Covered Calls During Earnings

Earnings announcements create both opportunities and risks for covered call sellers.

The Earnings Dilemma

Higher premium: IV increases before earnings Higher risk: Stocks can move 10%+ either way

Strategy 1: Avoid Earnings

  • Sell calls that expire before earnings
  • Close positions before announcement
  • Re-establish after IV crush

    • Pros: Avoid binary event risk Cons: Miss elevated premium

    Strategy 2: Sell Through Earnings

  • Sell calls that span earnings
  • Collect elevated premium
  • Accept assignment risk

    • Pros: Higher premium Cons: Unpredictable outcome

    Strategy 3: Straddle Earnings

  • Sell puts before earnings (bullish)
  • If assigned, sell calls after
  • Capture IV in both directions

    • Recommendations

    Conservative: Avoid earnings entirely Moderate: Sell far OTM through earnings Aggressive: Sell ATM for max premium

    Example: NVDA Earnings

    Typical premium increase: 40-60%

    | Timing | Call Premium | Risk | Before earnings$3.00Normal Through earnings$5.00High After earnings$2.50Lower