The first step in choosing which stocks and ETF’s on which to sell covered calls is to exclude those which are not appropriate.
For example, you should avoid leveraged ETF’s, small biotechs, start-ups and thinly traded stocks.
Next you can count out any stock that have a very illiquid options market. Look at the option strikes you will be trading, if the open interest is less than 500, then move on. Also keep an eye on the bid-ask spread of the options, if the spread is more than about $0.30 then you can also ignore those stocks.
Given the above, that significantly reduces the available universe of stocks on which to sell covered calls.
Stocks that you do want to look at for covered calls are quality, blue chip stocks that you would be happy to own in your retirement account. Dow stocks are a good place to start and all of the 30 stocks within that index would be appropriate for covered call writing.
Also, stocks in the consumer staples sector are generally low risk, low volatility that can be appropriate. The only downside with those is that low risk means low premiums so the return potential will be lower. Still, covered call writing is not meant to be exciting!
Here is my list of 62 stocks and ETF’s that I believe are appropriate for covered call writing.
AAPL Apple Inc
AMGN Amgen, Inc.
AXP American Express Co
BA Boeing Co
BAC Bank of America
BUD Anheuser Busch
C Citigroup
CAT Caterpillar Inc
CSCO Cisco Systems Inc
CVS CVS Health Corp
CVX Chevron Corp
DD E I du Pont de Nemours and Co
DIS Walt Disney Co
EEM iShares MSCI Emerging Markets Index ETF
EWZ iShares MSCI Brazil Index ETF
FXI iShares FTSE/Xinhua Chine 25 Index ETF
GE General Electric Co
GOOG Alphabet Inc
GS Goldman Sachs Group Inc
GSK GlaxoSmithKline plc (ADR)
HD Home Depot Inc
IBM International Business Machines Corp
INTC Intel Corp
IWM iShares Russell 2000 Index
IYR iShares Dow Jones US Real Estate ETF
JNJ Johnson & Johnson
JPM JPMorgan Chase and Co
KHC Kraft Heinz Co
KMB Kimberly Clark Corp
KO Coca-Cola Co
MA Mastercard
MCD McDonald’s Corp
MMM 3M Co
MO Altria Group Inc
MRK Merck & Co Inc
MSFT Microsoft Corp
NKE Nike Inc
PEP PepsiCo, Inc.
PFE Pfizer Inc
PG Procter & Gamble Co
QQQ PowerShares QQQ Trust, Series 1 ETF
SBUX Starbucks Corporation
SPY SPDR S&P 500 ETF Trust
TRV Travelers Companies Inc
UNH UnitedHealth Group Inc
UTX United Technologies Corp
V Visa Inc
VZ Verizon Communications Inc
WFC Wells Fargo & Company
WMT Wal Mart Stores Inc
XLB Materials Select Sector SPDR
XLE Energy Select Sector SPDR
XLF Financial Select Sector SPDR
XLFS Financial Services Select Sector SPDR
XLI Industrial Select Sector SPDR
XLK Technology SPDR
XLP Consumer Staples Select Sector SPDR
XLU Utilities SPDR
XLV Healthcare SPDR
XLY Materials Select Sector SPDR
XOM Exxon Mobil Corp
Why avoid leveraged ETF’s at all costs?
Hi Brian,
They are fine for trading short-term but you don’t want to hold them for too long so covered calls on leveraged ETF’s are not a great idea. This article gives more detail:
https://dqydj.com/dont-use-leveraged-etfs-unless/
Hope it helps.