Best Covered Call Stocks Under $50: How to Find High-Premium Candidates in 2024

The Short Answer: What Makes a Great Covered Call Stock Under $50?

The best covered call stocks under $50 share three traits: high enough implied volatility (IV) to generate meaningful premiums, enough liquidity so you can enter and exit without getting hurt on the bid-ask spread, and a business you are comfortable owning for weeks or months if the trade goes sideways. Stocks in the $20–$50 range are a sweet spot for many retail traders because one standard contract controls 100 shares, so your capital commitment stays manageable — $2,000 to $5,000 per position rather than $15,000+ for a single-contract position on a high-priced stock.

This article walks you through the selection criteria, a worked numerical example, the real risks you need to know before you sell your first call, and a short list of liquid names that have historically offered attractive covered-call setups in this price range.

Five Criteria for Picking Covered Call Stocks Under $50

Not every cheap stock deserves a covered call. Here is the filter checklist that experienced income traders use.

**1. Implied Volatility (IV) in the 30–60% range.** IV is the market's forecast of how much a stock will move. Higher IV means fatter premiums. Below 25% IV, the premium on a 30-day, out-of-the-money call is often too thin to bother. Above 70% IV, the market is pricing in a major event — earnings, FDA ruling, lawsuit — and the risk of a sharp drop is real. The CBOE publishes IV data for all listed options, and most brokers display it on the options chain.

**2. Open interest above 500 contracts per strike.** Open interest and daily volume tell you whether other traders are active at that strike. Low open interest means wide bid-ask spreads, which silently eat your premium. The Options Industry Council (OIC) recommends checking both open interest and volume before placing any options order.

**3. A stock you would hold anyway.** Covered calls do not protect you from a big drop. If the stock falls 30%, the small premium you collected does not come close to covering that loss. FINRA and the SEC both remind retail investors that covered calls are a yield-enhancement strategy, not a hedge.

**4. No earnings announcement inside your expiration window.** Earnings releases cause IV to collapse after the announcement (a phenomenon called IV crush). If you sell a call before earnings, you collect elevated premium — but you also take on the risk of a large gap down. Many traders simply avoid holding covered calls through earnings.

**5. Price stability or a mild uptrend.** Covered calls cap your upside. If a stock is in a strong uptrend, you will get called away repeatedly and miss the gains. A stock that moves sideways or drifts slightly higher is the ideal covered-call candidate.

Worked Example: Selling a Covered Call on Ford (F) at $12 — Wait, Let's Use a $40-Range Name

Let's use a concrete example with AMD (Advanced Micro Devices), which has traded in the $100–$200 range historically — but for this exercise, imagine you bought 100 shares at $45.00, which is a realistic entry point during pullbacks.

**The setup:** - 100 shares of AMD purchased at $45.00 per share. Total cost basis: $4,500. - Current stock price: $45.00. - You sell 1 AMD call option, 30 days to expiration, strike price $47.00 (roughly 4.4% out of the money). - Premium collected: $1.10 per share × 100 shares = $110 cash deposited into your account immediately.

**Three possible outcomes at expiration:**

*Scenario A — Stock stays below $47.00.* The call expires worthless. You keep the $110 premium. Your effective cost basis drops to $43.90 per share ($45.00 − $1.10). You can sell another call next month.

*Scenario B — Stock closes above $47.00.* Your shares get called away (assigned) at $47.00. You receive $4,700 for the shares plus you already kept the $110 premium. Total proceeds: $4,810. That is a $310 gain on a $4,500 investment in 30 days, or roughly 6.9% — not bad for one month.

*Scenario C — Stock drops to $40.00.* You still keep the $110 premium, but your shares are now worth $4,000. Net loss: $390 ($500 paper loss minus $110 premium). The call expires worthless, but the stock decline is the real damage. This is why stock selection matters more than premium size.

**Annualized yield check:** $110 premium ÷ $4,500 cost × 12 months = approximately 29% annualized — if you could repeat this every month at the same premium. Real-world results vary because IV changes month to month.

Liquid Names Under $50 Worth Watching for Covered Calls

The following names have historically shown the liquidity and IV characteristics that work well for covered-call writing. Prices shift daily — always verify current price and IV before trading.

**Ford Motor (F) — ~$11–$14 range.** One of the most actively traded covered-call stocks in the market. Extremely high open interest, tight spreads, and IV that regularly sits in the 35–50% range. The low share price means you need less capital per contract, but you also collect smaller absolute dollar premiums.

**Bank of America (BAC) — ~$35–$45 range.** A large-cap financial with consistent options volume. IV tends to spike around Federal Reserve announcements, which can temporarily boost premiums. Good for traders who want a blue-chip name with manageable volatility.

**Palantir (PLTR) — ~$15–$30 range.** Higher IV than the financials, which means bigger premiums — but also bigger swings. Suitable for traders comfortable with tech-sector volatility. Always check earnings dates before selling.

