How I Built a Consistent Options Income Strategy That Pays Every Single Month
Published · 3 min read
Two years of testing options strategies and most of them lost money. The covered call setup that finally worked — with the exact strikes, expirations, and position sizing I use today.
I spent two years and about $4,000 of tuition (mostly paid to the market) testing options strategies. Long calls, iron condors, earnings gambles, calendar spreads. Most of them lost money — and every one of them had the same flaw: they required me to be right about something I cannot control.
The strategy that survived does not require a prediction. It requires a plan.
Why the "smart" strategies failed
- Long calls: I was right on direction more often than I was wrong and still lost. Time decay and IV crush did the damage.
- Iron condors: a 65% win rate sounds great until one loser erases four winners. Spreads plus commissions ate the rest.
- Earnings plays: a coin flip with a bad payout after the spread.
All of them were bets on price. Covered calls are not a bet — they are rent.
The setup I actually trade
| Leg | My rule | Why |
|---|---|---|
| Underlying | 100 shares of a profitable large cap I would hold anyway | If it gets assigned, I am happy to sell |
| Strike | 5-10% above my cost basis, at or above 30-day resistance | I only cap upside I was unlikely to capture |
| Expiration | 21-45 days out | Enough premium to matter, little enough theta decay to fight |
| Size | Exactly 1 contract per 100 shares | No naked exposure, ever |
| Exit | Buy back at 50% of max premium, or roll if the strike is breached with under 7 days left | Takes the win early, keeps the shares |
That last row is the one nobody writes about, and it is most of my edge.
The maths on a real trade
100 shares at $50.00 is a $5,000 position. Sell 1 call: strike $52.50, 30 days, $1.20 premium = $120.
- Premium collected: 2.4% of the position in 30 days
- Max profit if assigned: ($52.50 − $50.00) × 100 + $120 = $370, or 7.4% in a month
- Break-even on the shares: $48.80 — the premium buys 2.4% of downside protection
- Annualised if repeated monthly: roughly 24% on premium alone, before share appreciation
Which of those numbers matters depends on your thesis: if you want the shares, watch break-even. If you are harvesting income, watch the premium rate.
Position sizing beats strike selection
A covered call cannot lose more than the stock can, but the stock can still take a position to zero. I cap any single underlying at 10% of the portfolio and total premium exposure at 25%.
Sizing is what turns a good strategy into a survivable one.
The monthly rhythm
- Every Monday: list positions with 21-45 days to expiry and no open call.
- Check the strike against resistance and my cost basis.
- Price the trade. If the annualised premium is under 12%, skip it.
- Set a 50% profit exit order the same day I open the trade.
- Log the fill, the premium, and the outcome. Review quarterly.
Do that for twelve months and you will know more about your own risk tolerance than any course can teach you. Start with the numbers in the options profit calculator, then size the position before you place it.
Use these tools to get started
- Options Profit Calculator — Breakeven, max profit, max loss — and a live payoff diagram for calls, puts, and covered calls. (Free)
- Position Size Calculator — Risk a fixed slice of your account per trade. Enter your entry and stop, get your exact share count. (Free)
Keep reading
- How to Read an Options Chain Without Panicking —
An options chain looks like chaos at first. Here's how to read every column, what delta and theta mean in plain English, and what to check first.
- Options Payoff Diagrams, Explained Like a Friend Would —
Payoff diagrams look like rocket science. They are not. A plain-English walkthrough of calls, puts, covered calls, and spreads — with numbers at every step.
- Position Sizing: The Boring Skill That Keeps Traders Alive —
Most traders do not blow up from a bad strategy — they blow up from bad size. A plain-English position sizing guide with real maths and worked examples.