Investors looking for stable income may find opportunity in covered calls — an options strategy that generates premiums by selling call options on stocks already owned. The approach can provide added income while maintaining exposure to long-term equity growth.
BNN Bloomberg spoke with Barry Martin, lead portfolio manager at Shelton Equity Income Strategies, about why he’s favouring General Motors, CVS Health and Newmont as his top covered call ideas. He discussed how this strategy can generate consistent income while managing risk in volatile markets.
Key Takeaways
- Covered calls allow investors to earn option premiums while maintaining stock ownership.
- General Motors offers solid fundamentals and cash flow for covered call opportunities.
- CVS Health provides defensive exposure and steady dividends alongside premium income.
- Newmont’s volatility and dividend yield make it a strong materials-sector covered call idea.
- Covered calls can reduce portfolio cost bases and help balance income with equity exposure.
Read the full transcript below:
ANDREW: On Hot Picks today, we’re taking a covered call angle. Covered calls, of course, are an option strategy where investors sell an option giving someone else the right to buy a stock they own at a fixed price. It can be great because you get premium income, which reduces your cost of owning the stock. Our guest thinks General Motors is amenable to this strategy. We’re joined by Barry Martin, lead portfolio manager at Shelton Equity Income Strategies. Great to see you. In expensive markets, this comes up a lot, doesn’t it — covered calls — because it makes it cheaper to own a stock for one thing?
BARRY: Yeah, exactly. And thanks for having us on, Andrew. We’re in an expensive market, and we’re also seeing a lot of volatility. So you can take advantage of those two things by selling covered calls on the underlying equity. What we’re doing is generating additional cash returns by monetizing volatility in the underlying position. We do that on specific stocks — as you mentioned, a stock like GM.
ANDREW: Why GM? Maybe we’ll put up a five-year chart for GM. Is there anything in particular that makes it suitable?
BARRY: Well, GM finally has a stable auto sector. When you’re writing covered calls, I like to look at names that have defensive qualities, generate free cash flow and have performed well. They recently had earnings and performed well, and they’re near all-time highs. So you can take advantage of that. Maybe that run has gone a little bit, but when you’re selling a covered call — for example, a good call to sell would be the December 75.
If you sell the December 75, someone will pay you about $1.10 for the right to buy GM from you in December for $75 a share. If GM never gets to $75, you keep the $1.10 and can do the strategy again. If it does get there, you have a choice: you can let the stock be sold or buy the option back. The great thing about this trade is that with the stock around $70, you get $5 of upside, plus the $1.10 premium. So you’re either reducing your cost basis by $1.10 or adding to your proceeds. You’re effectively selling at $76.10 — about an eight to nine per cent return. It could be a really nice trade depending on how it plays out.
ANDREW: CVS Health — could it work for this name as well, do you think?
BARRY: Yeah, CVS is a little different. It’s more of a defensive play. It’s already paying a sizable dividend — over three per cent — so if you can sell covered calls and generate an additional four to six per cent, you’re looking at something paying seven to nine per cent on a defensive name that’s done fairly well this year. The upside may be limited going forward, but the November 87 calls look attractive. They have earnings tomorrow, so there’s volatility in there. If you sell the November 87s, which expire in about 25 days, someone will pay you $1.41 for the right to buy CVS at $87. Add that to the roughly 3.5 per cent dividend yield and it’s a pretty attractive trade.
ANDREW: Newmont — you think it could work for that one as well? Gold stocks have been hot, though gold has come off its peaks.
BARRY: Yeah, this is a bit of a contrarian play because we’ve seen a pullback recently. It’s been our holding in the materials sector and had run up a lot, so the stock went into the money. We previously had calls written against it, and they went deep into the money. It got close to $100 and came all the way back down, which really dampened volatility in the underlying equity. But with volatility in Newmont, you can take advantage and sell covered calls again.
For that one, I’d look at the shorter-dated November 85s, about 25 days out. They’re paying roughly $1.44, which gives you about eight per cent upside, plus the dividend yield. It’s an attractive play that takes advantage of volatility.
ANDREW: Interesting. You may have seen there’s talk that Newmont might take a run at Barrick or perhaps try to acquire their Nevada operations. If a transaction came along and the market didn’t like it — and the stock dropped — you’d at least have your call income to mitigate the loss.
BARRY: Exactly. With this strategy, you’re taking advantage of volatility — which is also the unknown. One downside is that if the stock appreciates dramatically, you’ll get called out and your upside will be capped. But on the flip side, you have that cushion from the cash you receive for selling the calls.
ANDREW: We had a guest earlier who said covered calls have become so popular that it’s affecting the entire options market and depressing premiums because so many people are keen to sell calls.
BARRY: Yeah, we’re seeing that in the index space where there are a lot of structured, disciplined sellers of index calls. We’re more active on individual equities. There’s still dispersion between volatility in single stocks versus indexes. I like playing in the individual call space because you get that single-stock volatility, which isn’t as depressed as in index options. Especially now, in names like General Motors, CVS and Newmont, you can still find opportunities.
ANDREW: Barry, thank you very much.
BARRY: Thank you.
ANDREW: Barry Martin, lead portfolio manager at Shelton Equity Income Strategies.
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This BNN Bloomberg summary and transcript of the Oct. 28, 2025 interview with Barry Martin are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
