Election-Year Volatility: How Covered Calls Can Turn Market Uncertainty Into Monthly Income

Election years often bring uncertainty, headlines, and bigger market swings. While many investors see volatility as something to fear, Mark Yegge sees another possibility: higher option premiums for disciplined covered call investors.

The opportunity is not about predicting every political outcome. It is about having a system that uses volatility, manages positions, and generates income while investors wait for clarity.

Key Takeaways

Why Election Volatility Can Benefit Covered Call Investors

Mark’s argument starts with a simple idea: uncertainty creates demand for options. During election periods, traders often buy options as protection because they do not know how policies, markets, or sectors may react.

That increased demand can push option premiums higher. For someone selling covered calls, higher premiums can create an opportunity to collect more income from stocks they already own.

The Election-Year Covered Call Playbook

Mark explains that many investors make the mistake of treating covered calls as a one-time decision. They sell the same strike repeatedly, ignore changing conditions, and then panic when the stock moves.

His approach is different. He describes a three-phase framework that adjusts based on volatility, time, and market conditions.

Phase One: Before the Midterms

Mark describes the period before the midterms as a time when volatility may remain elevated. During this phase, he suggests using more aggressive strikes, such as calls around 5% to 7% out of the money.

The goal is to take advantage of higher premiums while collecting income each month.

Phase Two: The Consolidation Period

After the election, Mark expects volatility may settle temporarily. This becomes an adjustment period where investors can roll calls out in time and potentially adjust strike prices.

The objective is not necessarily to avoid assignment at all costs. It is to adapt the position to the new market reality.

Phase Three: The Longer Election Cycle

Looking toward the next presidential election cycle, Mark describes a more strategic approach. Investors may use calls further out of the money, perhaps 10% to 15% above the stock price, allowing more room for upside while still collecting premium.

A Covered Call Example

Mark provides a simple example. An investor owns 100 shares of a stock trading at $100. They sell a call option at a $106 strike price and collect $3 per share in premium.

That creates $300 of income from one position. Over twelve months, that could represent $3,600 in collected premium if similar monthly opportunities continue.

Mark emphasizes that this example is about understanding the mechanics. Actual results depend on the stock, option pricing, volatility, and market conditions.

How to Handle Assignment Risk

One of the biggest concerns investors have with covered calls is assignment. Mark explains that assignment is not automatically a mistake.

If a stock is trading near the strike price with time remaining before expiration, investors have several choices:

• Roll the call up and out.
• Take the profit and redeploy capital.
• Allow assignment and move to another opportunity.

The correct choice depends on the stock, the investor’s goals, and whether they still want to own the position.

Where Volatility May Be Highest

Mark points out that different sectors can react differently during election years. Areas such as healthcare, financials, and energy may experience larger swings because policy changes can directly affect them.

Technology and consumer discretionary stocks can also experience uncertainty. For covered call investors, the idea is to focus on quality companies where volatility creates attractive premium opportunities.

Earnings and Implied Volatility

Mark also highlights earnings announcements as another period where implied volatility can increase. Before earnings, option premiums may rise because traders are preparing for a potentially larger move.

However, investors need to be comfortable with the strike price they choose. A large earnings move can change the position quickly, so planning matters.

The Mindset Difference

According to Mark, the biggest difference between successful and unsuccessful covered call investors is not the strategy itself. It is the mindset.

When markets decline and fear rises, many investors stop selling covered calls. Mark believes that is often when premiums become more attractive.

His approach is to do the opposite of emotional investors: stay systematic, track positions, and use volatility instead of fearing it.

Building a Covered Call Tracking System

Mark recommends keeping records of every position:

• The stock owned.
• The strike price sold.
• The premium collected.
• Whether the position was rolled or assigned.

Over time, this information can reveal patterns about which stocks, strikes, and approaches work best for an investor.

Mark also discusses Cash Flow IQ as a tool he uses to help organize and analyze trading decisions.

What Investors Should Watch

The Bottom Line

Election-year volatility can make investors nervous, but Mark believes uncertainty can create opportunities for disciplined covered call investors.

The key is not trying to predict every political outcome. It is building a process: choose quality stocks, sell calls based on volatility, adjust positions when needed, and track the results.

In Mark’s view, volatility is not the enemy of an income strategy. With the right system and discipline, it can become the source of opportunity.