Covered calls are often hailed as one of the simplest options strategies for generating extra income from your stock holdings. At its core, a covered call involves owning shares of a stock and writing calls against them. You collect premium income from the call, which can provide steady cash flow—an attractive idea for those looking to earn a steady income from options trading.
But is it realistic to write covered calls for a living? To explore this question, let’s turn to the lived experience of Bang Pham Van, a professional options tactician and trainer at Piranha Profits who retired early using options trading.
Before we zoom into covered calls, it's important to understand why Bang transitioned from buying to selling options. In his early years, Bang focused heavily on buying call and put options, chasing large returns with leveraged trades. However, after years of losses and blowing up two accounts, he realized something fundamental:
“Option buyers lose money most of the time. You need the stock to go up, go up fast enough, and before expiration.”
This harsh reality pushed him to “unlearn and relearn everything”. He began to understand the Greeks, Volatility, and how time decay benefits option sellers rather than buyers. From that point on, he focused on selling strategies that put probability in his favor. Realising that option sellers make more consistent profits since time decay works for the seller and not against.
Covered calls sit within Bang’s broader philosophy of options selling. While Bang deploys various advanced strategies like cash-secured puts and spreads with high positive Theta, he does recognize covered calls as a viable strategy for investors seeking consistent, safer returns.
What does selling/writing covered calls do:
However, Bang emphasizes that covered calls alone might not suffice for those aiming to trade full-time, unless you have substantial capital and a disciplined management plan. Covered calls often yield modest returns compared to other premium-selling strategies, but their simplicity and risk-defined nature make them an ideal starting point for building confidence and discipline.
Bang’s journey to early retirement from his 28-year career at Proctor & Gamble was paved not just by strategy, but by mindset, training, and discipline. For traders who aspire to “trade for a living,” here are distilled insights from Bang’s experience:
Bang believes that psychology and risk management are even more important than strategy knowledge. While many traders understand the technical aspects of trading, they still end up losing money because they take on position sizes that exceed their account’s risk tolerance, overtrade after early wins due to complacency and overconfidence, and fail to manage their emotions when the market moves against them.
He cautions that making money can breed a dangerous sense of complacency, leading traders to take on risks beyond what they can afford, which often results in significant trouble when market corrections inevitably occur.
One of the most overlooked disciplines in trading is the ability to cut losses with the same decisiveness and confidence as taking profits. The psychology of losing trades can be one of the biggest pitfalls for traders. When faced with a loss, many traders experience a strong emotional urge to “win back” what they’ve lost. This often leads to doubling down on losing trades in the hope that if the market turns around, they can recover their losses quickly and end up profitable.
However, Bang warns that this mindset is dangerous and often catastrophic. Doubling down may seem logical in the heat of the moment, but it’s driven by fear and ego rather than rational analysis. It amplifies risk exposure and ties up capital, leaving traders vulnerable to even greater losses if the market continues to move against them.
Emotionally, it creates a vicious cycle: the larger the loss becomes, the more desperate a trader feels to recover it, leading to impulsive decisions and clouded judgment. Bang emphasizes that the true mark of a disciplined trader is the willingness to accept a loss, cut it decisively, and move on with a clear mind. Sometimes, after cutting a loss, you may watch the position turn around and become profitable after you’ve exited. This can be frustrating, but it’s important to remember that trading is a marathon, not a race. As long as you stay true to your strategy and risk management rules, you give yourself the best chance to do well over the long run.
While “many students start with a few thousand” to practice basic strategies like covered calls, Bang emphasizes that “a bigger account would be better for more advanced strategies with flexibility.” Capital determines the range of trades you can deploy and the consistency of income much achievable.
As for expected returns, Bang also sets a grounded expectation of around 20% annual return for himself, achievable through disciplined, probability-based strategies rather than speculative buying.
Selling options is not a passive endeavor let alone selling it for a living. It is recommended to spend at least 1 to 1.5 hours a day for:
Setting your own routine is also important. This could involve listening to podcasts, tallying results, running trade simulations, and then actively trading for several hours in the evening to further refine strategies.
Many traders are drawn to covered calls for their promise of regular income, but it’s crucial to understand how market conditions directly affect your returns.
Covered calls typically yield around 1% to 3% per month, depending on the volatility of the underlying stock and how aggressive you are with your strike selection. For example:
However, there’s a hidden dependency: covered calls work best in moderately bullish or sideways markets. You need your stock to remain stable or rise slightly without surging past your strike price too quickly. If the stock rallies too far, your shares get called away, capping your upside. If the stock declines significantly, option premiums shrink while your unrealized losses on the stock increase.
In a bear market, this strategy becomes problematic. As the underlying stock price falls, the loss in capital value can far outweigh the premiums collected. Should a stock's value decline significantly, say by $5,000 over several months, a monthly premium income of $200 would be insufficient to offset this capital loss. While this might be acceptable for a long-term investor willing to endure market fluctuations, it presents a challenging scenario for a trader relying on this strategy for their livelihood.
Additionally:
While covered calls can enhance portfolio returns in stable or rising markets, they do not guarantee consistent income sufficient for a living, especially during market downturns. For traders aiming to replace employment income, relying solely on writing covered calls you are still exposed to market risk, income volatility, and capital depreciation.
This is why professional options traders like Bang combine covered calls with other premium-selling strategies that can perform in varied market conditions, such as cash-secured puts or credit spreads, to create a more balanced and resilient income stream.
Bang Pham Van’s experience shows that trading for a living is absolutely viable—but only with the right mindset, knowledge, and discipline. Covered calls can be an entry point into this world, offering a safer avenue to harness the power of options selling. However, for those aiming for full financial independence through options trading, covered calls should be seen as part of a diversified options selling strategy portfolio, not the sole pillar.