CPT - Covered Call Trading Guidelines

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		TRADING GUIDELINES
		WRITING COVERED CALLS
🎯 Good Trade Setups Are the Goal! There’s no better way to get started than by following a set of Golden Guidelines — key principles that help position us for success when selling premium. Let’s be real: trades can go sideways. But by starting each one from a solid, well-considered place, we give ourselves the best possible chance to manage like pros. Below are the personal Golden Rules I strive to follow every time I enter a premium-selling trade. Now, a quick note... These aren’t rigid rules or deal breakers. Aim to follow as many as you can. But one stands above the rest — the #1 Golden Guideline: 💡 Only trade stocks you're willing to own. Because if the market turns against you and you end up holding a stock at a much lower price than you paid… you’ll want to sleep easy knowing it’s a company you believe in. I’ve been there — trust me. -
The Golden Guidelines of Covered Call Writing  “Smart trades start with smart plans. Let’s set ourselves up for success!” Trading covered calls is not about perfection — it’s about probabilities and positioning. Even great trades can go sideways. These 19 essential principles will help you trade like a pro, minimize risk, and maximize reward. And remember: Rule #1 is sacred. The rest? Follow as many as you can! 🚀 🔑 #1 GOLDEN RULE Only buy stocks you'd be happy to own long-term 💼 If the stock drops 📉, you're now a shareholder — so make sure it's a company you trust and believe in. 🧭 ENTRY STRATEGY & STOCK SELECTION 2. Buy stocks trading near the Keltner Midline or below Use Yahoo Finance's Keltner Channel default. Aim for RSI ≈ 40 or lower for a value entry. 🧮 3. Premium Goals Weekly: Target ~1% return 💵 30-day: Target ~3% return or more 💰 4. Avoid earnings week Options are inflated, and so is risk! Skip expirations that fall during earnings volatility. 🎢 5. Sell covered calls on green days 🌱 Positive momentum means higher call premiums — more 💰 in your pocket. 6. When stock is near resistance Sell OTM calls above resistance hoping for a fade. Keep the stock AND the premium. 🤑 7. Know the Ex-Dividend Date To avoid early assignment, plan your call strike and expiration accordingly if you want to keep the shares.  8. Avoid same-store sales catalysts These monthly mini-earnings create unpredictable price swings. 🔄 🛠️ TRADE MECHANICS & EXECUTION 9. Always use LIMIT ORDERS Options spreads can be wide. Start with the MID price and wait. 🕰️ 10. Pick strikes with 100+ open orders You want liquidity! No buyers = bad exits. Avoid going to market unless desperate. 🚪 11. Don’t buy at the top Enter near support zones for the best setups. Wall Street pumps and dumps are real! 📉🧱 12. Don’t wait Buy stock + sell call = our edge. Delay means you're just another speculator. 🐢💨 🧯 MANAGEMENT & EXIT STRATEGIES 13. Use the -50% Rule (within first 2 weeks) If call premium falls by half, buy it back and reset. Cut losses, not corners. ✂️ 14. After -50% buyback? Roll it out! Go further out in time, aim to collect equal/greater premium — turn losses into gains. 🔁💡 15. If premium drops under $0.10 (with 2+ weeks left) Buy it back — that trade is done. Free up capital. 🏁 16. Don’t pay more than 25% to close a near-expiry trade Unless there's a good reason, let it bleed or expire worthless. ⏳ ⚖️ STRIKE SELECTION STRATEGY 17. ITM Covered Calls Smaller premium, more downside protection. Make sure Time Value still delivers ~3%. 🛡️ 18. ATM Covered Calls Highest premium, biggest 💰. Aim for 4–5% return. Risk of assignment is high. 19. OTM Covered Calls Premium + stock upside potential. Still aim for 3%+ premium, plus share appreciation. 📈🎯 ✨ Final Thought ✨ Trading is a game of probabilities, not certainties. With these guidelines, you're stacking the odds in your favor. Be strategic, stay patient, and always protect your capital. 💪📊
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