You own RELIND. You've owned it for years. It pays a modest dividend. Meanwhile, every month, buyers in the options market are paying hundreds of rupees for the right to buy RELIND at prices above current market — the right you, as a long-term holder, could be selling them. This is a Covered Call, and it's the single most conservative income strategy available to Indian investors.
This playbook shows how to generate ₹9,000+ per month from 500 RELIND shares, with clear strike selection, Delta targeting, and roll rules.
1. What a Covered Call Actually Does
The trade
You own 500 shares of RELIND. You sell 1 lot of RELIND call option at a strike above the current price. Buyer pays you premium upfront. At expiry: if RELIND < strike, option expires worthless, you keep the premium AND shares. If RELIND > strike, your shares are sold (assigned) at the strike price — you still keep the premium.
2. Building It Live — RELIND at ₹1,310
RELIND · spot ₹1,310 · 30 DTE · IV 22%
SELL 1,360 CE at ₹18
Strike₹1,360 (~4% above spot)
Delta0.28
Premium₹18 per share
Lot size500 shares
Premium collected18 × 500 = +₹9,000
Capital tied up (500 shares)₹6,55,000
Yield this month9,000 / 6,55,000 = 1.37%
Annualized if repeated~16.5% (plus dividends and cap gains)
3. The 0.25 Delta Rule — Why It Works
Delta is approximately the probability the option finishes in-the-money. A 0.25 Delta call means:
- ~25% chance the call is assigned (you give up shares at strike)
- ~75% chance you keep the premium AND shares
- Reasonable premium relative to risk
- Room for stock to rally before assignment kicks in
Rule of thumb: Beginner → 0.20 Delta (very conservative, more premium). Intermediate → 0.25-0.30 (sweet spot). Aggressive → 0.35-0.40 (higher income, higher assignment rate). Most pros stay in 0.25-0.30.
4. Annual Income Math — Real Numbers
12-month Covered Call on 500 RELIND SharesIllustrative
| Scenario | Monthly income | Assignments/yr | Annual yield |
|---|
| Conservative (0.20 D) | ₹6,000-7,500 | 2-3 | ~11-13% |
| Balanced (0.25-0.30 D) | ₹8,000-10,000 | 3-4 | ~15-18% |
| Aggressive (0.35-0.40 D) | ₹12,000-15,000 | 5-6 | ~22-28% |
Assumes RELIND broadly in ₹1,200-1,400 range. Actual results vary with volatility and direction. Does not include dividends.
5. What If You Get Assigned?
Don't panic — assignment is not a problem, it's just an outcome. If RELIND goes to ₹1,400 at expiry, your 1,360 CE is assigned:
Shares sold at strike500 × ₹1,360 = ₹6,80,000
Premium kept+₹9,000
Total receivable₹6,89,000
Vs original cost (say ₹1,250)Cap gain: 500 × (1,360 - 1,250) = ₹55,000
Total profit this cycle₹55,000 + ₹9,000 = ₹64,000
After assignment, you have cash. You can buy RELIND back next day (if you still want it) or redeploy. Many income-focused investors use a "wheel": let assignment happen, sell cash-secured puts on RELIND, get shares back cheaper, sell covered calls again. Rinse and repeat.
6. Rolling Up and Out
If RELIND rallies mid-cycle and you want to avoid assignment:
Adjustment
Roll the 1,360 CE to 1,400 CE next month
Buy back current 1,360 CEPay ₹40 × 500 = -₹20,000
Sell new 1,400 CE next expiryCollect ₹32 × 500 = +₹16,000
Roll net cost-₹4,000
But total premium collected so far9,000 + 16,000 - 20,000 = +₹5,000
New breakeven at expiry₹1,400 (bought 40 points of room)
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Frequently Asked Questions
What is a Covered Call?
A Covered Call is when you sell a call option on a stock you already own. You collect premium upfront. If the stock stays below the strike at expiry, you keep the premium and your shares. If it rises above strike, your shares are 'called away' (sold) at the strike price — but you still keep the premium plus any gain up to the strike. It's a neutral-to-bullish income strategy.
What Delta should I sell for Covered Calls?
The sweet spot for monthly covered calls is 0.20-0.35 Delta. At 0.20, there's roughly a 20% chance of assignment — low risk but modest premium (~1-1.5% monthly yield). At 0.35, premium doubles but assignment risk rises. Most income-focused Indian investors target 0.25-0.30 Delta, aiming for 2-3% monthly yield with 70-75% probability of keeping shares.
What if RELIND rallies above my short strike?
You have three options: (1) Let it assign — your shares are sold at the strike, you keep the full premium plus any gain up to strike. You can buy back shares later. (2) Roll up — buy back the current call and sell a higher strike call further out in time, collecting additional premium. (3) Roll for credit — roll the call up AND out (same expiry or later) while collecting net positive credit. Most traders choose roll-up-and-out to stay in the position.
What is the tax treatment in India?
Options premium received from selling covered calls is taxed as 'Business Income' under F&O rules (not capital gains). This is because F&O is classified as non-speculative business income by the Income Tax Department. Net premium (after all trades netted) is added to your other income and taxed at your slab rate. You can also deduct broker charges and STT paid on these trades.
Can I do this on any stock?
Only F&O-listed stocks with liquid option chains. In India, that's approximately 180 stocks on NSE — including RELIND, TCS, HDFCBANK, INFY, ICICIBANK, SBIN, AXISBANK, BAJFINANCE, and most large-caps. Check the NSE F&O list on nseindia.com. For illiquid names, bid-ask spreads make covered calls unprofitable.
What's the catch — why doesn't everyone do this?
The catch is opportunity cost. If RELIND rallies 20% in a month (rare but possible), your cap at the strike means you miss gains beyond that. Covered calls work best when you believe the stock will move sideways or slightly up — not when you expect explosive gains. Also: you need 500+ shares of RELIND to cover one lot, requiring ~₹6.5L capital — not a small investment.
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