Selling options for income, in plain English.
Covered calls, cash-secured puts, the wheel, and rolling, with the math shown
Not financial advice. All results are estimates based on the prices you enter. This tool does not use real-time market data: check live quotes with your broker before you trade.
North-star rule of thumb
$100,000 at a 12% yield is about $1,000 a month
Capital needed = monthly income × 12 ÷ annualized premium yield. Halving the capital means doubling the yield, which means more volatile stocks and bigger drops when they fall.
Covered call vs cash-secured put: side-by-side
Same debts. Two strategies. The numbers below are the typical pattern; run yours through the calculator for the actual gap.
| Dimension | Covered call | Cash-secured put |
|---|---|---|
| What you hold | 100 shares per contract | Cash equal to strike × 100 |
| Premium is measured against | Today's stock price | The strike (your cash at risk) |
| If assigned | Your shares sell at the strike | You buy 100 shares at the strike |
| Break-even | Stock price − premium | Strike − premium |
| Best case | Premium + gain up to the strike | Premium only |
| Downside | Nearly all of the stock's fall, less the premium | Nearly all of the stock's fall below the strike, less the premium |
| Extras | You keep any dividends | Your cash may earn interest |
Verdict
The two trades have nearly the same profit-and-loss shape at the same strike and expiration. The put pays you to wait to buy; the call pays you while you hold. Both keep most of the stock's downside, so the deciding question is whether you want to own the shares (put) or would be fine selling them (call).
Frequently asked
Q.Is a cash-secured put safer than a covered call?
Not by structure. At the same strike and expiration their payoffs are nearly identical: both keep the premium if the stock rises and both lose almost dollar for dollar if it falls. A put often looks safer only because it's sold at a strike below today's price, which gives it a built-in cushion a covered call written on shares bought today doesn't have.
Q.Which pays more, a covered call or a cash-secured put?
On premium alone they tend to be close. The extras decide it: interest on the put's cash collateral versus dividends on the call's shares. On a $60 stock over 35 days, a $57 put for $1.00 earns 1.75% on its cash and a $63 call for $1.10 earns 1.83% on the shares.
Q.How much money do I need to make $1,000 a month selling options?
Divide $12,000 a year by the annualized yield you can sustain. At 12% that's $100,000; at 24% it's $50,000, but yields that high come from stocks that swing hard. Taxes come off too: most option premium is a short-term capital gain, taxed as ordinary income.
Q.How is option premium taxed?
Per IRS Publication 550, premium from an option you wrote that expires is a short-term capital gain. If a put you wrote is assigned, the premium lowers your cost basis in the shares; if a call you wrote is assigned, the premium is added to your sale proceeds.
The overview
Selling options for income comes down to two trades. With a covered call, you own 100 shares and sell someone the right to buy them at a set price (the strike) by a set date. With a cash-secured put, you hold enough cash to buy 100 shares at the strike and sell someone the right to sell them to you. Either way, the buyer pays you a premium up front, and you keep it whatever happens next.
The return math is short. A covered call's return is the premium divided by the stock price; a cash-secured put's return is the premium divided by the strike, because the strike times 100 is the cash you set aside. To compare trades of different lengths, annualize: return × 365 ÷ days. A $1.20 premium on an $80 stock over 30 days is 1.5%, or 18.25% a year.
Run the two trades in a loop and you have the wheel strategy: sell puts until you're assigned shares, sell calls on those shares until they're called away, then start again. Every premium lowers what the shares cost you. When a trade goes against you, rolling (buying back the option and selling a later one) can buy time, and the calculators below price that choice against closing or taking assignment.
What premiums can't do is remove the stock's risk. A covered call or cash-secured put keeps nearly all of the downside of owning the shares, softened only by the premium, while capping the upside at the strike. Options also need approval from your broker and a read of the Options Clearing Corporation's risk disclosure. These pages explain the math; whether any trade fits your situation is your call.
Run the math
The calculators that ground this hub. Free, sourced defaults, your inputs never leave your browser.
Deeper reads in this guide
Each one is a focused, plain-English breakdown. Articles markedComing soonwill publish on the moneyscale.app weekly content rhythm.
The wheel strategy, traced through 4 trades
Puts until assigned, calls until called away: one full cycle, the adjusted cost basis, and what a falling stock does.
Cash-secured put vs covered call
The same $60 stock run both ways: return, break-even, best and worst case, and where they differ.
How to calculate covered call return
The formulas for return if flat, if called, annualized, and break-even, worked on an $80 stock.
When to roll covered calls
Roll, close, or let the shares go: all three priced the same way, plus when a debit roll is worth it.
How much money to make $1,000 a month selling options
The capital needed at 6% to 24% yields, one month of real-size trades, and what a 20% drop costs.
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