Opinion on covered calls on Nifty

Would love to hear some opinions on doing covered calls on nifty, return expectation, weekly or monthly.

@Jason_Castelino would be the right man to answer this


Yeah. I do it. I do only two things. Cash secured puts and once it comes in the money, I go for covered calls.

On yearly basis I now have xirr of 40.2percent since 2017.
I keep updating my xirr on weekly basis. It was around 42 percent last year, but now I am not able to maintain the same because of low vix. So overall avg has come down to 40. So may be in last year or so it might have been around 30 percent.

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@Jason_Castelino, Can you please explain in more detailed form how the Cash secured put/covered calls work? I would like to explore this concept.

I ask this because I understand the concept from the stocks point of view where you take delivery or give delivery based on the expiry position(ITM). But how does it work with Nifty? Because Nifty options are cash settled.

When it becomes ITM, either buy futures or buy niftybees equivalent to the contract value of the option.

If I understand it correctly, for Ex -
If nifty is at say 20000 you sell 19900 PE, and if nifty falls to around ~19890 (You square off this PE sell position at a loss?) you deploy a covered call setup like buy nifty fut and sell 20000 CE.

Kinda similar. But I don’t play it for 100 points.
Once it becomes ITM, I take at least 1000 points. And once call comes ITM, I go down by at least 300 to 500 points again to sell puts.
Last came in the money at 19300ce. So last few weeks I have been selling 19000pe aggressively.

Can someone explain why using covered calls at all the pay off’s the same as a sell put? Selling a PE is cheaper in terms of both Max losses and Margin requirements. I do Covered calls to exit my stocks at a higher price, but why do it in indices if the index goes up (for covered call) you’ll unrealised gain from Niftybees or Fut and realised loss sell CE.
and if it goes down the premium received isn’t much to cover.
And vice versa for Cash secured Puts.
I find people saying you receive the premium on the spot and make money if it goes up… but when it does to make a profit you’ll have to sell the cover if that was the intention you’re better off with naked PE sell either way ain’t it?

Actually I did not understand your post. :disappointed_relieved:

He is talking about selling ITM PE rather than selling covered calls

Not necessary ITM PE but I’m asking for a comparison between

  1. Covered Call and Short PE
  2. Secured Put and Short CE

Which to prefer and what situation and why :slight_smile:

I usually only short PE. But if I say that over here, most of them get confused.

From what I understand, you are saying futures and short call, is same as short put of same strike. Absolutely agree.

Now we are at 19500, and I am short on put at 19300. Now if it comes to 19300, I will close that and sell 19500 put right away. Now if it goes deep in the money, then I switch to futures. And this is just for liquidity reasons. If it goes down further, I switch to niftybees and then keep selling calls. Reason over here is, I want loss in Fno and unrealised gains in portfolio. It’s just for tax planning.


i’m getting confused now too :joy:
ps was just checking out here

And as Jason said earlier not gonna bother too much about it :laughing: as least for now


Yeah this is what I wanted to say.

Makes sense :slight_smile:

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This is why I I don’t say I sell puts. Most of them will be like why sell it naked.

We studied this in SFM CA Final. Didn’t we? :rofl:
Put call parity.

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Yeah :grinning: