Mastering Covered Calls in Options Trading

Understanding Options Trading

Episode 03 – Mastering Covered Calls

David McGann (00:17)

Hello to all of our viewers. My name is David. I'm a director here at BMO Investor Line, and I'm thrilled to be co-hosting today's webinar on mastering covered calls. This comes to you as part of our webinar series that seeks to unpack options trading. Be sure to check out our education hub to find other webinars in this series that might be of interest to you. Once again today we'll be joined with our friends at OptionsPlay, and I'm pleased to introduce Tony Zhang. Tony is chief strategist at OptionsPlay, where he leads development of options, trading products, education for investors, and oversees the firm's quantitative options research. He's a frequent contributor to CNBC for analysis on the markets with the specific lens using technical analysis fundamentals, and of course options. We're pleased to have Tony back and I know we have some great content to review today on mastering covered calls. And with that, Tony, I'll hand things over to you.

Tony Zhang (01:09)

Thank you so much, David, and thank you so much everyone for joining us today on mastering cover calls. Now this is a strategy that is by far the most popular use of options all in, but certainly more so from an income generation perspective. And this is a strategy that's suitable for everyone who has a stock or ETF portfolio that you specifically use for long-term investments. And what we're gonna do is we're gonna show you a deep dive of how you can use cover calls to generate additional income in your overall portfolio, your long-term investment portfolio by utilizing this very popular option strategy. Now, before we get started, what we are going to discuss here today is purely for education and demonstration purposes. It is not a solicitation or recommendation to buy or sell any of the specific securities that we'll be using as example purposes during today's session. So let's take a look at what we're gonna cover during today's session. First, we're gonna cover what, just simply, what is a cover call? This is to make sure that everyone understands mechanically how a cover call works, what you need in terms of your account in order to sell a cover call for income. Then what we're gonna do is we're gonna look at an example. We're gonna co compare a buy and hold, uh, stock investment and compare it to a buy and hold stock investment with a cover call. We're gonna look at the different obligations that you take on alongside with that, what benefits you have with those obligations, and how much income you can potentially receive by looking at a cover call strategy for your overall portfolio. Then in order to really utilize this, uh, strategy in your port, in your account, what we're gonna explore are the different expiration date and strike prices that you can select when you're sell, when you're se selling cover calls, and understand the differences between different expiration dates and strike prices and how they're gonna affect the income levels that you receive and the different types of obligations and risks that you'll be taking on by selling a cover call. And then at the very end, we'll talk a little bit about trade management. Once you're in a cover call, what are the different scenarios you might find yourself in and how you might want to handle each one of those scenarios.

(03:31)

So with that in mind, the primary thing that I want you to be able to walk away from today's session is a clear understanding as to how can I aim to generate a consistent income yield, additional yield on your portfolio using the cover call strategy. So, like I said, first off, what we should do is we should consider what is a cover call and make sure everyone here is clear as to what the strategy entails, what risks you are taking on, and what obligations there might be to sell a cover call til. So to start off with, we always have to start off with at least 100 shares of an optional stock or ETF that you already own in your portfolio. Now, the reason that you need at least 100 shares of this particular stock or ETF is because each cover call or call option that you sell against the stock or ETF, like in order to generate income represents 100 shares. And that when, when you're selling that call option entails certain obligations that require you to deliver those 100 shares, you need to actually own at least 100 shares in your underlying portfolio in order to satisfy those obligations. So what that means is that if you own a stock with only 50 shares of a stock or ETF, that's optionable, you will not be able to sell a cover call because you would not be able to satisfy the obligations of that contract with only 50 shares. On the other hand, if you own 150 shares of an underlying stock, you can sell one contract that will obligate you to deliver 100 shares of that 150 shares you currently own. And what we're doing here is once you have a one 100 shares of a stock or ETF that is optionable, what you're going to do is you're gonna sell a call option against that stock. And what you're doing here is you're basically using the stock that you already own as collateral against the obligations that you have when you sell a call option. And when you sell a call option, what you're doing is you're obligating yourself to sell the specific stock or ETF at a specific price if the call option is assigned on or before the expiration date. So what you're effectively doing is you're taking on the  obligation to sell the stock at a specific price. And what you're doing here by selling that call option and taking on that obligation, is that you're going to receive a net income on the short sale of the covered call, and this is going to have a net effect of capping the upside potential of the stock price that, of the stock that you own at the strike price that you've agreed to obligate yourself to sell the stock at in exchange for income, that's gonna offset the current cost basis of the stock that you own. So if we look at a chart here on your screen, what you see is the dash blue line, which represents your current stock position, and that dash blue line is a symmetrical line that goes, in infinite directions up and down.

