10 Best Stocks for Covered Calls in 2025

The covered call strategy stands as a cornerstone for investors seeking to generate consistent income from their stock holdings. By selling call options against shares you already own, you can create a reliable cash flow stream, effectively getting paid to hold your positions. However, the success of this strategy hinges on one critical factor: selecting the right underlying stocks. The ideal candidates offer a delicate balance of stability, predictable volatility, and sufficient options liquidity to generate meaningful premiums without exposing your portfolio to unnecessary risk.

This guide cuts through the noise to provide a curated list of the best stocks for covered calls. We will analyze each company's unique profile, from low-volatility dividend aristocrats perfect for conservative income to select tech and energy names that offer higher premiums for those with a greater risk tolerance.

More importantly, we'll move beyond basic stock picking by demonstrating how to leverage data-driven probability metrics to refine your strategy. You will learn how to analyze key factors for each stock, including:

• Volatility Profile: Understanding how price swings impact premium.
• Premium Yield Potential: Identifying stocks that offer attractive returns.
• Dividend Capture: Aligning your strategy with dividend payout dates.
• Risk Considerations: Assessing the trade-offs for each position.

This approach helps turn guesswork into a systematic, income-generating process tailored to your financial goals.

1. Johnson & Johnson (JNJ)

Johnson & Johnson stands out as one of the best stocks for covered calls due to its blue-chip status, low volatility, and consistent dividend history. As a diversified healthcare giant, JNJ's stable business model translates into predictable stock performance, which is ideal for income-focused investors looking to minimize the risk of their shares being called away unexpectedly.

The core appeal of JNJ for a covered call strategy is its balance of modest premium generation and capital preservation. While its lower implied volatility won't produce the high premiums of a tech stock, it provides a reliable income stream with less risk of assignment. This makes it a perfect foundational holding for a conservative income portfolio.

Strategy Implementation

A common approach involves selling monthly calls that are slightly out-of-the-money (OTM). This strategy aims to collect premium income consistently while retaining the underlying shares to continue receiving JNJ's reliable dividend payments.

• Example Scenario: An investor holding 100 shares of JNJ could sell a call option with a strike price 10-15% above the current stock price, expiring in 30 to 45 days. This setup targets theta decay, the rate at which an option's value erodes over time, maximizing potential profit. If JNJ trades at $150, selling a $170 call might generate a premium of $150 to $300.

Actionable Tips for JNJ Covered Calls

To optimize your returns with this defensive name, consider these specific tactics:

• Target a Combined Yield: Aim for an annualized return of 8-12% by combining the dividend yield with the option premiums.
• Optimal Expiration: Focus on contracts 30-45 days from expiration. This window provides the best balance of premium income and accelerated time decay.
• Reinvest for Growth: Use the premiums collected to purchase additional shares of JNJ, creating a compounding effect over time.

2. Coca-Cola (KO)

Coca-Cola represents a premier choice among the best stocks for covered calls, anchored by its defensive consumer staples profile, predictable cash flows, and stellar dividend history. As a global brand with inelastic demand, KO offers the stability and low volatility that income-focused options sellers prize, minimizing the risk of sudden price spikes that could lead to unwanted assignment.

The primary attraction of KO for a covered call strategy is its reliability. While its low implied volatility means premiums are modest, they are consistent and come with a higher probability of the options expiring worthless. This makes Coca-Cola an exceptional vehicle for generating a steady income stream while preserving capital and collecting its renowned "Dividend King" payouts.

Strategy Implementation

A practical approach for KO involves selling monthly out-of-the-money (OTM) calls to generate regular income. This strategy is designed to benefit from time decay while holding the underlying shares for long-term dividend growth and stability.

• Example Scenario: An investor holding 100 shares of KO could sell a call option with a strike price 15-20% above the current stock price, expiring in 30 to 45 days. If KO is trading at $60, selling a $70 call might generate a premium of $50 to $150. This setup allows for significant capital appreciation before the shares would be called away.

