Delta & Theta

If you're learning to sell covered calls, you don't need to memorize every Greek. You really only need to understand the two that matter most: Delta and Theta (time decay). These two concepts drive almost everything you need to know to trade covered calls successfully and mechanically.

Delta — your probability and risk gauge

Delta measures how much an option's price is expected to change for every $1 move in the stock.

• A call with 20 Delta will move roughly $0.20 when the stock moves $1.
• When selling covered calls, we target ~20 Delta calls (or near the 1 Standard Deviation strike).

Theta decay — your daily paycheck

Theta measures how much an option loses each day due to the passage of time. When you sell a covered call, you are long theta (positive theta) — one of the biggest advantages of the strategy.

• Every day that passes, the call you sold loses value — even if the stock price doesn't move.
• This time decay works in your favor and is the main source of profit in covered calls.

Key point: theta decay accelerates as expiration gets closer. This is why many traders prefer the active 30–45 day style — faster income generation.

What about IVR and implied volatility?

We always prefer to sell covered calls when IVR is higher, because it gives us more premium. But since we can only sell covered calls on the stocks you already own, we often work with whatever IVR is available. Low IVR is not a deal breaker — the trade simply takes a little longer to work and pays less per trade. The mechanics (20 Delta target, 50% profit rule, rolling for credit) still apply, and the strategy remains sound.