The Top Covered Call Strategies for Maximizing Your Passive Income

As an investor, maximizing passive income should always be a priority. One of the best ways to do this is through covered call strategies. Covered calls are a popular option trading strategy that can help you earn extra income on top of your stock holdings. In this article, we will explore the top covered call strategies that can help you maximize your passive income.

Cash Flow Machine - Covered Calls -The Top Covered Call Strategies for Maximizing Your Passive Income

What are Covered Call Options?

  Before we dive into the strategies, let's first define what a covered call option is. A covered call is an options trading strategy where an investor holds a long position in a stock and sells a call option on the same stock. This means that the investor owns the underlying stock and has sold the right for someone else to buy the stock at a certain price (strike price) for a specific period (expiration date). The goal of a covered call strategy is to earn income from the premiums received from selling the call options, while also benefiting from any potential price appreciation in the underlying stock. If the price of the stock remains below the strike price, the investor keeps the premium and the stock. If the price of the stock goes above the strike price, the investor is obligated to sell the stock at the strike price, but still keeps the premium received.

Top Covered Call Strategies 

Now that we have a basic understanding of what covered calls are, let's explore some of the top covered call strategies.

Covered Call Writing

Covered call writing is the most basic covered call strategy. In this strategy, the investor sells a call option on a stock they already own. The premium received from selling the call option provides additional income, and if the stock price remains below the strike price, the investor can continue to sell call options and collect premiums. One of the advantages of covered call writing is that it can be used in a sideways or slightly bullish market. It's also a great way to generate income on stocks that pay a low dividend.

Diagonal Call Spread

  The diagonal call spread is a more advanced covered call strategy. In this strategy, the investor buys a longer-term call option and sells a shorter-term call option on the same stock. This strategy is used when an investor expects the stock price to rise in the short term, but not necessarily over the long term. The diagonal call spread can help to reduce the cost of the long-term call option, while still allowing the investor to earn income from selling the shorter-term call option. This strategy is also useful when an investor wants to maintain a long-term position in a stock, but still wants to generate income from the short-term price movements.

Call Ratio Spread

The call ratio spread is a more complex covered call strategy. In this strategy, the investor sells one call option and buys two or more call options on the same stock. The goal of this strategy is to benefit from a small increase in the stock price, while still earning income from selling the call option. The call ratio spread can be used when an investor is slightly bullish on a stock, but wants to limit the potential losses if the stock price drops. This strategy can be risky if the stock price falls too far, so it's important to understand the risks involved.


Covered call strategies are an excellent way to maximize passive income as an investor. By selling call options on stocks you already own, you can generate income while still benefiting from potential price appreciation. We hope that this article has provided you with a better understanding of the top covered call strategies. If you're interested in learning more about covered call strategies, we recommend consulting a financial advisor or investment professional, or learning more about the Cash Flow Machine Investing system.

Covered calls are a smart strategy for generating passive income in retirement. They offer lower risk, regular income, flexibility, and potential for capital gains. By implementing a covered call strategy, retirees can generate a steady stream of income to supplement other sources of retirement income.

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About Mark Yegge


Mark Yegge The Wealth Architect "Never give up your power in your health, your wealth or your time."

Mark Yegge is a recognized Wealth Architect, Hedge Fund manager, Author and Teacher in the Financial sector and the personal development arena. He has helped thousands of 6- and 7-figure investors create strategies for increasing returns, decreasing risk and reducing tax impact from investing. He is a co-founder of several mastermind groups helping successful people augment their lives in the areas of wealth, health, relationships, spirit and lifestyle. Some of his recognized programs include:

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