Actionable Tips for KO Covered Calls

To maximize returns from this blue-chip stock, implement these targeted tactics:

• Combine Yields for Total Return: Aim for a 7-10% annualized return by combining KO's dividend yield (around 3%) with the premiums from selling calls.
• Watch Ex-Dividend Dates: Be cautious selling calls with strike prices near the stock price around ex-dividend dates to avoid early assignment from investors seeking the dividend.
• Roll for Continued Income: If the stock price approaches your strike, consider rolling the position up and out to a higher strike price and later expiration date to collect more premium and avoid assignment.

3. Procter & Gamble (PG)

Procter & Gamble is a quintessential choice for conservative covered call writers, offering low volatility and a stellar dividend history. As a consumer staples giant, PG's products are in constant demand regardless of economic cycles, leading to stable stock performance. This predictability makes it one of the best stocks for covered calls aimed at generating consistent, low-risk income.

The main advantage of using PG for a covered call strategy is its defensive nature. While its lower implied volatility means premiums are modest, the risk of a sharp upward move causing assignment is significantly reduced. This allows investors to reliably collect monthly income while preserving their core holding and its attractive dividend.

Strategy Implementation

A popular strategy for PG involves selling monthly out-of-the-money (OTM) call options to generate a steady stream of income. The goal is to collect premiums without forfeiting the underlying shares, allowing for continued dividend collection and long-term capital appreciation.

• Example Scenario: An investor holding 100 shares of PG could sell a call option with a strike price 15-20% above the current stock price. If PG is trading at $150, selling a $165 call could generate a monthly premium of 0.4-0.6%, adding a reliable income layer to the position while minimizing assignment risk.

Actionable Tips for PG Covered Calls

To maximize returns with this dependable consumer staple, consider these specific tactics:

• Target a Combined Yield: Aim for an annualized return of 12-14% by combining PG's solid dividend yield with the collected option premiums.
• Use Weekly Options: For more frequent income, consider selling weekly options, which can capture accelerated time decay and offer greater flexibility.
• Mind the Earnings: Be mindful of earnings announcement dates. Avoid selling calls that expire right after an earnings report to sidestep potential volatility.

4. Intel Corporation (INTC)

Intel Corporation offers a compelling, higher-risk, higher-reward profile for covered call writers compared to more defensive names. As a semiconductor leader navigating operational turnarounds, INTC's stock exhibits greater volatility, which translates directly into richer option premiums. This makes it one of the best stocks for covered calls for investors willing to accept more price fluctuation for enhanced income potential.

The primary appeal of INTC is its ability to generate substantial income, even when the stock trades sideways or slightly down. Its operational challenges and competitive industry landscape create periods of elevated implied volatility (IV), especially around earnings reports, which significantly boosts the value of the call options you sell. This setup is ideal for those targeting aggressive annualized returns.

Strategy Implementation

A practical approach for INTC involves leveraging its volatility by selling shorter-term, out-of-the-money calls to capture its juicy premiums. The goal is to generate an income stream that can potentially reach 15-20% annually, while accepting a moderate risk that the shares may be called away during a sharp price rally.

• Example Scenario: Suppose an investor owns 100 shares of INTC trading at $30. During a period of high IV, selling a $35 call expiring in 30-45 days could yield a premium of $100 to $200. This provides immediate income and a buffer against minor price declines.

Actionable Tips for INTC Covered Calls

To maximize returns while managing INTC's inherent volatility, employ these specific tactics:

• Monitor Earnings Dates: Implied volatility spikes around earnings. Sell calls just before the announcement to capture peak premium, but be aware of the increased risk of a large price swing.
• Use Wider Strikes: Given INTC's higher volatility, select strike prices that are 10-15% out-of-the-money. This gives the stock more room to move upward before your shares are at risk of being assigned.
• Roll for Income: If the stock price approaches your strike near expiration, consider rolling the position up and out to a higher strike price and a later expiration date to collect more premium and avoid assignment.

5. AT&T (T)

AT&T secures its place as one of the best stocks for covered calls by offering a powerful combination of a high dividend yield and moderate volatility. As a mature telecom giant, T's stock price tends to trade within a predictable range, which is an ideal characteristic for generating consistent income from option premiums without excessive risk of the underlying shares being called away.

The primary appeal for covered call writers is T’s ability to generate a blended yield. The stock's substantial dividend provides a strong income base, and the premiums from selling calls can significantly enhance the total return. This makes it an excellent choice for investors prioritizing cash flow over aggressive capital appreciation.