(06:43)

Basically, if the stock continues to move higher and higher and higher, you can make more and more money. If the stock keeps moving lower and lower, lower all the way down to zero, you can lose more and more money. And what we're doing here by selling that call option is we are giving away upside or capping the upside above a certain level. That's the strike price or the, uh, price at which you've obligated yourself to sell the stock sometime in the future. But as you can see, what we're doing is we're shifting the line of your current position to the left. And what that means is we're lowering the cost basis of the stock that you own. So you actually effectively own the stock at a lower cost basis, which increases your profits if the stock does move higher up to a certain degree. And it also decreases your risk of the stock declines from where we currently sit. And this is an important diagram to understand the net effect that you have when you sell a cover call, which is the fact that you have, uh, your exchanging further upside beyond a certain level in exchange for income today, that's gonna offset the risk that you generally take with the underlying stock. Now, it's important to understand that despite the fact that you've sold the cover call for income, there's still substantial risk for the strategy because when you're selling a cover call, the majority of the risk that you have is still with stock that you own.

(08:10)

And if that stock were to decline to zero, you have a fairly substantial amount of risk on the line with your stock position, even if you have income to show from that cover call. So it's important to understand that by selling a cover call, you are still taking on a fairly substantial amount of risk with the stock that you own, even though you are actually reducing that overall risk by a certain amount.

And we'll look at an example with that to help you better understand. Now, just to lastly, cover the obligations that you have when you sell a cover call. When you sell a cover call, you are effectively obligating yourself to sell the stock at that specific strike price on or before the expiration date of the option. And as a seller, you have the obligation and the person on the other side who's the buyer of that call option, has the right to exercise that right at any time on or before the expiration date. And granted, what this means is that for the most part, if the call option is out of the money and it's not close to expiring, your chances of being assigned on that cover call are relatively slim. But if the stock does rally above the stripe price and you are approaching expiration, you can find yourself, being effectively obligated to sell your stock at that specific price, even prior to expiration. So it's important to understand your obligations and how exercise and assignment works prior to selling your first cover call, because that is a scenario that you very well may find yourself in. There are other factors to also consider such as dividends that may uh, be a factor in determining whether or not the buyer of that call option will exercise either on expiration or prior to expiration. And those are some of the scenarios that I think are really important to understand before you go ahead and execute your first covered call.

(10:14)

So with that, it's important to understand how exercise and assignment works for a cover call, making sure that you understand as a, as a seller your obligations and what a buyer could potentially do prior to expiration so that you can, uh, understand mechanics, of a cover call before you go ahead and and sell that first cover call.

David McGann (10:35)

Thanks, uh, Tony, I'm gonna jump in here. So that's a great initial overview of, uh, you know,

But if the stock does rally above the stripe price I heard you reference things like income, things like yield. When we think about options strategies is it safe to say that covered calls are like a lower risk or more conservative strategy? Could you expand on that a little bit, if you don't mind?

Tony Zhang (10:58)

Yeah, absolutely. And that's a great question because options strategies run a pretty wide gamut in terms of risk. Um, and this is really the only option strategy where you're not adding additional risk to your overall portfolio by selling a covered call because you are effectively covered as that's, as we call the strategy with the underlying share position. You will never end, end up in a position where you are worse off by selling a cover call than you were prior to owning the stock. Meaning you're always going to have reduced risk, by selling a cover call, you are giving away some upside. So if the stock was to rally substantially, you are losing out on potential gain, but you're not, you don't, you're not adding any additional risk. And it's the only option strategy that falls into that particular category where by selling a cover call, you're not adding additional risk. And from that perspective, I think for a lot of investors, they consider this to be on the safer side with regards to risk, certainly on the more conservative side when it comes to risk tolerance as an option strategy.

