How to Choose the Best Stocks for Covered Calls in 2023

Unlock the potential of your stock holdings and explore the possibility of generating more income by utilizing covered calls. This investment strategy is an excellent way to diversify your portfolio while potentially boosting returns in 2023. Here you’ll find all that’s needed for success, including resources, tools and a guide exploring which are considered to be the best stocks available for covered call investments this year!

Short Summary

  • Covered calls are an investment strategy that offer premium income, reduced cost basis and downside protection. Investors must understand the risks involved.

  • Stocks with good stability, long-term prospects and moderate price movement should be chosen for successful covered call strategies.

  • Investors can utilize option screeners, online brokers and educational resources to identify suitable stocks & optimize their trading strategies.

Understanding Covered Calls

Covered calls are a great way for investors to make extra money from their stock investments by selling call options on stocks they own. The covered call trade can bring various advantages such as receiving premium upfront, lower cost basis in buying shares and reducing downside risks. It is essential that due caution be exercised while partaking in the strategy: sound research should always be done beforehand so one can understand all of the associated dangers and identify which stocks would offer them optimal returns through this approach. By choosing carefully amongst these best-suited options specifically created for successful outcome with cover calls trading. An investor’s investment plan could gain maximum return potential avoiding any possible losses or other issues along the process.

The Mechanics of Covered Calls

Selling covered calls is an attractive option trading strategy for those with limited experience as it involves relatively lower risk. By implementing this approach, investors can generate income from the underlying stock they own and enjoy downside protection should the call option expire in the money. To maximize the benefits associated with these trades, individuals must pay close attention when selecting stocks for covered calls. Analyzing aspects such as price stability, long-term prospects and moderate volatility of each asset being considered are essential steps before taking any action.

Advantages of Covered Calls

Covered calls are a popular strategy used by investors looking to benefit from increased returns and downside protection. Writing covered calls on stocks they already own can lower the cost basis of their investment, generating additional income in the process. When markets are rising, this type of call provides an opportunity for setting a selling price above that of the current stock market rate. As such, it offers excellent potential rewards with reduced risk levels than standard investing alone would allow for. Investors gain even more flexibility when utilizing this tactic as it can be employed tactically depending upon given circumstances at any given moment in time, allowing them to quickly adapt strategies whenever needed or desired.

Key Criteria for Selecting Covered Call Stocks

When looking for the best stocks to use in a covered call strategy, strike price is just one of many important criteria. You should also examine stock stability, long-term prospects and moderate fluctuations in its pricing. By finding securities with strong financials plus growth opportunities and comparatively low volatility, you can benefit more from your chosen covered call approach while achieving better yields on investments.

Stock Stability

When building a covered call strategy, it is important to choose stocks that have reliable financials and minimal implied volatility. This will create dependable revenue as well as safeguard your investments in the long-term for novices and experienced investors alike. Sticking with high trading volume companies which are widely known can provide liquidity along with a lower risk profile of returns.

Long-Term Prospects

When it comes to achieving a steady return from investments, selecting stocks with strong business outlooks and growth opportunities is key. If you can identify these companies and then implement an effective covered call strategy, you will be able to take advantage of the potential for lucrative returns while securing reliable income. With this approach in mind, your chances of generating profits over time are significantly increased.

A successful long-term outcome depends on finding businesses with excellent projections as well as expansion prospects, that way you ensure your covered call tactic remains profitable all along the road ahead.

Moderate Price Movement

Incorporating stocks with moderate yet steady growth into your covered call strategy can be a beneficial approach, as it offers stability while still allowing you to potentially take advantage of gains. This balance helps reduce the chance of missing out on returns due to stock being called away, making it an advantageous tactic for achieving consistent income and limiting downside risk. By carefully selecting suitable stocks that show gradual increase without going up too quickly, investors are able to capitalize upon their covered calls in order to optimize performance outcomes with lessened exposure.

Top Stocks for Covered Call Strategies in 2023

Our top picks for 2023 have been meticulously selected based on their level of stability, forecasted long-term growth and expected moderate volatility – perfect qualities to implement a successful covered call strategy. These stocks are the ideal choice if you want to generate dependable income while limiting your exposure.

We’ve focused our analysis around these specific criteria when searching out the best stocks for covered calls so that you can make an informed decision about where to place your investments with confidence in knowing it meets all necessary requirements.

Advanced Micro Devices (NASDAQ: AMD)

Advanced Micro Devices, or AMD (NASDAQ:AMD) has a market capitalization of $607 billion and is expected to realize profitable growth in 2023. With that being said, analysts from CNN put the minimum price target at $210 up to a maximum of $400 for this stock with their median figure set at around $350 over the course of one year, making it an ideal choice when selecting stocks to construct your covered call strategy.

ConocoPhillips (NYSE: COP)

ConocoPhillips, a top-level energy corporation, informed of its vast experience in exploration, production, transport and selling of oil derivatives such as bitumen or liquefied natural gas. The company reported financial successes during the fourth quarter this year. With $8 billion adjusted earnings plus 2.27 earnings per share proving to be remarkable operational results.

