NOW Covered Call: Strike Selection, Premium & Risk
How to sell covered calls on ServiceNow Inc. — optimal strikes, expected premium, and the risks that actually matter for a large-cap technology name.
Is NOW a good covered call candidate?
NOW (ServiceNow Inc.) is a large-cap technology name with an elevated share price and excellent options liquidity. Implied volatility is moderate — enough premium to make selling options worthwhile, without the heart-stopping price swings you get on speculative names. It pays no dividend, so every dollar of income must come from the options you sell.
Strike selection for a NOW covered call
For NOW covered calls, target strikes 5-8% out of the money at deltas around 0.20-0.30. Use 30-45 DTE — the sweet spot for theta-to-gamma balance. On a moderate-volatility name like NOW, going closer to the money chases premium at the cost of a much higher assignment probability — the risk of being called away becomes meaningful below 5-8% OTM.
Expected premium and income on NOW
Typical monthly premium collected on NOW runs around 1.0-2.0% of capital, which annualizes to roughly 12-24% if you sell new contracts every cycle. Capital required to run a single contract wheel on NOW is $20,000+ — the share price and the 100-share lot size set the minimum, not the strategy.
Reference Trade
Example Covered Call on NOW
- Strike: $1,150 (6% OTM)
- Expiration: 30 days
- Premium: $25.00 per share
- Return if flat: 2.3% ($2,500)
- Return if called: 8.4% ($9,100)
- Probability keep shares: 72% keep shares
Risk management for NOW covered call trades
The core risk on a covered call is opportunity cost: if the stock rips through your strike, your upside is capped. You still profit, just less than someone who held the shares outright. NOW moves in a moderate-volatility range most of the time, but earnings week and sector rotations can still produce 5%+ single-day prints. Tech names are especially vulnerable to interest-rate shifts and earnings guidance revisions — both tend to produce gap moves that hurt short options.
NOW Covered Call FAQ
What is the best strike price for a NOW covered call?
On NOW, target 5-8% out of the money at 0.20-0.30 delta. On a moderate-volatility stock like this, closer-to-the-money strikes chase premium but spike assignment probability to uncomfortable levels.
How much premium can I collect selling calls on NOW?
Typical monthly premium on NOW is 1.0-2.0% of position value, annualizing to 12-24% when you roll every cycle. Earnings months can pay 2-3x the normal rate because of elevated IV.
What expiration should I use for NOW covered call trades?
Use 30-45 DTE as a default for NOW. This is the classic theta sweet spot and works well on a stable ticker like this.
Is NOW suitable for beginners selling options?
Yes — it's a well-known, liquid name with established options markets, which is what beginners need.
Related NOW strategies
Price a NOW covered call right now
Use the free OptionsPilot calculator with live quotes to find the best covered call strike on NOW.
Open the Strike Finder →