(12:06)

So moving on, let's talk a little bit about when you might wanna sell a cover call. Now that we understand what a cover call is. So first and foremost, it's important to understand that this is a strategy that what we consider mild modestly bullish, because the max gain on the, on the position now is now capped. If you were to just outright on the stock, we would typically call that a bullish strategy because you own a stock primarily for the reason that you believe that vet stock will appreciate in value in the future, and you wanna be able to capitalize on that, capital appreciation. But when we sell a cover call, what we're still doing is the majority of that position is still going to be the long stock or ETF position that we own. But by selling a call option, what we are reducing is the overall bullishness of the strategy because we are effectively choosing a strike price at which we are saying that we perhaps do not believe that the stock will exceed that level by much beyond that. And we're comfortable giving away any potential upside above that strike price in exchange for some income today. Now, if we think about it from a Delta perspective, we think of a hundred shares as being long 100 deltas because each share represents one. Um, uh, for every sh for every $1 the stock goes up. For every one share you own, that's $1 in profits. So a hundred shares would equate to a hundred deltas. Now, let's say you were to sell a cover call with let's say, a 20 delta strike price, which we're gonna cover here in a few minutes as to what that means. What you're doing is you're reducing the net deltas of your overall position, but it's still going to be a positive delta. So if let's say you sold the 20 delta against a 100 delta long position, then your net delta here is still at. So that means that you're still gonna be positively, geared as the stock moves higher, you'll be profitable as the stock moves lower, you'll be unprofitable or lose money on the overall trade. But this is still a strategy that you want to take when you, have a bullish view. But perhaps you are, uh, somewhat limited in terms of how much further you think the stock can move from where you are today. And like I said, by selling that cover call, by exchanging some additional upside sometime in the future, you're gonna receive premium or income today, and that's gonna offset the cost basis of the stock position that you own. That's gonna reduce the overall risk that you have in the underlying stock position. And that is a benefit that you receive immediately as soonas you sell the cover call. And the now what that changes is the riskv of your overall stock position is going to be reduced by the premium that you collect. Um, and that's something that's important for you to understand because that's the, that's the calculus that you have to determine as to what upside do you wanna give up in exchange for, how much income. Today we're gonna go through some examples, show you the full kind of go, the full range of expiration dates and strike prices so that you can actually see how much income that you're receive versus how much upside you have to give away in exchange for that income. Um, but overall what you're trying to do here is you're trying to generate some income for your overall portfolio.

(15:38)

So let's take a look at the T chart because I think a lot of beginners when they think about this type of strategy, they think of it as a single leg strategy. They think about the call option they have to sell, as opposed to thinking about it as a multi-leg strategy, which is really what the strategy is because many times, because it's a stock that you already own in your portfolio, you kind of don't think of the stock leg as part of the strategy, but it very much is. So if we refer back to our T chart, we have long calls and short puts at the top that are our bullish strategies, and we have short calls and long puts that are at the bottom of the chart, which are bearer strategies. And if you think about just the short call part that you're selling, the call option on that is a bearer strategy. But again, it's important  to consider both legs the long a hundred shares that you own and the short calls that you own, that you'll be selling. And think of those as a, as a strategy together, because the, the strategy together actually hedges any downside risks that you have as a short call with the stock that you own. Because in a short call, if the stock were, if you were to just sell a short call and the stock was to increase in value, the further the stock increases in value, the more money you would lose in a short call. And that has unlimited risk. So the further the stock goes higher, the more you would risk on that short call. But remember, you also own the underlying stock if on the stock position that you own, if the stock keeps going higher and higher and higher, you'll keep making more and more profits on the stock leg. And those two risks offset each other. The unlimited risk nature of the short call and the unlimited, profit potential on the long stock position will offset each other. And that's why the two strategies, as David was asking, whether or not this is a conservative or a relatively safe strategy is a relatively safe strategy because any risk that you have from selling the short call is effectively offset by the increased profit potential that you have in your underlying stock position. So if you're thinking about this, you know, for the first time, remember, you have to think about it from both legs perspective to better understand this overall strategy.

