcome:
• $270 capital gain
• • ~$15 option premium
• = ~$285 in 5 days
This is not guesswork. These are defined numbers before I even place the trade.
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Why I Chose the 102 Strike
I didn’t randomly pick $102.
I chose it because:
• It is above my cost
• It is slightly out-of-the-money
• It aligns with short-term resistance and realistic movement
• It allows upside participation without being overly aggressive
If NVDA rallies strongly above $102:
• I get assigned
• I sell my shares at a profit
• I walk away with cash and income
• I can always re-enter later
I do not view assignment as failure.
Assignment is a profitable exit, not a mistake.
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Understanding the Two Possible Outcomes
Every covered call has only two outcomes. I accept both.
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Outcome 1: NVDA Stays Below $102
This is the most common outcome with short-dated calls.
If NVDA closes below $102 at expiry:
• The option expires worthless
• I keep 100% of the premium
• I still own my shares
• My effective cost drops slightly
This is pure income.
No stress. No decision-making. No timing pressure.
I can then:
• Sell another call the following week
• Repeat the process
• Compound premiums over time
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Outcome 2: NVDA Goes Above $102
If NVDA rises above $102:
• My shares are called away
• I sell at $102
• I lock in a $2.70 per share gain
• I also keep the option premium
This is still a win.
Many traders emotionally resist assignment. I do not.
I remind myself:
• Profit is profit
• I sold my upside by choice
• I was paid to do so
If I still believe in NVDA long-term, I can:
• Wait for a pullback
• Re-enter
• Or use cash-secured puts next
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Why I Prefer Short-Dated Calls (5 Days)
I intentionally sell 5-day options instead of monthly calls.
Here’s why:
1. Faster Time Decay
Theta decay accelerates as expiry approaches.
Short-dated options lose value faster, which benefits me as the seller.
2. More Control
I reassess my position weekly instead of locking myself into a long contract.
3. Flexibility
Markets change quickly. Short expiries allow me to adapt.
4. Compounding Effect
Even small premiums add up when collected repeatedly.
$15 may look small once.
Collected every week, it becomes meaningful.
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My Risk Management Philosophy
Covered calls are not risk-free. I manage risk intentionally.
1. I Only Sell Calls Above My Cost
I never sell calls below my breakeven unless I deliberately want to exit.
2. I Accept Opportunity Cost
If NVDA explodes to $110, I miss upside beyond $102.
I accept this because:
• I was paid upfront
• I prioritise consistency over home runs
3. I Do Not Overtrade
I sell one call per 100 shares, not more.
4. I Stay Emotionally Neutral
No chasing. No panic rolling.
I let probabilities work.
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How This Strategy Fits My Overall Trading Style
My trading style is:
• Income-focused
• Probability-based
• Risk-defined
• Repeatable
Covered calls align perfectly with this mindset.
I am not trying to:
• Predict tops
• Catch bottoms
• Time every swing
Instead, I let:
• Time decay
• Volatility
• Structure
do the heavy lifting for me.
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Why This Is Not Gambling
Many people misunderstand options.
This is not gambling because:
• I already own the stock
• My risk is defined
• My outcomes are known in advance
• I choose strikes intentionally
The real risk is emotional decision-making.
Covered calls remove a lot of that.
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How Covered Calls Lower My Effective Cost Over Time
Each premium collected:
• Slightly reduces my effective cost
• Acts as a buffer during pullbacks
• Smooths equity curve volatility
Over months, this adds up.
Even if NVDA goes sideways:
• I still get paid
• My capital is productive
• I am not idle
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Psychological Benefits of This Strategy
One underrated advantage of covered calls is mental clarity.
I no longer obsess over:
• Every tick
• Every headline
• Every candle
Because:
• I already know my plan
• I already know my exit
• I already got paid
This reduces overtrading and emotional mistakes.
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Why I Am Comfortable Repeating This Trade
I repeat this strategy because:
• It is simple
• It is structured
• It is scalable
• It matches my temperament
I do not need NVDA to be perfect.
I just need it to behave normally.
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Final Thoughts
My 22 December NVDA covered call is not about being clever.
It is about being disciplined.
I own NVDA at ~$99.30.
I sell a 5-day $102 call.
I collect premium.
I define my upside.
I accept both outcomes.
If the shares stay below $102, I keep income.
If they go above, I exit profitably.
Either way, I win.
That is why I use covered calls.
That is my strategy.
@Daily_Discussion @TigerStars @TigerClub @Daily_Discussion @MillionaireTiger @TigerEvents $NFLX 20260116 100.0 CALL$
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