Strategy Implementation

A popular strategy for T involves selling monthly out-of-the-money (OTM) calls to capture both the option premium and the high dividend. The goal is to create a total annual return that far exceeds what either the dividend or the premiums could provide alone.

• Example Scenario: Suppose an investor holds 100 shares of AT&T trading at $20. Selling a monthly call with a $21 strike price might generate a premium of $60 to $100. This supplements the stock’s existing 7% dividend yield, creating a powerful dual-income stream. A blended yield strategy targeting 7% from dividends and 8-10% from call premiums could achieve a total return of 15% or more.

Actionable Tips for T Covered Calls

To maximize returns while managing risk with this high-yield name, consider these specific tactics:

• Balance Premium and Risk: Target strike prices 15-20% OTM to find a sweet spot between earning a worthwhile premium and keeping a low probability of assignment.
• Factor in the Dividend: Always be aware of the ex-dividend date. The high yield can make in-the-money calls more likely to be assigned just before this date.
• Monitor Company Health: Keep an eye on AT&T’s debt management and capital allocation plans, as major changes could impact stock volatility and long-term stability.

6. Microsoft (MSFT)

Microsoft (MSFT) offers an excellent blend of growth potential and moderate volatility, making it a compelling candidate for a covered call strategy. As a dominant force in software, cloud computing, and AI, its strong fundamentals provide a stable base, while its consistent innovation drives enough price movement to generate attractive option premiums. This balance makes it one of the best stocks for covered calls for investors seeking both income and capital appreciation.

The appeal of using MSFT for covered calls lies in its ability to produce higher premiums than ultra-stable dividend stocks without the extreme risk associated with high-flying growth names. Its consistent upward trend allows investors to capture steady income while participating in the company's long-term growth, particularly as it expands its footprint in the cloud. With the increasing demand for AI and machine learning services, developments in the data center GPU market are particularly relevant for Microsoft's cloud segment and its future growth prospects.

Strategy Implementation

A balanced approach for MSFT involves selling monthly or quarterly out-of-the-money (OTM) calls. This strategy lets you collect meaningful premiums while leaving room for the stock to appreciate, aligning with its growth-oriented nature. Selecting the right strike is crucial, and you can learn more about choosing the best option strike price to refine your approach.

• Example Scenario: If you own 100 shares of MSFT trading at $380, you could sell a call with a $400 strike price expiring in 30-45 days. This position might generate a premium of $200 to $350, providing immediate income while allowing for $20 per share in potential capital gains before assignment.

Actionable Tips for MSFT Covered Calls

To maximize returns with this tech titan, consider these specific tactics:

• Target a Combined Yield: Aim for an annualized return of 10-12% by combining option premiums with Microsoft’s modest dividend.
• Balance Strike Prices: Use strikes that are 10-15% OTM to find a sweet spot between generating premium and allowing for stock appreciation.
• Avoid Key Events: Be cautious about selling calls right before major product announcements or earnings reports, as increased volatility could lead to unwanted assignment.
• Monitor Growth Drivers: Keep an eye on the growth metrics for the Azure cloud platform, as this is a primary catalyst for the stock's performance.

7. Realty Income (O)

Realty Income (O) is a premier choice for income-focused investors, earning its spot among the best stocks for covered calls due to its unique combination of high dividend yield and moderate volatility. As a Real Estate Investment Trust (REIT) with a reliable portfolio of retail properties, its monthly dividend payments create a strong income floor that can be significantly enhanced with option premiums.

The primary appeal of "O" for a covered call strategy is its ability to generate a powerful dual-income stream. The stock’s moderate price fluctuations provide attractive premiums without the extreme risk associated with high-growth names, making it ideal for investors looking to maximize their total annual return. To learn more about selling covered calls for income, consider exploring foundational strategies.

Strategy Implementation

The goal with Realty Income is to layer option premiums on top of its already substantial dividend. Selling monthly calls slightly out-of-the-money allows you to capture consistent income while retaining a high probability of keeping the shares to collect the monthly dividend.

• Example Scenario: If you own 100 shares of Realty Income trading at $65, you could sell a call option with a $67.50 strike price expiring in 30 days. This might generate a premium of $100 to $150, creating a combined annual return of 12.5% to 14.5% when added to its ~5.5% dividend.

