Wall Street’s record rise is accelerating investors’ turn to covered call strategies. This method offers investors the opportunity to both hedge individual stock risks and earn additional income.
The use of covered calls is particularly noticeable among portfolios concentrated in large technology stocks, investors nearing retirement, and company executives. Through this strategy, investors earn premium income by selling call options on the shares they own; They can also diversify their portfolios and manage their taxes more effectively.
According to experts, the market has approximately $15 trillion in concentrated equity positions suitable for covered calls and similar strategies. The S&P 500’s 10% rise since the beginning of the year has raised the question of how to manage the gains of AI-focused technology stocks in particular.
According to data, investments in option-based ETFs increased from $7 billion in 2020 to $150 billion by the end of 2024. Fund inflows exceeded $40 billion in the first seven months of this year alone. Financial advisors state that the covered call strategy offers investors the opportunity to reduce volatility, ensure discipline, and achieve more tax-efficient returns. Increased investment in this area by large portfolio management companies also indicates that demand will grow even further.
