Did the covered calls beat buy and hold

Over the worked year, yes: the premium book returned 14.3 percent against 10.8 percent for simply buying the same six stocks. That result is published here because it came out of the arithmetic rather than being chosen, and then taken apart, because the two positions that got called away surrendered $3,900 of upside above their strikes and one path of one year settles nothing.

This is the question the whole strategy stands or falls on, and most answers to it compare a real premium book against an imaginary index.

Three ways to spend the same $50,000

Same six names, same 365 days, same price path.

The book won by $1,758 against the first and $1,793 against the second.

Before anyone takes that as vindication, look at what the year did to the underlyings: AMD up 22.0 percent, MU up 21.7, INTC up 25.6, T up 10.2, KMI up 9.4, WBD down 24.6. That is a strong year with one disaster in it, which is close to the ideal environment for this strategy, and the reasons are worth being precise about.

Why it won, in two parts

WBD is most of the answer. The stock fell 24.6 percent. Holding 100 shares lost $280 and holding an equal-weighted $8,333 of it lost $2,050. The book lost $61, because it only ever owned 100 shares and collected $79 of premium along the way. Small exposure to the disaster was worth more than any premium.

The assignments came in low. The book was assigned AMD at $113 when the stock had started the year at $118, and MU at $89 against $92. Getting put into shares during a selloff gives you a lower basis than the buy-and-hold investor who bought on day 1. That is real, and it is the mechanical benefit of the strategy in a V-shaped year.

Neither of those is a general result. Both are properties of this path.

The cost, which is there even in the winning year

Two positions were called away in cycle 5. Follow them to the end of the year.

$3,900 of upside above the two strikes. Against $4,598 of premium collected across all 46 trades of the year, that is 84.8 percent.

Read that as the honest summary of what a covered call is. Nearly everything the premium column earned on the whole book was handed back as forgone appreciation on two positions out of six.

The net cost was smaller, $1,540, because after the call-away the freed cash went back to selling puts and collected another $871 on AMD and $659 on MU. That rescue only worked because the stocks kept rising and the new puts stayed out of the money. In a year that peaked in cycle 5, the same mechanic hands you the shares back at a higher basis.

The name that lost to doing nothing

T. Eight puts, eight expirations, $204 collected, never assigned, never a decision to make. The perfect year.

And holding 100 shares of T instead would have made $230. The wheel lost by $26 on the only position that behaved exactly as intended, because the stock rose 10.2 percent and the book never owned it.

That is the trade in one row. You cannot collect premium for not owning something and also collect the appreciation of owning it.

What one year proves

Very little, and this is the part worth taking away rather than the 14.3 percent.

Eight cycles across six names is 46 observations that are not independent, taken from one path. The result turned on WBD's collapse and on assignments landing near a local bottom. Move the crash to cycle 7 instead of cycle 3 and the recovery never arrives inside the year. Delete WBD and buy and hold wins.

The longer record is already on this site and it does not flatter the strategy: the at-the-money Cboe BuyWrite index returned 7.91 percent annualized over ten years against 15.50 percent for the S&P 500 with dividends. Cluster D publishes that comparison with its caveats, the largest being that BXM writes at the money and nobody here is suggesting you do.

So the defensible claim is narrow, and it is this. Premium selling converts some of an uncertain return into a smaller, steadier one, and it does best in flat and choppy tapes and worst in strong straight-line advances. The worked year was choppy with a violent middle, so it did well. A year that goes up 20 percent in a line will beat it and there is no version of the strategy that changes that.

If your reason for selling calls is that you expect to beat the index, the ten-year number is the one to argue with. If your reason is that you want income and a smaller drawdown and you accept a cap on the upside to get them, this year is a fair illustration of what that looks like, including the $3,900.

OptionsKing scores every candidate strike on a deterministic 0 to 100 scale, blends that score with the return on the capital the trade ties up, and shows you the highest-ranked handful. There is no minimum score. How it works covers what the ranking does and does not tell you.

Questions people actually ask

Sources

• OCC, Characteristics and Risks of Standardized Options

Rules and thresholds above were checked against these documents on August 4, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.

Keep reading

• The ten-year index comparison
• The ledger this audit runs on
• The two returns a single call has

Do the math on your own trade

• Covered call calculator premium, break-even, static and if-called return, annualized.
• Annualized return calculator turn any credit and any holding period into a yearly rate.
• Wheel strategy calculator what the position becomes after assignment.

Every price in this article is an illustrative worked example, not a quote. Read Running the book for the rest of the series, and the disclaimer before you act on any of it. Selling options carries real risk of loss, and the loss can be far larger than the premium you collected.