What separates a covered call from a consistently profitable covered call?

In this episode, Dan Passarelli walks through an actual Amazon covered call from start to finish, explaining every decision he made—from selecting the expiration and strike price to managing the trade after entry. Along the way, he introduces the PAS (Price History Anchored Strike) Indicator, the proprietary tool he developed after discovering that no existing technical indicator was designed specifically for option traders.

Rather than teaching theory, Dan breaks down his real-world decision-making process, showing how probability, technical analysis, implied volatility, theta, annualized return, and trade management all fit together inside a repeatable wheel strategy.

Dan explains that not every covered call is designed to have shares called away. For long-term holdings like Amazon, his objective was to collect premium while keeping the shares, a goal he refers to as "skating." That objective determines every subsequent decision, including strike selection and trade management.

After searching through hundreds of existing chart indicators without finding one designed specifically for wheel traders, Dan built his own. The Price History Anchored Strike (PAS) Indicator uses historical price ranges over a defined holding period to create statistically meaningful strike levels, helping traders select strikes based on actual market behavior rather than arbitrary rules.

Using Amazon as the example, Dan walks through support and resistance analysis, PAS Band placement, strike selection, comparing one-week versus two-week expirations, evaluating implied volatility, theta comparisons, and annualized return calculations. The result is a complete blueprint for how an experienced options trader evaluates competing trade candidates.

Entering the trade is only half the process. Dan explains why he immediately enters a Good-Til-Cancelled buy order, when he rolls positions, why he waits for confirmation candles before reacting to price movement, and how he approaches passive versus active wheel management.

Many traders avoid earnings altogether. Dan explains why he doesn't always. Instead of avoiding earnings automatically, he studies previous earnings gaps, weighs the additional premium against the added risk, and evaluates whether the trade still offers a favorable edge.

"I want the position, not the penny."

Successful covered call trading isn't about finding a magic delta or blindly selling premium every month. It's about developing a repeatable process built around probability, historical price behavior, clear objectives, and disciplined trade management.

This episode offers a rare look inside Dan Passarelli's actual decision-making framework, providing listeners with a practical blueprint they can use to improve their own covered call strategy.

Disclosure:

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document

Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.  

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