Covered call strategies are gaining attention as investors search for ways to generate portfolio income while maintaining exposure to technology, artificial intelligence and innovation themes.
BNN Bloomberg spoke with Jonathan Molchan, senior portfolio manager and head of ETF trading at Shelton Capital Management, about why Micron Technology, Amazon and Tesla stand out as potential covered call candidates because of their volatility, growth exposure and option premium opportunities.
Key Takeaways
- Covered calls allow investors to generate income by selling call options on stocks they already own while remaining invested in the underlying shares.
- Micron Technology benefits from AI infrastructure demand and elevated volatility, which can create larger option premiums for covered call investors.
- Amazon provides exposure to both resilient consumer spending and AI-related cloud growth through Amazon Web Services.
- Tesla’s volatility and innovation-driven growth profile may create opportunities for higher covered call income generation.
- Covered call strategies may help investors balance income generation with long-term exposure to technology and growth themes.
Read the full transcript below:
LINDSAY: Welcome back. It’s time now for Hot Picks, and today we are looking at three covered calls, an option strategy where investors sell a call option on a stock they already own to generate premium income. Our next guest says Micron is a great stock for this option. Here to tell us more is Jonathan Molchan, senior portfolio manager and head of ETF trading at Shelton Capital Management. It’s great to have you join us. Thanks so much.
JONATHAN: Thanks. Thank you for having me.
LINDSAY: I just gave the briefest description of what a covered call is. Before we get into your picks, can you explain to our viewers a little more about what a covered call actually is?
JONATHAN: Yeah. A covered call is a great mechanism to generate cash flow on favourable thematic investing strategies.
When we look at technology for largely the last 10 to 15 years, it has been in favour. The Magnificent Seven and AI have pretty much dominated the headlines lately. What a covered call gives you the ability to do is participate in that segment of the market while also generating cash flow at the same time, in a period where income-focused investors are really struggling to figure out where to position money.
LINDSAY: Okay, so let’s get into it. Your first hot pick is Micron Technology. You say it’s tied to the AI infrastructure buildout in a big way. What is it that you like about Micron?
JONATHAN: If you look at the broader AI theme, everybody has been focused on Nvidia. If you look at year-to-date performance, Micron has massively outperformed Nvidia. It’s a derivative pick that is loosely correlated to that, but still in the space.
When everybody owns the same position, it becomes a little riskier if there is a flight out of that trade.
A lot has been talked about with the dispersion trade over the last year or two. The implied volatility on Micron relative to the Nasdaq is roughly double. The cash flow you can generate even one month out writing a covered call is three to five per cent. That makes it really interesting to own something that is quality, relevant in the market and capable of generating cash flow.
LINDSAY: Okay, we’ll move on now to Amazon. That’s your next hot pick. You say it gives investors exposure to two major themes at once. Let’s talk about those two themes first.
JONATHAN: Yeah. In the face of everyone talking about recession and inflation, looking at the stock price of Amazon is incredible because it has basically performed in lockstep with the Nasdaq 100. The consumer in America is resilient.
Then you also have the AWS story. Now you are broadening out and diversifying your exposure, where you are getting a little more of the broader economy, but you still have that AI theme. Similar to Micron, you are also getting strong cash flow opportunities in the marketplace for owning a high-quality stock.
LINDSAY: And from a covered call perspective, you say the angle is not about avoiding risk. Can you elaborate on that?
JONATHAN: When I look at the covered call space, or any overlay space in general where you are trying to generate cash flow using call options, it is a way to supplement income, but it is also a way to dampen the performance spectrum you are going through.
What I mean by that is you can dampen volatility while generating cash flow, which makes it a pretty interesting investment option for those who need yield.
LINDSAY: Next up is Tesla, your third hot pick. Tell us why you picked this company. It’s another pricier stock, right?
JONATHAN: Right. I think the three main pieces here are that Micron is more tied to the AI theme, Amazon starts to delve further into the consumer side of the economy, and Tesla shows just how much innovation there is within technology right now, to the point where indexes are reconstituting their methodologies to include SpaceX going forward.
It is a very innovative company. When you look at Micron, Amazon and Tesla, the yield you can pick up on a covered call is significant. These are great companies to generate strong cash flow from, but the themes are in place where there is also a reason to buy the underlying common stock.
LINDSAY: And that’s also because there’s a lot of volatility, right? Can you explain how volatility factors into Tesla as a covered call option?
JONATHAN: The higher the volatility, the more premium you are going to receive when you write a covered call. This could be a better way for people to own these positions rather than owning them outright.
It comes back to that smoother distribution of returns where you do not necessarily have to worry as much, as long as you are hitting that income-oriented goal while still owning high-quality names.
At Shelton, we have a handful of ’40 Act’ products through mutual funds and active ETFs. We also package these for investors so that if they do not necessarily feel comfortable doing it with individual stocks or on their own, they can turn to us and lean on our expertise in the options space.
LINDSAY: Right. For someone just getting into trading covered calls and options, what are some of the first things they should look for?
JONATHAN: You should always trade what you know. From a risk profile perspective, a covered call is a great way to engage in certain stocks that have higher volatility if you are an income-focused investor.
As people look at where technology and growth stocks have gone, a covered call approach right now is a great way to still be involved in the market. You are basically solving for two problems at the same time: how to supplement the income component of your portfolio, while also making sure the principal balance grows.
LINDSAY: Okay, we’ll have to leave it there. Jonathan Molchan, senior portfolio manager and head of ETF trading at Shelton Capital Management, appreciate your time. Thanks so much for joining us.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MU:UQ | N | N | N |
| AMZN:NASDAQ | N | N | N |
| TSLA:NASDAQ | N | N | N |
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This BNN Bloomberg summary and transcript of the May 6, 2026 interview with Jonathan Molchan 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.
