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Covered Call Backtest: 5 Years, Three Tickers, One Strategy
Monthly covered calls on SPY, AAPL and QQQ from 2020 to 2024. The yields that worked, the strike that won, and the only regime where covered calls beat buy-and-hold.
Simulated data for display.
Illustrative narrative — not a verified live backtest.
ApexVol Terminal
Options analytics, live.
Chains, IV rank, expected move and dealer positioning for 5,500+ US stocks and ETFs.
Free on AAPL, no account. Trial: no charge if you cancel before it ends.
On this page
The test setup
- Tickers
- SPY (broad ETF), AAPL (high-IV mega-cap), QQQ (tech ETF).
- Position
- 100 shares of each underlying, held throughout. Monthly 30-delta call sold against shares.
- Entry
- 30-45 DTE call, 30-delta short strike. Close at 50% of max profit or roll on the day of expiration.
- Assignment handling
- If shares are called away, immediately repurchase at market and resume selling calls. No waiting.
- Period
- January 2020 – December 2024.
ApexVol Terminal
Options analytics, live.
Chains, IV rank, expected move and dealer positioning for 5,500+ US stocks and ETFs.
- Live chains and Greeks
- IV rank and percentile
- Expected move and GEX
- Screener and strategy P&L
Free on AAPL, no account. Trial: no charge if you cancel before it ends.
Results by ticker
| Ticker | CC total return | Buy & hold | Premium yield (ann.) | Sharpe ratio | Assignment rate |
|---|---|---|---|---|---|
| SPY | +65% | +85% | 5.8% | 1.4 | ~32% |
| AAPL | +78% | +128% | 8.4% | 1.3 | ~38% |
| QQQ | +61% | +84% | 7.1% | 1.3 | ~35% |
Same pattern across all three: covered calls beat on Sharpe ratio but lag on absolute return during the bull regime. The gap to buy-and-hold widens with the underlying's volatility — AAPL's 50-point shortfall is the cost of capping rallies on a high-momentum name.
Strike selection: the 30-delta sweet spot
| Short call delta | Avg premium | Assignment rate | 5-yr total return | Sharpe |
|---|---|---|---|---|
| 15 | $1.10 | ~12% | +76% | 1.2 |
| 20 | $1.80 | ~20% | +71% | 1.3 |
| 30 | $2.85 | ~32% | +65% | 1.4 |
| 45 | $4.50 | ~58% | +48% | 1.2 |
15- and 20-delta calls produced higher absolute returns because the upside cap rarely binds — they track the +85% buy-and-hold result most closely. But 30-delta produces the best Sharpe ratio — premium income smooths the curve enough to compensate for the modestly capped upside.
When covered calls win: 2022 was spectacular
The single best year for covered calls in the 5-year sample was 2022 — the bear year:
| Year | SPY covered call | SPY buy & hold | Outperformance |
|---|---|---|---|
| 2020 | +14% | +18% | -4 pts |
| 2021 | +19% | +28% | -9 pts |
| 2022 | -12% | -19% | +7 pts |
| 2023 | +19% | +24% | -5 pts |
| 2024 | +16% | +22% | -6 pts |
The covered call outperformed by 7 percentage points in 2022 — the only year in the sample. In every up year, buy-and-hold beat covered calls by 4-9 points because the short call capped upside. Covered calls are a defensive overlay, not an offensive one.
Common mistakes
- Selling too close to ATM. 40+ delta calls collect more premium but cap rallies hard. Many traders give back years of premium during a single bull leg this way.
- Buying shares for the explicit purpose of CCing. Often pays a premium to enter; better to layer CCs on shares you already wanted to own.
- Selling calls into earnings. IV crush works for you on the call leg, but a positive earnings surprise can blow past the strike and assign the shares.
- Selling calls in low IV. Premium too small to compensate for upside cap. Wait for IV to expand.
- Disqualifying long-term capital gains. Selling unqualified deep-ITM CCs can break the long-term holding period on the shares for tax purposes.
The screener filters by IV rank, options volume and dividend yield to surface covered call targets for current conditions.
Best stocks for covered callsTakeaways
Five things the
five years said.
- Default to 30-delta short calls. Best Sharpe-ratio outcome across the 5-year sample.
- Covered calls are defensive, not offensive. They smooth the equity curve; they don't beat buy-and-hold in rallies.
- Run on broad-market ETFs primarily. Less single-name risk; deeper liquid options markets.
- Close at 50% of max profit. Smooths equity curve and frees capital for the next cycle.
- Skip the strategy in IV rank under 20. Premium too thin to justify capping upside.
Keep reading
The mechanics behind
the numbers.
Backtest narrative is illustrative — built from typical covered call mechanics and historical regimes, not from live broker fills. Past performance, simulated or real, does not predict future results. See methodology.
The backtest is the theory.
The chain is the trade.
Every figure above starts with a strike and an IV rank. The Terminal shows both live, on a real chain, so you can see whether the premium is paying for the cap today. Run it on AAPL without an account.
Real market data, not a sandbox. See it live on AAPL.