In the past two posts of this series, a number of readers asked the same question: What’s your actual rate of return? Some asked out of curiosity, others perhaps out of doubt. Fair enough—let’s dig into that today.

This year, the overall market has been very strong, so my returns look solid. I’ll admit, luck played a role too. But let me clarify something up front: my goal with covered calls isn’t to rely solely on them for profit. Rather, I use CCs as a way to generate consistent cash flow while holding the underlying stocks for the mid- to long-term.

My personal benchmark? To outperform the market by about 10%.

What That Looks Like in Practice

Here’s another way to frame it:

• When the market is strong, my aim is simply to keep pace with it.

• When the market falls, my goal is to beat it by roughly 10%.
  
  

That might sound conservative. Not very ambitious, right? But let’s walk through an example:

Suppose in Year 1, the S&P rises 20%. In Year 2, it drops 5%. Over two years, the net gain is about 14%, which aligns with long-term U.S. stock market averages. Now let’s say I’m selling covered calls alongside. In Year 1, I also gain 20%, in line with the market. But in Year 2, instead of losing 5%, I actually manage a gain of 5%—thanks to the premiums collected. Now my two-year return is 26%, nearly double the market’s. That’s the quiet power of selling covered calls: steady compounding.

Beyond Returns: Practical Benefits

The premiums themselves add flexibility. They can cover everyday expenses, or they can be reinvested—allowing me to scoop up more shares during market dips. That reinvestment alone can add a few extra percentage points to total returns over time.

Of course, achieving this depends heavily on choosing the right strike prices and expiration dates (the “DTE,” or days to expire). Those choices are driven by Delta, Theta, and implied volatility. I’ll save the details for the next post, since it deserves its own discussion.

Why Not Just Buy QYLD?

Some readers have asked, “Why not just buy QYLD and let them handle the covered calls for you?”

Personally, I don’t recommend it. I haven’t studied QYLD in depth, but when it first launched I looked into their strategy. It seemed very mechanical: sell ATM or near-OTM calls on QQQ (or SPY) every time. The problem? That approach heavily caps your upside. If the stock rallies, you miss most of it—that’s the risk people always point out.

My philosophy is different: set the strike price a little higher, so if shares do get called away, you don’t regret it. Even better, adapt based on the stock’s movement. Covered calls shouldn’t be mechanical; they should be flexible.

The Art of Managing ITM Calls

One of the trickiest parts of this strategy is handling calls that go in-the-money. Do you let your shares get called away? Do you roll to a higher strike or further out expiration? How far up, how far out?

There’s no one-size-fits-all answer. Every situation calls for judgment. That’s why I say covered calls aren’t just about picking a strike and collecting premium. They’re about giving yourself room for error and improving your odds of success.

I’ll share specific examples in future posts—but for now, just remember: the details matter, and flexibility is key.