Selling the Covered Call
Once you own the shares (through assignment or direct purchase), you sell covered calls against them. This is Phase 3 of the Wheel — and it's where the Tactical CC Red-Day workflow from your scanner image is applied daily. You're paid to wait for the stock to recover to your strike.
What You're Doing in Phase 3
You own 100 shares at a cost basis of (strike – premiums collected). You sell a call option above your cost basis. The buyer pays you a premium for the right to buy your shares at the strike price. If the stock rises above your call strike, your shares are "called away" at a profit. If not, you keep the premium and sell another call next week.
The Red-Day Covered Call — Your Primary Income Window
Your Tactical CC image shows this exactly. The best time to sell a covered call is when your stock is down 1.5–5% on elevated relative volume. Here's why: when stocks fall, implied volatility rises. Higher IV = more expensive options premiums. Selling options when IV is elevated means you collect more premium for the same strike and DTE.
Pass 2 scanner (WheelPass2_RedDayCC) finds these windows automatically. It scans your owned positions for stocks down 1.5–5% with relative volume above 1.2. When it fires — that's your CC selling opportunity that morning.
Strike Selection for Covered Calls
Match your CC strike to your Wheel goal:
| Goal | Strike choice | Delta target | Result if called |
|---|---|---|---|
| Maximize income, OK being called away | Just above cost basis | 0.40–0.50 | Higher premium, shares called sooner |
| Balance income + upside | 3–7% above current price (your image) | 0.30–0.40 | Moderate premium, some upside |
| Keep shares, collect some income | 8–12% above current price | 0.15–0.25 | Lower premium, much less assignment risk |
Your tactical CC image specifies: 3–7% above current price, delta 0.30–0.40, DTE 1–2 weeks, spread ≤ $0.05. This is the OPERATOR Wheel CC standard.
The 5-Minute Morning Workflow (from your image)
You were assigned at $5.10 (your cost basis). Stock is now at $5.00 (down from assignment). Today it's red: down $0.16 (-3.2%), relative volume 1.8×. Pass 2 fires. You sell the $5.50 call (7.7% above current, delta 0.35) for $0.35 = $35 collected. New cost basis = $5.10 – $0.35 CC premium = $4.75. If called at $5.50: $5.50 – $4.75 = $0.75 gain = 11.6% in 8 days.
Rolling the Covered Call
If the stock rallies strongly toward your strike, you face a decision:
Let it be called: Shares assigned at profit. The Wheel is complete on this lane. Use the cash to start a new CSP in Phase 1 on a fresh ticker.
Roll up and out: Buy back your current call, sell a new call at a higher strike and/or further expiration. You keep the shares, collect net credit, and extend your income runway. Pass 3 Monitor shows a CYAN "ROLL UP" signal when the stock approaches your strike.