Sheaff Brock Covered Call Income Portfolio Strategy

This strategy seeks income and growth of capital from the sale of covered call options on high-quality equities. Stocks are purchased, and out-of-the-money calls are sold on them with the intent of being called away.

Covered Call Income Strategy Overview


The Sheaff Brock Covered Call Income strategy seeks income and growth of capital from the sale of covered call options on high-quality equities. Sheaff Brock purchases stocks and writes/sells out-of-the-money call options with the intention of the stocks being called away. The portfolio seeks and is designed to provide income by selling short-term call options on 25–30 high-quality stocks. Stocks are selected based on their fundamental and technical strength as determined by a proprietary research and analysis methodology. The objective of the option portion of the portfolio is to generate consistent income and add diversification. The call options are selected based on the overall attractiveness and potential for profitable outcomes.

The primary objective of the Covered Call Income portfolio is twofold:

  1. Identify and earn premium credit from call options that can provide current and consistent income
  2. Identify and invest in high-quality stocks that can offer the potential for capital appreciation 


Sheaff Brock Covered Call Income strategy invests in a diverse portfolio of high-quality stocks and writes/sells short-term out-of-the-money call options. The option strategy targets a 2% option premium per quarter (7% annualized) as well as the opportunity to participate in stock price appreciation. Calls are generally written with 2 to 4 months expiration and 3%–5% out of the money.

Stock selection is reviewed and managed on a consistent basis. Sheaff Brock utilizes a fundamental approach toward stock selection while incorporating institutional research focused on downside risk. An initial screen utilizes a fundamental value approach scoring domestic equities on about 20 variables (e.g., free cash-flow, revenue stability, profitability changes and trend, leverage, stock price volatility and correlation, and earnings surprise persistency). This data is then used for analysis focused on downside risk, which seeks to measure the risk of a stock versus the potential return—with the goal to avoid downside risk.

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