Covered Calls Explained: The Real Trade-Off Nobody Told You
Why making income can still feel like a loss - and the mindset shift that changes everything
Hey buddy,
We’ve been talking about covered calls for weeks now. Some of you tried the strategy, earned money, and have been kind enough to share your results.
I love seeing you win.
But it also frightens me to think that you might one day experience a win—and still walk away feeling like you lost. Here’s what I mean…
Last week I made $557 selling two covered calls. It took 10 minutes to execute, and I couldn’t be happier.
But both stocks skyrocketed that week, which meant I missed out on $2,300+ in gains because the covered call capped my upside.
Most beginners would call that a bad deal. They’d say I lost $2,300. But I didn’t. That money was never in my account to begin with.
Investors who think that way usually struggle with trading psychology. They obsess over what they could’ve made instead of respecting what they did make.
To succeed at this, you need healthy trading psychology. Building that starts with understanding the exact trade-off you're making when you sell a covered call, and genuinely being okay with it.
The Trade-Off
When you sell a covered call, you get paid immediately. No ifs, no buts. The money hits your account, guaranteed.
In exchange, you agree to limit the amount you would earn if the stock rises above your “strike price.”
That’s the trade-off. It’s why I didn’t collect $2300+ when both stocks took off.
But that doesn’t make the strategy a bad one—it means it worked exactly as it was designed to. It handed me immediate, guaranteed income so I wouldn't have to sit around hoping the market would rise so I could earn a profit.
To keep a healthy mindset about this, you need to know that every covered call comes with this trade-off. The strategy is meant to earn a reliable income week after week, nothing more. If you’re looking for big swings, this isn’t the strategy.
💡Pro tip: I’ve taught big swing strategies in previous articles. But this is the only strategy that reliably gives you income every time you run it.
Why This Matters
If you sell a covered call, collect your money, and then get upset when the stock pushes above your strike price, the strategy isn’t the problem. Your expectations are.
Covered calls are only painful when you expect both outcomes: the premium and the full upside. You do not get both.
And that’s why your mindset matters so much here. Because once you internalize that, you transform. You stop second-guessing yourself. You stop thinking about gains that were never yours to begin with. You just show up every Monday morning, run the play, and generate a few hundred dollars before most people have finished their coffee.
I just did it 20 minutes before writing this newsletter 🙂
That’s the win. Please learn to enjoy that.
Until tomorrow,
Isaiah from Earn Out Loud
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