**SoFi Technologies (SOFI) — ~$7–$12 range.** Very high IV, active options market, and a low share price. The premiums as a percentage of stock price can be attractive, but the stock is more volatile than the names above. Position sizing matters here.

**Plug Power (PLUG) — ~$3–$8 range.** Extremely high IV, but the stock has trended sharply lower over several years. This is a cautionary example: high IV often signals high risk, not just high income. Only sell covered calls on stocks you genuinely want to own.

Note: This is not a buy recommendation for any of these stocks. It is a list of names with options characteristics worth researching. Always do your own due diligence.

The Real Risks — Read This Before You Sell Anything

Covered calls are one of the most conservative options strategies, but conservative does not mean risk-free. Here are the risks that matter most for stocks under $50.

**Downside risk is unlimited relative to the premium.** If you own 100 shares at $45 and collect $1.10 in premium, a drop to $30 costs you $1,500 minus $110 = a $1,390 net loss. The premium barely cushions a serious decline. FINRA classifies covered calls as a Level 1 options strategy, meaning they are approved for most retail accounts — but that approval does not mean the strategy is without risk.

**Assignment can happen early.** American-style options (which cover most US-listed stocks) can be exercised by the buyer at any time before expiration. Early assignment is rare but happens most often when a call goes deep in the money or just before an ex-dividend date. The OIC has detailed educational material on early assignment risk that is worth reading before your first trade.

**Tax treatment is not simple.** In the United States, the IRS treats covered call premiums as short-term capital gains in most cases. If your call is assigned, the premium adjusts your cost basis or sale proceeds depending on how the position is structured. Qualified covered calls have specific rules under IRS Publication 550. In Canada, the CRA treats option premiums differently depending on whether you are considered a trader or an investor — Canadian readers should review CRA Interpretation Bulletin IT-479R before trading. Consult a tax professional for your specific situation.

**Opportunity cost is real.** If you sell a $47 call on a stock that runs to $55, you miss $8 per share of upside. Covered calls are a trade-off: you accept a ceiling on your gains in exchange for immediate income. In a strong bull market, that trade-off can feel painful.

How to Size Positions and Build a Covered Call Portfolio Under $50

Most experienced covered-call traders follow a few simple rules to keep risk manageable.

**Diversify across sectors.** Do not put all your covered-call positions in tech or all in financials. If one sector gets hit, you want other positions to cushion the blow.

**Limit any single position to 10–15% of your portfolio.** This is a general guideline, not a hard rule, but it prevents one bad stock from wrecking your year.

**Use 30–45 day expirations as your default.** Options lose value fastest in the last 30 days before expiration — a concept called theta decay. Selling 30–45 day options captures this accelerating decay. The CBOE's options education center explains theta in detail for traders who want to go deeper.

**Roll or close positions before earnings.** If earnings are announced inside your expiration window, consider buying back the call (closing the position) before the announcement to avoid IV crush and gap risk.

**Track your actual yield, not just the annualized estimate.** Keep a simple spreadsheet: date opened, stock, strike, premium collected, outcome. After six months you will have real data on which names and which market conditions produce the best results for your style.

What is the best stock under $50 to sell covered calls on right now?

There is no single best answer because IV, price, and liquidity change daily. Ford (F), Bank of America (BAC), and Palantir (PLTR) are frequently cited by retail traders for their active options markets and reasonable premiums. Always check current IV and open interest on your broker's options chain before placing a trade.

How much money can I realistically make selling covered calls on stocks under $50?

A realistic monthly premium on a 30-day, slightly out-of-the-money call is roughly 1–3% of the stock price in normal market conditions. On a $45 stock, that is $45–$135 per contract per month. Annualized, that is 12–36% — but real results vary because IV changes and not every month produces the same premium.

Can I sell covered calls in a Roth IRA or TFSA?

Yes. Most US brokers allow covered calls in a Roth IRA at the Level 1 options tier, as defined by FINRA guidelines. In Canada, the CRA permits covered call writing inside a TFSA as long as the activity is not classified as carrying on a business. Check with your broker and a tax advisor for your specific account type.

What happens if my covered call gets assigned early?

Early assignment means the option buyer exercised their right to buy your shares before expiration. Your 100 shares are sold at the strike price, and you keep the premium you already collected. Early assignment is most common when a call is deep in the money or just before an ex-dividend date, as explained in OIC educational materials.

Is it better to sell weekly or monthly covered calls on cheap stocks?

Monthly (30–45 day) expirations are generally recommended for beginners because they offer a better balance of premium collected versus time spent managing the position. Weekly options can produce higher annualized yields but require more active monitoring and generate more taxable events, which the IRS tracks as short-term capital gains.

How do I pick the right strike price for a covered call under $50?

A common starting point is a strike that is 3–5% above the current stock price, which gives the stock room to rise while still collecting a meaningful premium. Check the option's delta — a delta of 0.20 to 0.30 means roughly a 20–30% chance of assignment, which many income-focused traders find acceptable. The OIC's options calculator can help you model different strike scenarios.