Covered Call Strategies

  • To mitigate risk, a diverse portfolio that doesn’t only consists of Covered Call ETFs is recommended. Mix it up with Index ETFs as well as with other type of investments, preferably ones that are known to react differently to market changes than Covered Call ETFs.
  • etfs appleTo mitigate risk for the part of your portfolio that consists of Covered Call ETFs, invest in several different Covered Call ETFs. Ideally pick a selection of Covered Call ETFs that varies from each other when it comes to important aspects such as which index they are tracking and if the management team is known to play it aggressively or are more risk-averse.
  • If you have invested in ETFs that are based on stocks, you may want to hedge it by increasing your exposure to bonds. When the stock market is doing poorly, bonds tend to do better, and vice versa.
  • Covered Call ETFs has a built-in limited upside. You may therefore want to balance your investment in Covered Call ETFs with something more risky, with more upside (but also more downside) potential.How much of your total investment portfolio that should be comprised of something considered much more risky than Covered Call ETFs, and exactly how high-risk you are willing to invest, will of course be determined by a long row of factors, including the time frame for your investment portfolio. Generally speaking, one can dare to take larger risks with capital if one has time to allow for investments to bounce back again after a downperiod.

Dollar-Cost Averaging

There are several different strategies that can be employed when purchasing EFT shares. An example of a popular strategy is the one known as dollar-cost averaging.


  1. You have $10,000 to invest in the Covered Call EFT of your choice.
  2. Instead of just making one big purchase of shares and pay one commission fee, you break you purchase up into several smaller ones. Let’s for instance assume that you decide to make five purchases á $2,000 each.
  3. You make one $2,000 purchase each month for five months. As the share price varies, the amount of shares that you receive for $2,000 varies.
    Purchase day Price of 1 share Amount of shares bought Total price paid (not including commission)
    April 25th 5 USD 400 2,000 USD
    May 25th 8 USD 250 2,000 USD
    June 25th 4 USD 500 2,000 USD
    July 25th 5 USD 400 2,000 USD
    August 25th 10 USD 200 2,000 USD

If you pay a fixed broker fee for transactions, using this method can be much more expensive than just making one big $10,000 purchase. If, on the other hand, the commission is based only on the size of the transaction, one $10,000 purchase will make the same commission as five purchases á $2,000 each.