How I Sold a 17-Day Covered Call on Prudential Financial at $97.55 – Collecting $2.99 Premium for Protection and Income
When I bought Prudential at around $97.55, my plan was never just to wait passively for price appreciation. As an income-focused investor, I like to make my shares work harder for me. That’s where the covered call strategy comes in. For this position, I sold a 17-day covered call with a strike price of $97.50, collecting $2.99 per share in premium.
This single move gave me nearly a 3% buffer in just over two weeks — and that’s powerful.
Let me explain the logic behind it.
⸻
Understanding the Covered Call Strategy
A covered call is a strategy where you:
1. Own 100 shares of a stock
2. Sell (write) one call option against those shares
Because each option contract controls 100 shares, selling one call against 100 shares makes the position “covered.” If the stock rises above the strike price, you may be required to sell your shares at that strike. If it stays below, you keep both your shares and the premium.
In my case:
• Bought PRU around: $97.55
• Sold 1 call option
• Strike price: $97.50
• Premium received: $2.99
• Duration: 17 days
That premium of $2.99 equals $299 per contract immediately credited to my account.
⸻
Why I Chose the $97.50 Strike
Some investors prefer out-of-the-money calls to allow for more upside. However, I chose the $97.50 strike, which was very close to my cost basis.
Why?
Because I was comfortable exiting around breakeven while locking in almost 3% short-term income. My focus wasn’t aggressive capital gains — it was:
• Income generation
• Downside buffer
• Short-term capital efficiency
With a 17-day timeframe, earning $2.99 on a $97.55 stock represents roughly:
2.99 ÷ 97.55 ≈ 3.06%
That’s about a 3% return in just 17 days.
Annualized, that would be massive — although we all know premiums fluctuate and such opportunities don’t repeat identically every cycle.
⸻
My Real Breakeven: $94.55
This is the key part.
My cost: $97.55
Premium collected: $2.99
So my adjusted breakeven becomes:
97.55 - 2.99 = 94.56
Rounded, around $94.55.
That means:
If Prudential drops from $97.55 to $94.55, I’m still effectively breakeven because the premium cushions the fall.
That’s what I call a premium buffer.
Instead of worrying about small market volatility, I’ve built in a 3% protection layer.
⸻
Scenario Analysis
1️⃣ If PRU Stays Below $97.50
Best case for income strategy.
• Option expires worthless
• I keep $299
• I still own my 100 shares
• I can sell another call
This is ideal for consistent income generation.
⸻
2️⃣ If PRU Rises Above $97.50
Shares get called away.
What happens?
• I sell shares at $97.50
• I already collected $2.99 premium
• Total effective sale price = $100.49
So even though the strike is slightly below my cost, the premium makes my effective exit:
97.50 + 2.99 = 100.49
That’s a solid gain over 17 days.
I’m perfectly fine with that outcome.
⸻
3️⃣ If PRU Drops Below $94.55
Only here do I start taking real paper loss.
But even then:
• I still collected income
• I can sell another covered call at a lower strike
• I can reduce my cost basis further
This is how I systematically lower risk over time.
⸻
Why I Like Covered Calls on Prudential
Prudential is a strong dividend-paying insurance company. It typically offers:
• Solid cash flow
• Stable business model
• Attractive dividend yield (around ~5% range historically)
Because of that, it’s suitable for income strategies like covered calls.
You are not doing this on a hyper-growth stock that can spike 20% overnight. You’re doing it on a relatively stable financial name with predictable option premiums.
That’s important.
Covered calls work best on:
• Dividend stocks
• Sideways markets
• Moderate volatility stocks
Prudential fits that profile.
⸻
The Power of Short Duration (17 Days)
Why 17 days?
Short-dated options decay faster due to theta decay. Time value melts quickly as expiration approaches.
By selling short-term calls:
• I capture faster time decay
• I can recycle capital more often
• I adjust strike prices more frequently
In 17 days, I generated nearly 3%. That’s extremely efficient capital usage.
Even if I only capture half of that consistently, it significantly boosts annual returns.
⸻
Psychological Advantage
Covered calls also reduce emotional stress.
Instead of worrying:
“Will the stock drop?”
I think:
“Okay, I have $2.99 cushion.”
Instead of chasing rallies:
“If it goes above strike, I exit profitably.”
It creates structure and discipline.
I’m not gambling. I’m managing probabilities.
⸻
Risks to Be Aware Of
Covered calls are not risk-free.
❌ Big Rally Risk
If PRU suddenly jumps to $110, I miss the upside above $97.50.
But I accept that trade-off because income consistency is my priority.
❌ Big Crash Risk
If PRU drops to $85, the $2.99 premium won’t save me entirely.
However, it reduces damage compared to holding naked shares.
Covered calls are defensive income tools — not crash protection systems.
⸻
Strategy Philosophy: Income First, Appreciation Second
For this trade, my goal was clear:
• Earn premium
• Create buffer
• Accept capped upside
• Repeat consistently
Many investors focus only on capital gains.
I focus on:
Cash flow generation + controlled risk.
Over time, premium stacking compounds.
One cycle = 3%
Multiple cycles per year = meaningful enhancement
And on top of that, I still collect dividends if shares aren’t called away.
⸻
Final Thoughts
Selling the 17-day covered call on Prudential at $97.50 and collecting $2.99 premium gave me:
✔ Nearly 3% short-term return
✔ A breakeven lowered to $94.55
✔ Defined upside exit at effective $100.49
✔ Reduced emotional stress
✔ Structured income generation
This is how I turn a dividend stock into an income machine.
Covered calls aren’t about hitting home runs.
They’re about:
• Consistency
• Discipline
• Risk management
• Cash flow
For investors who own stable dividend stocks like Prudential, covered calls can transform ordinary holdings into high-efficiency income assets.
And in markets where volatility exists but direction is uncertain, that 3% buffer over 17 days can make all the difference.
Find out more here: SGD 688 Cash Vouchers* up for grabs
Welcome to TigerTrade
@TigerStars @Esther_Ryan @TigerEvents @TigerEvents @MillionaireTiger @TigerEvents
Comments