Why I Sell In-The-Money Covered Calls: A Smarter Way to Generate Consistent Income

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Covered calls are one of the most reliable strategies in the investing world—especially for those of us focused on generating consistent income. But here’s a twist you may not have considered: selling in-the-money covered calls instead of the more common out-of-the-money ones. Sounds counterintuitive, right?

Let me walk you through why this might just be the smarter move for investors looking to protect their portfolio and earn a steady stream of cash flow.

What Are In-the-Money Covered Calls?

If you’re new to options, a “covered call” is when you own a stock and sell a call option against it. This lets you collect a premium—essentially rent—for holding the stock.

Most people sell out-of-the-money calls, hoping the stock price rises so they can profit from both the stock and the premium.

But what if we flip that strategy?

An in-the-money (ITM) call means the strike price of the option is below the current stock price. This might reduce your upside on the stock, but it boosts your income and reduces downside risk.

Why I Prefer In-The-Money Calls

When I coach people through my Cash Flow Machine program, I focus on protecting the account first, then creating income.

Here’s why:

Reduced Downside Risk: By selling ITM calls, you’re receiving a larger premium up front. That means your breakeven point is lower. If the market dips, you’re more protected than if you’d sold out-of-the-money options.
Consistent Income: I'm not gambling on where the stock will go. I’m locking in premium income week after week, no matter if the market is red or green.
Psychological Advantage: Trading for income instead of chasing the next big stock move changes your mindset. It’s about discipline, not prediction.

Let’s Break It Down With Math

Say you own a stock trading at $100. Instead of selling a $105 call (out-of-the-money), you sell a $95 call (in-the-money) and collect a $9 premium.

If the stock gets called away, your net return could look like this:

Capital loss: $100 - $95 = -$5
Premium collected: +$9
Net gain: $4 per share, or 4% in a short time frame.

Even if the stock drops to $96, you’re still up because your breakeven is $91.

That’s the beauty of ITM covered calls: more protection and more reliable profits.

Life-Improving Tips From This Strategy

Ditch the Stress: Trying to guess the next market move is exhausting. Income strategies like this bring peace of mind.
Sleep Better at Night: With built-in downside protection, you don’t need to panic when the market pulls back.
Build a Cash Flow Mindset: Think of your portfolio like a rental property. Consistent income is better than speculative gains.
Protect Your Future: Especially if you're nearing retirement, income-producing strategies like covered calls can help you preserve capital while generating yield.

Frequently Asked Questions

Q: Isn’t selling in-the-money calls giving up potential profits?

Yes—but only potential profits. The tradeoff is higher probability and safer, more reliable income. If you’re an income investor, you’re playing a different game.

Q: What happens if the stock drops below the strike?

You still keep the premium. And because the call was sold in-the-money, your breakeven is lower than the market price, which cushions your loss.

Q: Do I have to hold until expiration?

Nope. Many traders close or roll their positions early to lock in profits or adjust for changing market conditions.

Call to Action

Want to learn how to build your own income-producing portfolio using strategies like these?

Check out the Cash Flow Machine Program for expert coaching and step-by-step training.

Start building safe, consistent, and predictable income from your investments—today.

Get started today

Final Thoughts: Strategy Over Speculation

In-the-money covered calls are not about getting rich overnight. They’re about getting rich slowly and safely. This strategy emphasizes protection, reliability, and consistent income.

It may feel unusual at first, especially if you’ve been trained to always “go for the big win.” But if you’re looking to turn your portfolio into a monthly paycheck machine, this could be a game-changer.

Why I Sell In-The-Money Covered Calls: A Smarter Way to Generate Consistent Income

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