(17:59)

But I always think the best way to learn about a strategy, especially when it comes to options, is to go through real example. And before we jump into the cover call example, what I wanna first walk you through is what your, position looks like today as a stock investor. So let's say you, uh, you, you buy a 100 shares of stock X, Y, Z, and the stock's currently trading at 1 45. And let's say you have a price target of $170 on the stock. Now what that means is that you would typically, once you own the stock, place a limit order at $170, which is your price target to sell the stock at $100. Now, because you own the stock at 1 45, that means that's your total risk because if the stock declines zero, you're risking $145 per share. Now, your potential reward is the $25 difference between $170 and 145. If the stock reaches your target price and your limit order is filled, you have a risk, a risk of 145 with a profit potential of $25. And during this time, while you wait for the stock to rally up to your limit price, you are in that time exposed to the movements of that underlying stock. And if the stock pays any dividends, you will be able to collect dividends on the stock that you own. So you really only have the capital appreciation to show for it, plus some dividends, uh, while you hold, uh, the stock and you're exposed to the volatility of that underlying stock and you're basically holding onto it hoping that the stock will rally up to that $170 level, in order for you to take profits on this overall trade. Now this should be a fairly simple and, simple concept to grasp if you're currently a stock or ETF investor. So let's now take a look at what if you were to also add options to this position, how does that change your risk profile? How does that change your potential income  and your potential reward for the overall trade?

(20:11)

So let's now take a look at the same scenario. I own a stock at 1 45, a hundred shares of x, y, Z at 1 45. My price target on this is $170. Now, what I'm gonna do as a cover call or as an options investor, is instead of just placing a limit order at $170 to sell the stock at my price target, I'm going to sell a call option with a $170 strike price, that expires sometime in the future. And what I'm gonna do in this particular instance is I'm gonna collect $3 worth of income. And what you're gonna see here is that by selling that call option at $170, I take on effectively the same obligation as someone who places a limit order at one 70, which is the obligation to sell the stock at, at the specific price on or before the expiration date. But the difference between a limit order and a cover call is that a limit order doesn't pay me any income, but a cover call in this particular case pays me $3 a share or $300 for my 100 shares that I own, and that $300  that I'm gonna collect will offset my cost basis on the stock. And what you're also gonna see is gonna reduce my overall risk down to $142 per share, because now I've collected $3 worth of income, I now effectively own the stock at $3 lower, which is $142, and it also has the effect of increasing my potential reward because now my cost basis has been reduced. If the stock were to rally to $170 and the call option gets, uh, assigned to me, and I effectively delivered my stock at $170, now my potential reward is increased to $28 a share because now I'm earning $3 a share higher from the income that I receive. And what's incredibly interesting about a cover call is that if the stock does not reach my strike price by the expiration date, I'm able to effectively sell a new a cover call and generate more additional income. And during the time that happens, I'm exposed to the underlying volatility of the stock just like I would be if I was a equity investor, but, and collect dividends at the same time. But, uh, this is something that I can continuously do and generate not just $3 of income in total, but $3 of income every single time I'm capable of selling a cover call. And I can do that, uh, for potentially months on end before my stock actually reaches my, my target price and my stock gets called away. So it's really important to understand the differences between a limit order and a cover call. And one particular instance that I do think it's important to understand, that's because I don't think it's fair to compare limit orders with cover calls apples to apples. They are quite different because a limit order will get filled effectively immediately as soon as the stock rallies above your limit price. But a cover call typically will only be assigned if the stock is above the strike price on or very close to the expiration date. Um, rather than sometimes if, let's say you still have 20, 30 days left before expiration, the stock, uh, rallies above one 70, but by the time the expiration date comes along, the stock is below one 70. In that particular case, it's unlikely that the call option will be assigned. In that instance, you're more likely to keep the $3 of income and potentially sell another cover call the next month. Uh, so, uh, it is important to understand that there are differences from that perspective between a limit order and a cover call.

David McGann

(23:58) Tony, I'm gonna jump in. Again, I really like how you framed it. Um, and, and thinking about the strategy, which is, well, what would be my ultimate price target, you know, for the shares that I own and, and selling a call at that level and then collecting income, you know, as, as it tries to approach that. And then of course, if it doesn't hit that one 70 level, in this particular case with this example, we have an opportunity to sell another call option maybe for the next month and, and kind of repeat the process and continue to generate some income. That's great. I imagine you're gonna touch on this a little bit later, but what happens in the particular case here with the same example if, you know, I've sold that one 70 strike and before, um, expiration, the prices actually exceeded one 70. Can you expand on that a little bit?

