Avoid These 6 Covered Call Mistakes That Can Cost You Thousands

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Are your covered call trades not delivering the passive income you expected? You’re not alone. Many investors unknowingly make costly mistakes that reduce their gains or amplify losses. In this blog post, based on Mark Yegge’s video, we’ll break down six of the most common blunders investors make when selling covered calls—and how you can avoid them to secure steady, reliable retirement income.

The 6 Most Dangerous Covered Call Mistakes

No Trading Plan

The biggest mistake? Not having a plan. Many investors sell calls without knowing:

When to roll
How to react to a market drop
What to do if the stock rallies

Mark reminds us:

“When emotions go up, intelligence goes down.”

Fix it: Create a simple, rules-based plan that outlines your entries, exits, adjustments, and market conditions.

Selling Calls on Downtrending Stocks

Selling calls on stocks that are already falling is a recipe for disaster. You might collect $3 in premium but lose $6 as the stock continues its slide—and that pattern can repeat.

Fix it: Avoid declining stocks unless you have a long-term belief and a repair plan. Prioritize uptrending or stable stocks.

Choosing Stocks with Poor Fundamentals

Mark’s example of pot stocks highlights a key rule: bad companies make bad investments. If a stock lacks earnings, sales, or sound leadership, it's more likely to keep falling.

Fix it: Stick to “super stocks” like Apple, Nvidia, or Microsoft—companies with:

Rising earnings and sales
Good return on equity
Consistent institutional support

Selling Covered Calls During Market Downturns

If the entire market is falling, your stock likely is too. Covered calls won’t protect you much in a major selloff.

Fix it: Learn basic market timing to know when to stay active and when to slow down. Even a 70–80% success rate improves your edge.

Not Repairing Trades

When a stock drops, many traders freeze. But if your short call has lost value, that’s a chance to buy it back cheap and sell a new one lower—this is called repairing your trade.

Fix it: Learn adjustment techniques like:

Rolling down and out
Selling additional contracts (when appropriate)
Using protective puts

Trying to Predict the Market

The worst mistake? Thinking you're a market prophet. Many traders make decisions based on gut feelings like “It’ll bounce at the 50-day moving average.”

Fix it: Focus on probability and income—not prediction. The covered call strategy works best when used consistently, not when chasing direction.

Life-Improving Tips for Covered Call Investors

Keep a Trade Journal to track results and emotions.
Use a checklist before entering a trade (e.g., trend, fundamentals, earnings date).
Set alerts for price levels and option expiration dates.
Limit yourself to high-quality stocks with consistent performance.
Use charts, not guesses—but don’t rely on one technical signal.
Join a community or mastermind to stay accountable and learn from others.
Plan your exits before you enter.
Roll when you’re ahead, not just when you’re behind.
Focus on risk management first, profit second.
Automate where possible (reminders, trade logs, screeners).

❓ Frequently Asked Questions (FAQs)

Q1: Can I sell covered calls in a bear market?

Yes, but be cautious. In-the-money calls offer more downside protection than out-of-the-money calls.

Q2: What are the best stocks for covered calls?

Choose high-liquidity, high-quality stocks with strong fundamentals—like Apple, Microsoft, or Nvidia.

Q3: How do I know when to roll a call option?

Roll when:

The stock moves near or past your strike price
Time decay favors a new position
Your premium is mostly gone

Call to Action

Want to avoid these mistakes for good and start generating 2–4% income per month? Join Mark Yegge’s Cash Flow Machine program and get the tools, coaching, and community support you need to succeed.

👉 Visit cashflowmachine.io to learn more.
👉 Subscribe to Mark's YouTube Channel for more tips and trade breakdowns.

Get started today

Conclusion

Covered calls are a powerful strategy for building passive income and supporting retirement goals—but only if done right. Avoiding these six common blunders could be the difference between a failing portfolio and a consistent stream of income.

Remember: It’s not about guessing the market—it’s about managing the trade and letting time work in your favor.

Now that you know the mistakes to avoid, you're already one step ahead. Stay disciplined, stay consistent, and keep building your cash flow machine.

Avoid These 6 Covered Call Mistakes That Can Cost You Thousands

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