Actionable Tips for O Covered Calls

To effectively manage this high-yield strategy, consider these specific tactics:

• Maximize Total Return: Target a combined annualized yield of 12-15% by strategically balancing premium generation with its high dividend.
• Time with Dividends: Be mindful of the ex-dividend date. Roll your options to a later expiration if you want to avoid assignment and ensure you collect the monthly dividend.
• Balance Premium and Retention: Sell calls that are 5-8% out-of-the-money to find a sweet spot between earning a worthwhile premium and retaining your shares.
• Monitor Lease Renewals: Keep an eye on major tenant lease expiration dates, as this can impact investor sentiment and stock volatility.

8. Wells Fargo (WFC)

Wells Fargo offers a compelling blend of value, a respectable dividend, and heightened volatility compared to defensive stocks, making it one of the best stocks for covered calls aimed at generating higher income. As a major U.S. bank, its performance is closely tied to economic cycles and interest rate policies, which creates the price fluctuations necessary for earning substantial option premiums.

The primary attraction for WFC is its ability to generate significantly higher premiums than blue-chip staples. Its moderate-to-high implied volatility means investors can demand more for selling call options, amplifying their income potential without venturing into highly speculative assets. This makes it an excellent choice for those willing to accept slightly more risk for a greater reward.

Strategy Implementation

A balanced approach for WFC involves selling out-of-the-money calls to harness its volatility while still benefiting from its solid dividend yield. The goal is to generate a robust income stream that surpasses what safer, low-volatility stocks can offer, while managing the increased risk of assignment.

• Example Scenario: If you own 100 shares of WFC trading at $50, you could sell a monthly call option with a $52 strike price. This might generate an attractive premium in the range of $150 to $250, creating a significant income boost on top of any potential stock appreciation.

Actionable Tips for WFC Covered Calls

To maximize returns while managing risk with this financial giant, consider these tactics:

• Aim for a High Combined Yield: Target a combined annualized return of 10-12% from premiums, in addition to its 3.5% dividend yield.
• Monitor Economic Indicators: Pay close attention to Federal Reserve policy announcements and interest rate expectations, as these directly impact WFC's stock price and volatility.
• Manage Earnings Risk: Avoid selling calls with expirations immediately following an earnings announcement, as unexpected news can cause sharp price moves and lead to unwanted assignment.

9. Utilities Sector ETF (XLU) or Duke Energy (DUK)

For the most risk-averse investors, utility stocks or ETFs like the Utilities Select Sector SPDR Fund (XLU) are among the best stocks for covered calls. This sector is renowned for its stable cash flows, high dividend payouts, and exceptionally low volatility, creating a predictable and defensive income stream. This stability minimizes the risk of shares being called away while providing a reliable foundation for generating premium income.

The appeal of utilities for a covered call strategy lies in capital preservation and consistent, albeit smaller, income. The low implied volatility means premiums are modest, but the combination of dividend yield and option income can produce a highly dependable total return. This makes utility holdings an ideal choice for retirees or those prioritizing income over aggressive growth.

Strategy Implementation

A conservative approach involves selling far out-of-the-money (OTM) monthly or bi-monthly calls to capture premium without threatening the core holding. This strategy aims to harvest the high dividend yield and supplement it with consistent, low-risk option premiums.

• Example Scenario: An investor holding 100 shares of a utility stock or ETF like XLU could sell a call option with a strike price 15-20% above the current stock price, expiring in 45 to 60 days. This setup targets a combined yield, for example, a 3.8% dividend plus an additional 5-7% from call premiums, resulting in a potential total annual return of 8.8% to 10.8%.

Actionable Tips for Utility Covered Calls

To maximize returns from this defensive sector, consider these specific tactics:

• Go Further OTM: Given the sector's limited upside volatility, use strikes that are 15-25% out-of-the-money to significantly reduce the risk of assignment.
• Longer Expirations: Focus on contracts 45-60 days from expiration. This provides a better balance of meaningful premium and manageable time decay for low-volatility assets.
• Monitor Dividend Ex-Dates: Be aware of ex-dividend dates, as call options can be exercised early by buyers wanting to capture the dividend. For a deeper understanding of timing your trades, you can learn more about when to sell covered calls.
• Diversify with an ETF: Using an ETF like XLU instead of a single stock like Duke Energy (DUK) reduces single-company risk while retaining the sector's defensive characteristics.

