What is a Good Premium for Covered Calls?

A "good" premium depends on the stock, but here are general benchmarks:

Monthly Premium Benchmarks

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| Stock Type | Good Premium | Notes | Blue chips (AAPL, MSFT)1-2%Lower but safer Growth stocks (NVDA, AMD)2-4%Higher volatility High volatility (TSLA, COIN)4-6%+Much higher risk | ETFs (SPY, QQQ) | 0.8-1.5% | Lowest risk |

Annual Yield Expectations

  • Conservative: 10-15% annualized
  • Moderate: 15-25% annualized
  • Aggressive: 25-40% annualized

    • When Higher Premium ISN'T Better

    High premium usually means high risk:

  • Stock is very volatile - Big moves expected
  • Earnings coming - Event risk priced in
  • Bad news pending - Market expects drop
  • Speculative stock - Could crash

    • Example: Premium Comparison

    | Stock | Price | Monthly Premium | Risk | KO$65$0.80 (1.2%)Low AAPL$230$4.00 (1.7%)Medium NVDA$130$4.50 (3.5%)Higher | TSLA | $270 | $15.00 (5.5%) | High |

    My Target Range

    For most investors, target 1.5-2.5% monthly premium at 0.25-0.35 delta. This balances income with probability of keeping shares.

    The Trade-Off

    Higher premium = Higher risk of assignment or stock decline Lower premium = Safer but less income

    Find your comfort zone and stick with it.