Income Strategy · Combination Trade

Buy-Writes

Buy 100 shares of stock and sell a covered call in one simultaneous transaction. You start generating income from the moment you enter the position — with a built-in discount on your cost basis before the trade even settles.

Risk LevelLow

IncomeHigh

Capital Req.100 Shares − Premium

Time FrameDays–Weeks

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The Basics

What Is a Buy-Write?

A buy-write is simply a covered call — but executed as a single simultaneous order rather than two separate trades. You buy 100 shares and sell a call option at the same time, in one order.

The result is identical to a covered call, but the execution is cleaner. You get the combined price in a single transaction, which can mean tighter fills and less slippage than legging into each trade separately.

The premium you collect immediately reduces your net cost basis. If you buy stock at $185 and collect $3.40 in premium, your effective entry price is $181.60 before the day is over.

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Covered call vs. buy-write: Same strategy, different execution. A covered call assumes you already own the shares. A buy-write is when you buy the shares and sell the call simultaneously — often used to enter a new income position cleanly.

Key Terms

Buy-Write

Simultaneous purchase of 100 shares and sale of 1 covered call in a single combination order.

Net Debit

What you actually pay: stock price − call premium. Your effective cost basis from day one.

Static Return

Return if the stock stays flat through expiration. Premium ÷ net debit × annualized.

Called Return

Return if the stock gets called away at the strike. (Strike − stock price + premium) ÷ net debit.

Slippage

The difference between expected and actual fill price. Combo orders reduce slippage vs. legging in.

Walk-Through

A Real Example

You want to start a covered call position on MSFT at $415/share. Instead of buying shares and then selling a call as separate orders, you enter a buy-write combo order.

You specify: Buy 100 shares MSFT + Sell 1 call, $425 strike, 30 DTE. The net debit fills at $411.50/share ($415 stock − $3.50 call premium). Total outlay: $41,150.

Your effective breakeven is $411.50. You're already $3.50 better off than if you'd just bought the stock. Two potential outcomes at expiration:

✓ MSFT stays below $425

Call expires worthless. You keep your shares and the $350 premium. Static return: 0.85% in 30 days (~10% annualized). Sell another call.

+$350 income

⬆ MSFT closes above $425

Shares called at $425. Profit = ($425 − $411.50) × 100 = $1,350. Called return: 3.28% in 30 days (~39% annualized).

+$1,350 total

Strategy

When to Use It

You want to enter a new covered call position in one clean trade
You want the best possible price on the combined stock + call
Implied volatility is elevated — great time to sell calls
You're initiating a position in a volatile stock where legging in is risky
You want your cost basis reduced from the moment you buy

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Pro tip: Use limit orders for buy-writes. Enter the net debit you're willing to pay. The broker will work both legs simultaneously to get you that combined price.

Metrics

What to Target

1–3%

Static return / month

Return from premium if stock stays flat. Target 12–36% annualized.

3–5%

Called return / month

Return if shares get called away. Should be higher than static return.

OTM 5–10%

Strike distance

Sell calls 5–10% above current price. Enough room for the stock to breathe.

30–45 DTE

Days to expiration

Peak theta decay zone. Roll or take profit at 50% premium captured.

Honest Assessment

Pros & Cons

✓ Pros

Cleaner entry — one order, no legging risk
Immediate cost basis reduction from day one
Can get better combined fill than two separate orders
Same income-generating profile as covered calls
Simple to repeat month after month
Works well in volatile markets where timing matters

✗ Cons