10. Chevron (CVX) or Energy Sector Stocks

Chevron and other energy sector giants are excellent candidates for covered calls due to their cyclical nature and heightened volatility tied to commodity prices. This volatility translates into richer option premiums, especially during bull markets for oil and gas. For investors comfortable with the sector's swings, CVX offers a powerful combination of a substantial dividend and the potential for high premium income.

The core appeal of using an energy stock like CVX is its ability to generate significant cash flow in favorable market cycles. Unlike low-volatility stocks, the higher implied volatility in the energy sector allows for selling calls further out-of-the-money while still collecting a meaningful premium. This strategy is ideal for capturing income during periods of rising or stable energy prices.

Strategy Implementation

A common approach is to capitalize on periods of high implied volatility by selling OTM monthly calls. This strategy seeks to generate an attractive income stream that supplements Chevron's already strong dividend yield, creating a potent total return profile. While many consider traditional energy giants for covered calls, the expanding renewable energy sector also offers potential. For those looking to understand the fundamentals of this growing area, consider reviewing a practical guide to solar energy.

• Example Scenario: An investor holding 100 shares of CVX at $160 could sell a call option with a strike price of $180, expiring in 30 to 45 days. During periods of higher volatility, this trade might generate a premium of $250 to $400, adding a significant boost to the stock's dividend.

Actionable Tips for CVX Covered Calls

To maximize returns from this cyclical stock, consider these specific tactics:

• Target a Combined Yield: Aim for an annualized return of 12-18% by combining the dividend yield with aggressively captured option premiums during favorable commodity cycles.
• Monitor Macro Factors: Pay close attention to oil price charts, geopolitical events, and global supply-demand reports, as these directly impact CVX's volatility and stock price.
• Roll for Continued Income: If CVX rallies and your call option is at risk of being assigned, consider rolling the position up and out to a higher strike price and later expiration date to continue collecting premium.

Top 10 Stocks for Covered Calls

Asset	Implementation Complexity (🔄)	Resource Requirements (⚡)	Expected Outcomes (📊)	Ideal Use Cases (💡)	Key Advantages (⭐)
Johnson & Johnson (JNJ)	Low 🔄 — simple monthly covered calls	Moderate capital & low monitoring ⚡	Stable income: ~10–12% annualized (dividends + premiums) 📊	Conservative income, 30–45d 10–15% OTM calls 💡	Dividend aristocrat, low volatility; steady premiums ⭐⭐⭐
Coca‑Cola (KO)	Low 🔄 — predictable execution	Moderate capital; high option liquidity ⚡	Predictable income: ~8–12% combined; small premiums 📊	Defensive income, avoid ex‑dividend assignment, 15–20% OTM 💡	Exceptional dividend history; defensive cash flows ⭐⭐⭐
Procter & Gamble (PG)	Low–Medium 🔄 — weekly/monthly options available	Moderate capital; excellent liquidity ⚡	Steady income: ~12–14% annual target (dividends + premiums) 📊	Conservative covered calls, weekly collections, 15–20% OTM 💡	Recession‑resistant brands; consistent earnings ⭐⭐⭐
Intel (INTC)	Medium–High 🔄 — active management & earnings monitoring	Lower share price but frequent monitoring required ⚡	Higher premiums; variable returns and assignment risk 📊	Opportunistic income during IV spikes; roll as needed 💡	High option premiums and upside potential ⭐⭐⭐⭐
AT&T (T)	Medium 🔄 — consider dividend timing & assignment	Low capital per share; monitor debt/cashflow ⚡	High blended yield: ~15%+ possible; stagnation risk 📊	Yield‑focused investors; consider slightly ITM or 15–20% OTM 💡	Very high dividend yield; strong baseline income ⭐⭐⭐
Microsoft (MSFT)	Medium 🔄 — balance growth and income rolls	High capital required; excellent liquidity ⚡	Balanced outcomes: ~10–12% from premiums + small dividend 📊	Growth + income strategies; roll monthly/quarterly around events 💡	Growth drivers (Azure), tight spreads; liquidity ⭐⭐⭐⭐
Realty Income (O)	Medium 🔄 — account for monthly dividends & tax	Moderate capital; monitor lease/interest exposure ⚡	High income: ~12–14% combined; monthly cash flow 📊	Income seekers wanting monthly distributions; 15–20% OTM suggested 💡	Monthly dividends; diversified property portfolio ⭐⭐⭐⭐
Wells Fargo (WFC)	Medium–High 🔄 — rate/earnings sensitivity	Moderate capital; monitor macro/credit ⚡	Elevated premiums: ~10–12% + ~3.5% div; cyclical returns 📊	Tactical income when rates favor banks; avoid earnings windows 💡	High option premiums in volatile periods ⭐⭐⭐
Utilities ETF (XLU) / Duke Energy (DUK)	Low 🔄 — conservative, slow trades	Moderate capital; low turnover ⚡	Predictable income: ~8.8–10.8% combined; low drawdowns 📊	Defensive allocation, longer option tenors (45–60d) 💡	Regulated cash flows; low volatility stability ⭐⭐⭐
Chevron / Energy Stocks (CVX)	Medium–High 🔄 — active cycle management	Moderate capital; monitor commodities & geopolitics ⚡	Potentially high returns in rallies: 15–20% annualized; variable 📊	Tactical covered calls around commodity cycles; roll during rallies 💡	High yields and premiums during energy upcycles ⭐⭐⭐⭐

