Best Covered Calls to Sell on MSFT and NVDA This Month for High Premium

The Short Answer: Where the Premium Is Right Now

If you own MSFT or NVDA and want to sell a covered call this month for meaningful premium, the sweet spot is typically a strike 5–8% above the current stock price with 21–35 days to expiration (DTE). That range captures enough implied volatility (IV) to pay you well while keeping a reasonable chance the stock stays below your strike and you keep the shares.

NVDA almost always offers higher raw premium than MSFT because its IV is structurally higher — often 45–65 IV rank versus MSFT's 25–40 range. Higher IV means the market is pricing in bigger moves, and option sellers collect more for taking that risk. The trade-off is real: NVDA can move 8–12% in a single week, so the premium is not free money.

Why Implied Volatility Is the Only Number That Matters for Premium

Premium is not random. It is priced almost entirely by implied volatility (IV). The CBOE defines IV as the market's forward-looking estimate of how much a stock will move, expressed as an annualized percentage. When IV is high, every option — calls and puts — costs more. When IV is low, premiums shrink.

IV Rank (IVR) tells you whether today's IV is high or low relative to the past 52 weeks. An IVR of 70 means IV is in the 70th percentile of its one-year range — historically elevated and a better-than-average time to sell. An IVR below 30 means you are selling cheap options and accepting more risk per dollar of premium collected.

Before you pick a strike on MSFT or NVDA, check IVR on your broker platform or on the CBOE's free tools. If IVR is below 20 on either name, consider waiting or moving to a different stock entirely. Selling low-IV covered calls is one of the most common mistakes retail traders make, according to the Options Industry Council (OIC).

Worked Example: Selling a Covered Call on NVDA

Let's use real numbers. Assume NVDA is trading at $875 per share. You own 100 shares (one standard contract covers 100 shares). You want to sell a covered call expiring in 28 days.

Option chain snapshot (illustrative, based on typical NVDA IV environment): - $920 strike call, 28 DTE: bid $14.20 / ask $14.60, delta ~0.28, IV ~58% - $940 strike call, 28 DTE: bid $9.80 / ask $10.10, delta ~0.22, IV ~57% - $960 strike call, 28 DTE: bid $6.50 / ask $6.80, delta ~0.16, IV ~56%

If you sell the $920 call at the $14.20 bid, you collect $1,420 in premium (14.20 × 100 shares) immediately. That is a 1.62% return on your $875 cost basis in 28 days, or roughly 21% annualized if you repeat it monthly.

Your breakeven on the downside drops to $860.80 ($875 − $14.20). If NVDA closes anywhere below $920 at expiration, you keep the full $1,420 and still own the shares. If NVDA closes above $920, your shares get called away at $920 — you still profit $45 per share in stock gains plus the $14.20 premium, for a total of $59.20 per share, or $5,920 on 100 shares. The only scenario where you lose money is if NVDA falls below $860.80.

The $940 strike is more conservative: lower premium ($980 collected) but a wider buffer before assignment. The $960 strike pays even less but gives you more room to run. Which strike is right depends on your outlook and how much you care about keeping the shares.

Worked Example: Selling a Covered Call on MSFT

Now assume MSFT is trading at $415 per share. MSFT is a lower-IV stock, so premiums are smaller in percentage terms but the stock is also less likely to gap violently.

Option chain snapshot (illustrative): - $430 strike call, 28 DTE: bid $4.90 / ask $5.10, delta ~0.30, IV ~28% - $440 strike call, 28 DTE: bid $2.80 / ask $3.00, delta ~0.22, IV ~27% - $450 strike call, 28 DTE: bid $1.50 / ask $1.65, delta ~0.15, IV ~26%

Selling the $430 call at $4.90 collects $490 per contract — a 1.18% monthly return, or about 14% annualized. That is lower than NVDA's 21%, but MSFT's realized volatility is also lower, so you are taking less risk per dollar invested.

A useful rule of thumb from the OIC: aim for a delta between 0.20 and 0.35 on your short call. That range historically gives you a 65–80% probability of expiring worthless (keeping the full premium) while still paying a meaningful amount. Deltas below 0.15 often pay so little that commissions and bid-ask spread eat a significant slice of the premium.

What Are the Real Risks Here?

Covered calls are not a free lunch. Here are the three risks you must understand before selling:

1. Capped upside. If NVDA jumps from $875 to $980 in a month, you only participate up to your $920 strike. You miss $60 per share in gains. This is the most common complaint from covered-call sellers — and it is a real cost, not a hypothetical one.

2. Downside is not fully protected. The premium you collect reduces your loss but does not eliminate it. If NVDA drops from $875 to $750, your $14.20 premium only offsets $14.20 of that $125 loss. You still lose $110.80 per share. Covered calls are not a hedge; they are an income strategy on shares you are already willing to hold.