The organization intends to invest more in capital expenditure in 2023 while prospecting new opportunities within the sector. With notable economic performance and progressive development objectives, ConocoPhillips is well placed to execute a covered call strategy – an excellent option that uses options contracts where they are bought by investors to receive income based upon their shares’ success rate without necessarily having to sell them off immediately.

PepsiCo Inc (PEP)

PepsiCo is a highly profitable food and beverage firm, having an estimated market capitalization of $224.7 billion that includes 23 brands with each brand’s retail sales being worth around the one billion dollar mark. This creates an ideal opportunity for using a covered call strategy given its current stock price at 162.52 dollars and forecasts from CNN Analysts pointing to potential growth over the upcoming 12 months, reaching as much as 187 US Dollars according to median predictions by such analysts. Alongside Frito-Lay & Gatorade are Pepsi-Cola, Quaker Oats Tropicana Juice and SodaStream all sitting among this powerful conglomerate making it particularly attractive in terms of investment options when considering high returns on offer within set timelines alongside sound financial performances both present day and potentially into the near future if certain trends hold true.

Oracle (NYSE: ORCL)

Oracle is a computer technology corporation with an impressive market capitalization of 75.97 billion dollars, which has seen strong financial performance in its second quarter report, including 6% growth year-over-year for cloud and license services revenues as well as 5% growth in on premise license revenue. This makes Oracle’s products (notably Java and data services) a wise choice to consider when making covered call strategies. Investors are particularly looking forward to the fourth quarter earnings report from this highly innovative software company, hopeful that it will continue its success into the next period too.

Walmart (NYSE: WMT)

Walmart, a multinational company with many stores around the globe, is enduring these difficult times along with other companies despite having to face strong competition from giants like Amazon. Their stock price remains at $121.60 and their market capitalization stands high above $333.6 billion as of now which has analysts predicting future prices in between $131-$180 – where they believe it will average out at around 157 dollars fifty cents per share over a twelve month time frame for those pursuing a covered call strategy on this titan’s shares. Given its proven record of success during economic downturns accompanied by numerous worldwide outlets that are still running smoothly, Walmart is an ideal choice when choosing your stocks according to certain covered call strategies plans set forth.

Tools and Resources for Covered Call Investors

Various tools and resources can be used to make your covered call strategy more effective, as well as helping you easily locate the most attractive stocks for it. These include option screeners provided by online brokers and educational materials that will help refine your trades so they deliver their maximum potential returns.

Option Screeners

OptionDash is a powerful option screener tool designed to help narrow down and assess stocks that are suitable for covered call strategies. It offers an advanced rating system based on the stock’s value, quality, and trend – simplifying what could be an otherwise tedious process of finding appropriate investments.

Investors who take advantage of such technology can save time in their search process while ensuring they make informed decisions when investing in these type of options contracts. With efficient filtering tools like OptionDash at your disposal, you can devote more energy to implementing trades or managing your portfolio instead of searching through endless possibilities manually.

Online Brokers

In order to carry out your covered call investments, you will need the support of a dependable online broker. Several trading platforms offer functions specifically tailored for stock options that are perfect for constructing covered calls on respected blue-chip companies.

When deciding upon an online brokerage service, take into account factors such as commission fees, user friendliness, client assistance and available tools and materials. By selecting one that meets all of your wants and requirements you can guarantee an easy going exchange experience.

Educational Resources

Those who wish to be proficient in covered call tactics and boost their trades can find plenty of educational sources. With options trading plans, webinars and online classes on the topic, you will have access to helpful advice and comprehension for negotiating success with this particular strategy.

By putting some energy into grasping these strategies, it is possible to improve results while lowering potential hazards connected with covered calls transactions. Having effective resources available gives you an advantage when engaging in such investments so that your efforts are rewarded accordingly.


Covered calls are an effective method for investors to generate income from their stock holdings, and provide security while increasing overall returns. To optimise the strategy, it is important to use resources correctly when researching the best stocks based on stability, long-term potential and steady price movements. Making covered call investments today can create new financial growth prospects.

Frequently Asked Questions

What is the most profitable covered call strategy?

Covered calls can be an effective strategy, especially when the stock price reaches its strike price. Then, it enables the writer to receive all of the premium from selling that option.

Should they not exercise their choice, then still gains could result due to a rise in share value for that specific equity.

Do you need 100 shares for a covered call?

Yes, you need at least 100 shares to write a covered call as one option contract usually represents 100 shares. Therefore, you must own at least that amount (or more) for every call contract you plan to sell in order to utilize this strategy.

Should you invest in covered calls?

When investing in covered calls, it is key to make sensible decisions when selecting the stocks. It’s a good idea to proceed with caution if you don’t have strong emotions attached to any specific stock. Keeping these few tips in mind can help ensure an effective investment strategy for your money!

What are the benefits of utilizing covered calls?

Covered calls provide many advantages, such as generating income, amplifying profits, shielding from market losses and setting a target price for sales.

What are the key criteria for selecting covered call stocks?

When looking at potential covered call stocks, it is essential to evaluate the stability of each stock as well as their long-term prospects and moderate price fluctuations.