From Theory to Profit: Implementing Your Covered Call Strategy with Precision

Navigating the world of covered calls begins with identifying the right underlying assets, and this guide has provided a robust list of candidates. From the dividend aristocrats like Johnson & Johnson (JNJ) and Coca-Cola (KO) to the tech-stability of Microsoft (MSFT) and the high-yield potential of energy stocks like Chevron (CVX), you now have a curated selection of some of the best stocks for covered calls. Each one offers a unique blend of moderate volatility, consistent liquidity, and reliable premium generation potential.

However, selecting a stock is only the first chapter. True, sustainable success lies in the meticulous execution and ongoing management of your strategy. The core takeaway from our analysis is that profitability is not just about picking a 'good' company; it's about systematically managing risk and reward with every single trade.

Key Pillars for Consistent Income

To transform this list of stocks into a reliable income stream, focus on these critical principles:

• Align with Your Goals: Do you want to maximize monthly income, or are you more focused on protecting your principal and avoiding assignment? A stock like Intel (INTC) might offer higher premiums due to volatility, while a utility ETF like XLU provides more conservative, albeit smaller, returns. Your personal objectives must dictate your choice of underlying asset and strike price.
• Embrace Probability, Not Prediction: The market is unpredictable. Instead of guessing where a stock will go, successful covered call writers lean on statistical probabilities. Understanding the likelihood that a stock will remain below your chosen strike price is the single most powerful tool in your arsenal. This data-driven approach removes emotion and guesswork from the equation.
• Consistency Over Home Runs: The goal of a covered call strategy is to generate consistent, incremental gains. Chasing the highest possible premium by selling at-the-money (ATM) or slightly in-the-money (ITM) strikes dramatically increases your assignment risk. A disciplined approach that targets high-probability, out-of-the-money (OTM) strikes will build wealth more reliably over the long term.

The Power of a Systematic Approach

Ultimately, the best stocks for covered calls are those that fit seamlessly into a repeatable, data-informed system. Your process should involve identifying a suitable stock, analyzing its volatility, selecting a strike price based on a specific probability of success, and actively monitoring the trade until expiration.

This methodical process is what separates hobbyists from serious income investors. By committing to a structured strategy, you can turn your portfolio of quality stocks into an active, high-performance income engine. It empowers you to navigate market fluctuations with confidence, knowing that each decision is backed by logic and statistical evidence, not just hope. This is the path from theoretical knowledge to tangible, consistent profit.

---

Ready to stop guessing and start implementing a data-driven covered call strategy? Strike Price provides the probability metrics and real-time alerts you need to confidently select the right strike prices on the best stocks for covered calls. Take control of your income generation by visiting Strike Price to see how our tools can refine your approach.