3. Early assignment risk. American-style equity options (which MSFT and NVDA options are) can be exercised at any time before expiration. FINRA and the OIC both note that early assignment is rare except near ex-dividend dates, but it can happen. If your call is deep in the money and MSFT goes ex-dividend, the buyer may exercise early to capture the dividend, leaving you without the shares earlier than expected.

Always check the ex-dividend date before selling a covered call. If the ex-date falls within your expiration window and your strike is close to the money, either choose a later expiration or a higher strike.

Tax Treatment: What the IRS and CRA Say

In the United States, the IRS treats covered-call premium as short-term capital gain in most cases, regardless of how long you have held the underlying stock. There is an important exception: if your covered call is considered a "qualified covered call" under IRS rules, the holding period on your stock continues to run. If the call does not qualify — for example, if it is deep in the money — the IRS may suspend your holding period, potentially converting a long-term gain into a short-term gain if the stock is called away. Consult a tax professional and review IRS Publication 550 for the specific rules.

In Canada, the CRA treats option premiums received as capital gains or income depending on the frequency of trading and intent. Active traders are typically taxed as business income; occasional investors may qualify for capital gains treatment. The CRA's Interpretation Bulletin IT-479R covers this distinction. Canadian investors should confirm their classification with a tax advisor before building a systematic covered-call program.

One practical point for both US and Canadian investors: keep detailed records of every trade — entry date, strike, premium received, expiration or close date. Your broker's year-end tax forms help, but they do not always capture every nuance of qualified versus non-qualified call treatment.

How to Pick the Right Expiration This Month

The 21–35 DTE window is the standard recommendation from most options educators, including the OIC, because theta decay (the daily erosion of option value) accelerates in the final 30 days. You collect premium that decays quickly, and you can roll or re-sell sooner.

However, earnings dates change the math entirely. Both MSFT and NVDA report quarterly earnings, and IV spikes dramatically in the week before the report. Selling a covered call that expires after an earnings date means you are selling into elevated IV — which sounds good — but you are also exposed to a large gap move in either direction. If the stock gaps up 10% past your strike, you miss all of that upside. If it gaps down 10%, your premium barely covers the loss.

The safer approach for most retail investors: sell an expiration that lands before the earnings date. You collect slightly less premium (because the IV spike is not fully in your contract) but you avoid the binary event risk. Check the earnings calendar on your broker platform or on the CBOE's earnings tool before every trade.

If you specifically want to sell through earnings for the higher premium, size down. Sell one contract instead of five. The premium is higher, but so is the risk of a large move locking you into a bad position or triggering early assignment.

Which pays more premium right now, MSFT or NVDA covered calls?

NVDA almost always pays higher raw premium because its implied volatility is structurally higher — often 45–65% IV versus MSFT's 25–35% range. On a $875 NVDA position, a 28-DTE call 5% out of the money might pay $1,400 per contract, while a comparable MSFT trade on a $415 stock might pay $490. The higher NVDA premium comes with higher risk of a large move against you.

What delta should I target when selling a covered call on NVDA or MSFT?

The OIC and most professional options educators suggest targeting a delta between 0.20 and 0.35 for covered calls. That range gives you roughly a 65–80% probability of the option expiring worthless so you keep the full premium. Deltas below 0.15 pay very little after commissions; deltas above 0.40 risk capping too much of your upside.

Can I sell a covered call on NVDA before earnings for extra premium?

Yes, but it carries meaningful risk. IV spikes before earnings inflate the premium, but a large post-earnings gap can push NVDA well past your strike, capping your gains, or drop it sharply, leaving you with a loss that the premium only partially offsets. Most conservative covered-call sellers choose an expiration before the earnings date to avoid the binary event.

What happens if my MSFT covered call gets assigned early?

Early assignment means the option buyer exercises before expiration and your 100 shares are sold at the strike price. You keep the premium you collected plus any gain from your purchase price to the strike. Early assignment on MSFT is rare except near ex-dividend dates, as noted by FINRA; checking the dividend calendar before selling can help you avoid the surprise.

How does the IRS tax the premium I collect from selling covered calls?

The IRS generally treats covered-call premium as short-term capital gain in the year it is received or the position is closed. If your call does not qualify as a 'qualified covered call' under IRS rules, it can also suspend the holding period on your underlying shares, potentially converting a long-term gain to short-term if the stock is called away. Review IRS Publication 550 and consult a tax professional for your specific situation.

How much of my downside does the covered call premium actually protect?

Only dollar-for-dollar up to the premium amount. If you collect $14.20 per share selling a covered call on NVDA at $875, your effective downside breakeven drops to $860.80 — a buffer of about 1.6%. A 10% drop in NVDA would still leave you with an $87.50 per-share loss minus the $14.20 premium, for a net loss of roughly $73.30 per share. Covered calls reduce losses; they do not eliminate them.