Laddering Covered Call Strikes Defensively – August 24, 2026
In challenging market environments, conservative investors should consider defensively structured covered call trades. This translates into implementing in-the-money (ITM) strikes. For those of us trading multiple contracts per position, we may also want to incorporate laddering of our strikes. This means using multiple strikes for the same stock and expiration date. On April 6, 2026, I was favoring defensive trades due to the war with Iran, tariffs and other geopolitical and economic concerns. I decided to favor ITM strikes 3-to-1 over out-of-the-money (OTM) strikes. Here’s how I structured my trades with Flex Ltd (Nasdaq: FLEX).
Real-life trade with FLEX
- 4/6/2026: Buy 400 shares of FLEX at $68.59
- 4/6/2026: STO 3 x 4/17/2026 $60.00 ITM calls at $9.11
- 4/6/2026: STO 1 x $70.00 OTM call at 2.15
Initial returns using the BCI Trade Management Calculator (TMC)
- Red circle: 12-day trade
- Yellow cell: Breakeven prices
- Brown cells: Initial 12-day & annualized returns
- Purple cell: Downside protection % for initial time-value profit
- Pink cells: Amount of % upside potential for the OTM call strike
- Blue cell: $ amount of time-value premium collected
Analysis & discussion
The annualized returns ranged from 26.36% to 95.34%, both significant. The protection for the ITM call was > 12% and the upside share appreciation additional income for the OTM strike was 2.06%. In the BCI methodology, we only use elite-performing securities and then structure our trades based on overall market assessment and personal risk tolerance. Laddering strikes adds an additional bullet in our arsenal which can assist in achieving the highest possible returns with capital preservation in mind.
Author: Alan Ellman