Published: January 16, 2026.

Last Update: July 16, 2026.

A covered call (also known as an overwrite) is a widely used income strategy that combines ownership of an underlying equity with the sale of call options on that same asset. Because you already hold the stock, your risk is limited if the option is exercised and you are required to sell the shares. For positions you are already considering exiting, the premium received from selling the call can help offset transaction costs and enhance overall returns when the shares are called away.

When would you use covered calls?

• When you’re neutral to mildly bullish.
• When you want income from a stock, you already hold (currently own at least 100 shares).
• When you believe the stock will trade sideways or rise slowly.

With the Covered Call Builder, TradeSmith will help you find the best trade setup for you in 2 easy steps!

Let’s explore the tool together.

To access the Covered Call Builder, go to the Options page at the top navigational header and click on the tool tab below. 

Screenshot taken from an Options360 account on Jul. 16, 2026. 

Step 1: Please specify the ticker.

Step 2: What best describes your desired outcome? 

Each outcome expresses the investor’s goal in the first person and is visually represented by icons. For example, in the first selected choice, the “X” icon represents that you do NOT want to sell the equity.   

• Choice #1: I don’t want to sell my equity but want to generate income while I wait for a move to the upside.
• Choice #2: I want to generate as much income as possible and do not mind selling my equity position.
• Choice #3: I want to generate additional income while I wait for a specific exit price.

If you want to generate additional income from a stock you own and intend to sell the position at a target price, go with Choice #3.   

Once you have selected your desired outcome, click the Find Covered Calls button.

You will then see two tabs below: Top Trades and Alternative Trades. 

Screenshot taken from an Options360 account on Jul. 16, 2026. 

The top trades will be displayed according to the selected outcome and our algorithms. Within each option's tile card, you will see the probability metrics if the option trade is assigned or unassigned.

You can scroll to review the underlying asset, its price forecast, and key statistics. 

If you want to evaluate the underlying asset, click on the ticker symbol above the option ticker, and the site will route you to the Asset Details page. 

To review the sell call options trade, click on the option ticker. 

The Trade Summary link will route them to the Trade Summary page. 

On the Trade Summary page, you can view the trade details and the best- & worst-case scenarios, determine if the trade meets your checklist requirements, and add the options trade to a portfolio with alerts.  

Let’s briefly review the Alternative Trades tab. 

If you want to review additional options trades and explore the various expiration dates and strike prices, click the Alternative Trades tab. You can adjust the display from “If-Unassigned Probability & Annualized ROI” to “If-Assigned Probability & Annualized ROI.” 

Screenshot taken from an Options360 account on Jul. 16, 2026. 

You can also review your results through the “Tile” or “List” views. 

The Filters button lets you narrow your results by various options-related criteria:

• Exclude Earnings Before Expiration: Filters out options contracts where the underlying stock has an earnings announcement scheduled before the option's expiration date. Earnings events cause implied volatility to spike beforehand and often trigger large, unpredictable price moves. For covered calls, an earnings surprise could blow through your strike price (capping upside you didn't expect) or crash the stock (hurting your shares). Many covered call sellers avoid earnings risk entirely by excluding these.
• Exclude Dividends Before Expiration: Filters out contracts where the stock goes ex-dividend before expiration. This matters because: (1) the stock price typically drops by roughly the dividend amount on the ex-dividend date, which affects your covered call's outcome, and (2) if your call is in-the-money near the ex-dividend date, there's a risk of early assignment — the call holder may exercise early to capture the dividend, taking your shares away sooner than expected.
• Days to Expiration: The number of calendar days until the option expires. This lets you screen for a specific time window (e.g., 30-45 DTE is a common sweet spot for covered call sellers, balancing decent premium collection with manageable time commitment).
• Implied Volatility Rank (IV Rank): Shows where current implied volatility sits relative to its own range over a lookback period (usually 52 weeks), on a 0-100 scale. An IV Rank of 80 means the current IV is near the top of its yearly range. Covered call sellers often prefer higher IV Rank because options premiums are richer (more income for the same risk).
• Implied Volatility Percentile (IV Percentile): Similar concept to IV Rank, but calculated differently — it's the percentage of days in the lookback period where IV was lower than today's IV. It's less sensitive to outlier spikes than IV Rank, since it's based on the frequency of days rather than the high/low range.
• Delta: Measures how much the option's price is expected to move per $1 move in the underlying stock, and is also commonly used as a rough proxy for the probability of finishing in-the-money. For covered calls, delta helps you choose how far out-of-the-money to sell — a lower delta (e.g., 0.20-0.30) means a smaller chance of being assigned but less premium; a higher delta means more premium but a greater chance your shares get called away.
• Vega: Measures how much the option's price changes for a 1-point change in implied volatility. Since covered call sellers are short options, a high Vega means your position's value is more sensitive to IV changes — if IV drops after you sell, that generally works in your favor.
• Theta: Measures the option's expected daily price decay from the passage of time, all else equal. As a covered call seller, you're collecting theta decay — essentially your daily "rent" for selling the option — and it's a core part of the strategy's appeal.
• Gamma: Measures how much delta itself changes per $1 move in the underlying. High gamma means delta (and therefore your risk profile) can shift quickly, which typically happens with near-the-money, short-dated options. Covered call sellers often watch gamma because high-gamma positions can move against you fast as expiration approaches.
• Volume: The number of contracts traded for that specific option that day. Higher volume generally indicates better liquidity, meaning tighter bid-ask spreads and easier order fills — important for covered call sellers who want to enter and exit (or roll) positions efficiently.

A quick note since this touches on trading strategy: We are not financial advisors, so treat this as educational background rather than a recommendation on which filter values to use for your own trades.

Need Help? 

Our Customer Success team is ready to assist: 

• Phone: 1-866-385-2076 (toll-free) 
• Email: [email protected] 

Thank you for your attention!

*Note—The tabs and features you see on your TradeSmith Finance site will vary based on your subscription(s) and subscription level(s).