GLD covered calls
A guide to selling covered calls on SPDR Gold Shares (GLD), with a calculator set up for it. Enter your own numbers: this page does not show live prices.
What happens at expiration
What GLD is
GLD is an exchange-traded fund backed by physical gold bars held in a vault.
How a covered call works on GLD
You own 100 shares of GLD and sell one call option against them. The buyer pays you a premium today. You keep that premium whatever happens.
If GLD ends above the strike price at expiration, your shares are sold at the strike. If it ends below, you keep the shares and the premium. The tradeoff is simple: you earn income now and give up gains above the strike.
Covered calls on GLD suit holders who want income from a gold position and accept giving up gains above the strike. Gold has no earnings dates, so timing depends on interest rate and dollar news.
What to watch with GLD
- Volatility
- GLD follows the price of gold, which moves on interest rates, the US dollar and demand for safe assets. It usually moves less than a single stock, so premiums are often modest.
- Events
- GLD has no earnings report. Interest rate expectations, moves in the dollar and geopolitical news move the price of gold.
- Dividends
- GLD holds physical gold and pays no dividend, so early exercise driven by a dividend is not a concern.
- Liquidity
- GLD options are actively traded with many strikes and weekly expirations. Spreads are usually tight but always check the bid and ask on the exact contract you plan to use. Strikes far from the current price can have wider spreads.
Choosing a strike and expiration
A strike close to the share price pays a larger premium but is more likely to sell your shares. A strike farther above pays less but leaves room for the fund to rise before your gains are capped.
Shorter expirations bring the premium in sooner and let you reset the trade more often. Longer ones pay more in total but tie up your shares for longer. Use the calculator above to compare the return and breakeven of a few strikes side by side.
Assignment and tax-lot considerations
If your call is exercised, your GLD shares are sold at the strike. That sale is taxable. Which shares count as sold depends on how your broker assigns tax lots. Shares bought at different times and prices produce different gains.
How long you held the shares affects how the gain is taxed. A call with a strike well below the share price can also pause the holding period on the shares it covers. The rules are detailed, so check them with a tax professional before you trade.
A fund that holds physical metal can be taxed differently from a stock fund, so ask a tax professional how GLD gains are treated.
This page is for education only and is not financial or tax advice.
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Plain-English terms
- Option contract
- An agreement that covers 100 shares of a stock.
- Strike price
- The price written into the contract. It is the price shares change hands at if the option is exercised.
- Premium
- The money the option seller collects up front. You keep it no matter what happens next.
- Days to expiration (DTE)
- How many calendar days remain before the contract ends.
- Assignment
- When the buyer exercises the option and you must carry out your side of the deal: sell your shares. Most exercise happens at expiration, but the buyer can also exercise early.
- Breakeven
- The share price at expiration where the position neither makes nor loses money.
- Annualized return
- A single period's return scaled up to one year. It assumes you could repeat the same trade all year, which is not guaranteed.
- Covered
- You own the 100 shares the call is written against.
- Cash-secured
- You hold enough cash to buy 100 shares at the strike if assigned.