Tony Zhang (24:47)

Yeah, absolutely, David. Um, if the stock is exceeds $170 before expiration, well that is where you do have the potential, uh, opportunity where the call option could be assigned early, and that's when your a hundred shares that you own will be delivered to the call buyer at $170. Um, but otherwise, if the call option is not, assigned early, what you will see is that you will see a loss on the short call side of the, of the strategy. And that sometimes can be a little, uh, disconcerting for first time cover call sellers. You know, the, basically the stock is going in the direction you expect it to, but you see an unrealized loss on the cover call side of the position. But remember the long stock hedges that underlying risk, so if you see a loss on the short call, that means you've got a substantial gain on the long stock position that you have to offset any losses that you have on the short call. But ad expiration, if the stock is still above $170, that's when the book call buyer will likely or will be auto exercise, meaning they will effectively exercise their right to buy the stock from you at $170 and your stock will be delivered to them out of your account at $170 to the buyer. So those are the different scenarios, but we will cover a little bit more on that as we go through the trade, uh, management slides.

(26:17)

So let's move on because once you understand the cover call conceptually and you understand why and when you might want to utilize this type of strategy, that begs the question, okay, how do I actually go about selecting the right cover call for my overall portfolio? And I think the best way to do that is to go through the full range of potential expiration dates and strike prices that you can choose and walk you through. Uh, you know, what you get, depending on whether you choose a short dated expiration, a long dated expiration, a strike price that's close to the current price, or a strike price that's further away from the current price, because you're gonna get different income levels and you're gonna get different obligations for each one. So let's start off on the short end of the curve. Let's talk about, uh, what I'm gonna go through. It's pretty extreme to the short end of the curve. We're looking at a weekly option, so an option that expires in just seven days, and we're gonna use SPY in this particular example.

(27:17)

Uh, in this particular example, SPY is just trading below five, uh, a little above five 10 here. And what we're looking at is a weekly option, an option that expires in just seven days. And we're gonna look at are three different strike prices. I'm calling these three, three strike prices, conservative, moderate, and aggressive. So the conservative one is what we call a $525 strike. In that particular case, we're gonna collect 75 cents in income. Remember, that's 75 cents per share. So multiply that by 100 shares, that's gonna be $75 worth of income. The moderate one is five 20. This is a strike price that's a little bit closer to the current price of the stock. For that, you're gonna collect a dollar 94. Um, and then the aggressive one is five 15. That's just outside of the current price of the stock. And that's when I collect $4 and 7 cents. And what you see here next to each strike price is that I have a delta number. The conservative one says 14 delta, the moderate says 29 delta, and the aggressive one says 48 delta. Now, what I mean by delta here, and a lot of, and a lot of traders ask us, you know, uh, about Delta, we typically use a delta based approach to selecting strike prices. And the reason for that is because Delta approximates the probability that the stock will be above that specific price above or below that specific price at expiration. And because we're talking about call options, that delta will approximate the probability that the stock will be above that specific strike price at expiration. So when we talk about a conservative delta of 14 deltas, that means there's a roughly 14% chance the stock will be above $525 seven days from now. On expiration date, the moderates 29 deltas. So 29% chance the stocks will be above $520 at expiration in seven days, and 48% chance of the stock will be above $515 at expiration. So let's look at how much income we collect from that. So the conservative one, we collect only 75. The aggressive one, we collect $4 and 7 cents, $407. We're collecting nearly five times the income on the aggressive strategy than on the conservative strategy.

(29:40)

Just kind of to help you compare those numbers from a yield perspective, $75 on the roughly $51,000 that's required to buy 100 shares of SPY equates to only 15 basis points. That's the raw return that you see here on the right hand side, 15 basis points in yield over seven days. Now, we generally don't like to annualize numbers that are this small because it it kind of small, very short dated options, very short dated returns in they're annualized give kind of skewed results. But because we're a analyze annualizing, the same terms, apples to apples, what this is really just giving you a sense for is, uh, trying to compare apples to apples across different expiration dates, what type of yield you're actually receiving on an annualized basis. So if you're able to collect 15 basis points every single week, and you're able to do that for 52 weeks throughout the year, how much income does that come out to be? If you were able to collect $75 or 15 basis points every week, that comes out to be an annualized yield of 7.9%. Now, just to put that into context, even on a very conservative strategy where you're collecting only 15 basis points, you're adding an additional nearly 8% yield to your overall portfolio by selling a conservative cover call. Think about how much dividends you collect by owning SPY. It's a little over 2%. So what you're doing here is you're getting nearly almost four times the dividend yield even on the very conservative tract of selling a cover call. Now let's look at the moderate one, right? The moderate, the five 20, that's that's collecting $194 worth of income. That's a 38 basis point yield in the next seven days, annualizing out to 21%. And obviously the $407, which is a fairly substantial amount of income to collect in just, uh, seven days for the $51,000 position that you have, that's 79 basis points or fi nearly 51% when you annualize that out. Now, before we actually really dive into kind of what all of this stuff means, I do want to cover one, um, concept that's important to understand, which is the fact that we are starting off on the very short end of the curve when it comes to the expiration dates. We're gonna, in the next couple of slides explore the the later term structure the deeper parts of the term structure. We look further out in terms of expiration dates, but I wanna first talk about why someone might choose such a short dated expiration and kind of what benefits that you get and what potential risks that you have. Also with that, now with shorter dated options, you're going to collect less income, uh, just because there's so little time between now and expiration.

