Monthly covered call
A covered call pairs a long position with a call sold above the market, swapping some upside for monthly premium income. This version uses NIFTY futures as the long leg and, at the start of each monthly series, sells the call roughly 3% out of the money. Both legs run to the monthly expiry and are then replaced with a fresh pair, with no stop.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
The month's direction decided the result, as the code implies: a long future with a small sold call. The 4 months when NIFTY rose more than 1% all won, making ₹1,33,025, while the 3 months it fell more than 1% lost ₹3,93,656, with the call premium offsetting only a sliver. Months that started with NIFTY below its 20-day average lost ₹2,65,948 over 9 trades. The sample is 13 monthly cycles, too few to split finely, but the pattern is the textbook one: the covered call gives up the big upside and keeps almost all of the downside.
About this strategy
- On the first trading day of each monthly futures series, at 09:20, buy one lot of the near-month NIFTY future.
- At the same time, sell one lot of that month's call at the first strike at or above the futures price plus 3%.
- Hold both legs for the whole series; there is no stop and no target.
- At 15:15 on the monthly expiry day (the last Tuesday of the month), close the future and the call.
- Open a new future and a new 3% OTM call on the next session, starting the next month's cycle.
Why traders use it
The premium from the sold call cushions small falls and adds income in flat months, while the 3% gap still leaves room for a decent rally before gains are capped. It is one of the oldest income strategies and the idea is easy to grasp: you get paid for agreeing to give up gains above a level you were unlikely to reach. Long-term index investors often see it as a way to earn something extra from a position they hold anyway.
The year in plain words
On NIFTY from 1 Oct 2025 to 30 Sep 2026 the strategy ran 13 monthly cycles, winning 6. The net result was a ₹2,87,716 loss before costs and ₹2,91,248 after ₹20 per order and slippage. The March 2026 series alone lost ₹2,15,868 as the market fell and the call premium offset only a small part of it; September lost another ₹1,14,875. The best months, October 2025 and April 2026, each made around ₹60,000 to ₹66,000. The call premium was far too small to cushion the futures losses in falling months.
What the settings do
Risks
- The downside is almost the same as holding NIFTY futures; the call premium is a small buffer, not protection.
- Upside beyond the strike is capped, so the strategy lags plain futures in strong rallies.
- There is no stop, so a bad month is held all the way to expiry.
- A full futures lot needs significant margin and is exposed to every overnight gap.
Who it suits
Traders or investors who are comfortable being long NIFTY for the long run, have the margin for a futures lot plus a short call, and want to turn part of the upside into monthly income while accepting full downside exposure.
Questions traders ask
What is a covered call on NIFTY?
It is a long position in NIFTY, here a futures contract, combined with a sold call above the current price. The premium from the call is kept if NIFTY stays below the strike. If NIFTY rises above it, gains beyond the strike are given up.
Is a NIFTY covered call profitable?
In this backtest from 1 Oct 2025 to 30 Sep 2026 it lost ₹2,87,716 before costs and ₹2,91,248 after ₹20 per order and bid-ask slippage, mainly because of large falls in March and September 2026. Statutory charges are excluded. Past results do not guarantee future ones.
Does a covered call protect against a market fall?
Only a little. The call premium offsets a fall roughly equal to the premium received, which is usually a fraction of a percent to one or two percent of the index for a monthly 3% OTM call. Beyond that, the futures loss is taken in full.
Why use futures instead of buying a NIFTY ETF?
This backtest engine trades derivatives only, so the long leg is the near-month future, rolled each monthly expiry. Futures need margin rather than full payment, but they must be rolled every month and are closed overnight around each expiry.