💸 Make Your Own Machine Part 5: How Covered Calls Actually Make You Money (with Real Numbers)
Now that you know what a covered call is (aka renting out your stock like a boss), it’s time to break down what this looks like in real life — and more importantly…
How much money are we actually talking about here?
Spoiler: It’s not thousands overnight. But it’s steady. Predictable. And it snowballs.
Let me show you exactly how.
🔢 Real Example: 100 Shares of RUM
Let’s say you own 100 shares of RUM (Rumble).
- You bought them at $7.50 each
- Total cost: $750
Now RUM is trading around $7.80, and you want to sell a covered call.
Here’s what you do:
- You sell 1 call option (each call covers 100 shares)
- You choose a strike price of $9, expiring next Friday
- The option buyer pays you $15 upfront
That $15 is your premium — and it’s yours to keep no matter what happens.
📈 Scenario A: RUM Stays Below $9
- Let’s say RUM ends the week at $8.45.
- Your option expires worthless.
- You keep your 100 shares
- You keep the $15 premium
You made $15 in 7 days — just for owning the stock.
That’s a 2% return on your $750… in a week. Stack that over 52 weeks and you start seeing how this adds up.
💰 Scenario B: RUM Goes Above $9
Let’s say RUM shoots up to $9.50.
- Your shares get called away (someone buys them from you at $9)
- You make $1.50 per share in capital gains ($9 – $7.50 = $1.50)
- You also keep the $15 premium
Total profit:
- Capital gains = $150
- Premium = $15
- Total = $165
Not bad for a week, right?
🧠 Either Way: You Win
| Outcome | Keep Shares? | Profit |
|---|---|---|
| RUM stays < $9 | ✅ Yes | $15 |
| RUM goes > $9 | ❌ No | $165 |
This is why I love this strategy. You’re not trying to guess the market. You’re getting paid to wait. If the stock runs? You still win.
🪜 Stack and Snowball
Here’s where it gets fun:
- Take that $15
- Reinvest it over and over
- Every time you hit 100 shares, you unlock another covered call
Eventually, instead of 1 contract a week, you’re selling 2… then 3… then 5.
And that, my friend, is the FIRE Engine.
🧠 Bottom Line
Covered calls make you money whether your stock goes up, down, or sideways — as long as you stick to the plan.
Next time, we’ll talk about what happens if your shares get called away… and why it’s not the end of the world (in fact, sometimes it’s exactly what you want).
👉 Up Next: [Post 6: What Happens If My Shares Get Called Away?]
New here? Start at the beginning of the FIRE Engine series.