(32:39)

The extrinsic value of an option, which is what you're collecting in this particular case, these out of the money options is going to be relatively small when you compare them to longer dated options. But shorter dated options have an acceleration in terms of time decay, meaning for every day you hold onto the option, you're gonna collect a faster amount of income or a, or a higher amount of income per day when you sell shorter dated options. And that's what attracts a lot of investors to selling shorter dated options, weekly options, sometimes even daily options. Um, but certainly, uh, anytime anything under 21 days, in my opinion, I consider as the shorter end of the curve when it comes to time, uh, when it comes to expiration dates. And what you get with the shorter end of the curve is simply an acceleration. So for each day, you hold onto it, you're gonna collect more income. We're gonna see how seven days compared to let's say 45 days, how much income you receive. But it's important to understand that because you're selling such short dated options every single week is the potential for the stock to be above your specific strike price and the stock to be called away. Which means that if you sell very short dated options, you could perhaps in a week have your stock get called away and have very little income to show for it during that one week's time, because over one week time, you're only gonna collect one 52nd  of an entire year's worth of income. So even though you annualize it out to nearly 8% on the conservative track, you're not collecting 8%, you're only collecting 15 basis points because the stock got called away after a single week. So that's sort of the risk that you, you have when you're selling short dated options. Not to mention, you also have a significantly increased transaction cost because you're entering, uh, you know, and potentially closing out a cover call position every single week.

You're paying commissions, you're paying fees, you're paying, um, the bid as spread on the option if you are buying and selling. So those are some of the things to consider when you're, when you're selecting shorter dated options because from a conceptual, theoretical and academic perspective, you have an edge from selling shorter dated options. Because if, let's say you were to sell seven a seven day option versus a 21 day option, if you were able to successfully sell three one week options as opposed to a three week option, you're gonna collect more money from  that from selling three weekly options, then you are gonna from selling one, uh, three week option. But you know, that's theoretical, that's not accounting for transaction costs, that's not accounting for the fact that you might get, the stock might get called away after the first week and, you never actually collect the rest of the two week two and week three worth of income. So it's really important to understand that before you decide which expiration date you choose. And like I said, the short end of the curve has some downsides, in my opinion, to go too short because of the higher transaction cost. But with that in mind, let's just take a look at exactly what you are taking on, what obligations that you have.

So, like I said, the stock in this particular example is trading just above $510. Let's say you were to sell the five 15 strike. That means that if the stock rallies even just a couple of bucks by in a week's time, you are effectively giving, you're effectively selling your stock, uh, at $515, giving yourself very little room in exchange for of capital appreciation in exchange for a large amount of income, $407 worth of income. Now, on the other hand, if, let's say you were to select a conservative strike 525, now the stock has to rally about 1213 bucks before the stock gets called away. And what you have is very little income to show for that only $75 worth of income. But I think what you need to consider is think about the difference between the aggressive strike and the conservative strike. The difference between those strike prices is about $10. The difference between the income levels on those two strike prices is only about $3. So what you're doing is that you're effectively exchanging $3 worth of income today in exchange for $10 worth of capital appreciation in one week's time. And that's the calculus that you have to ask yourself as to whether or not that suits you to give, to take $3 in exchange for today, in exchange for $10 of potential upside one week from now. Um, and, and that's really how you need to think about choosing your expiration date and strike prices for a cover call.