Covered calls on sub-$20 stocks are appealing for one obvious reason: you can own 100 shares for $500 to $2,000 instead of $15,000 to $25,000. For traders with smaller accounts, that capital efficiency is real and meaningful.
The problem is that most articles on this topic hand you a static list of tickers that was accurate when they wrote it and useless two weeks later. Prices move. IV changes. Earnings come and go. A list is not a strategy.
Here's what actually matters when you're looking for covered call stocks under $20 — the criteria that make a cheap stock worth selling calls on — plus a few examples from current market data and how to find better ones yourself in real time.
Why Cheap Stocks Can Actually Work for Covered Calls
The math on covered calls under $20 is straightforward. At $10 per share, 100 shares costs $1,000. At $20 per share, $2,000. Compare that to Apple at $200 ($20,000) or NVIDIA at $174 ($17,400), and the capital efficiency argument becomes obvious — you can run three or four covered call positions in sub-$20 stocks for the cost of one position in a large-cap name.
For smaller accounts, this matters. Running covered calls on $150+ stocks means heavy concentration in a single position. Sub-$20 stocks let you diversify across multiple names without overcommitting capital to any one position.
The tradeoff is that the premium in dollar terms is smaller. Collecting $0.50 on a $10 stock is a 5% yield on the position — strong in percentage terms. But $50 per contract is $50. If you're looking for meaningful dollar income, you'll need more contracts, which means more capital, which partially offsets the efficiency advantage.
The Three Things That Actually Matter
1. IV rank — not just IV. The premium you collect on any covered call is directly tied to implied volatility. On cheap stocks, IV can be misleadingly high in percentage terms while the actual dollar premium is thin. What you want to know is whether IV is elevated relative to that stock's own history — that's IV rank. A stock with IV rank above 40 is offering premium that's expensive relative to its normal range. Below 20 and you're selling cheap options for thin income. Always check IV rank, not just the raw IV number.
2. Liquidity — open interest and bid-ask spreads. This is where cheap stocks become traps. A $7 stock with a $0.15 bid and $0.55 ask has a spread that eats 40 cents of premium before you're even filled. On a $0.50 premium, that's 80% of your income gone in the spread. Open interest below 100 contracts means you might struggle to fill at a reasonable price at all. For sub-$20 covered calls to actually work, you need tighter spreads and decent open interest — ideally above 500 contracts on the strike you're targeting.
3. A business you'd actually want to own. This is the same rule that applies to all covered call stocks but gets ignored more often on cheap names. Low-priced stocks are often cheap for a reason — declining business, regulatory risk, sector headwinds, or just a speculative name with no earnings. Selling a covered call on a stock you'd never want to own at assignment is just short-term income with significant downside exposure. The strike needs to be a price where you'd genuinely be comfortable holding 100 shares if assigned.
What Makes a Sub-$20 Stock a Trap
Not every cheap stock is a covered call candidate. A few warning signs:
Penny stock spreads. If the bid-ask spread is more than 10-15% of the mid price, the liquidity isn't there. You're giving up your edge in the fill before the trade even starts.
Zero earnings predictability. Biotech stocks under $20 are the classic example. The IV is often sky-high — sometimes 200-300% — because the stock is one FDA decision away from a 50% gap in either direction. That premium looks incredible until the binary event goes the wrong way and the stock halves overnight. Selling covered calls on biotech binary events isn't an income strategy. It's speculation with capped upside.
No underlying business quality. A stock trading at $6 because the company is burning cash and has no path to profitability is not a covered call candidate. Getting assigned means owning shares in a deteriorating business. The premium doesn't compensate for that risk over time.
Three Examples From Current Market Data
These are real examples pulled from StrikeScan's live scanner at the time of writing. Prices, premiums, and probabilities change daily — these are illustrative of what the criteria look like in practice, not a permanent recommendation. Always verify current data before you trade.
Nokia (NOK) — $9.83
Historical probability of call expiring worthless: 86.3%. Open interest: 55,000+ contracts. Annualized ROI on nearby strikes: approximately 59%. NOK is a large, established telecom company with a real business and a liquid options market. The premium in dollar terms is modest — around $0.36 per share on a 23-day call — but the probability is strong and the liquidity is excellent. A reasonable covered call candidate for traders who want high probability over maximum income.
Rivian (RIVN) — $17.74
Historical probability: 77.6%. Open interest: 31,000+ contracts. Annualized ROI: approximately 60%. RIVN is a well-known EV manufacturer with volatile price action and elevated IV relative to its history. The premium is higher in dollar terms than NOK — around $0.65 per share — and the liquidity is strong. The tradeoff is higher assignment risk given RIVN's historically wide price swings. Only suitable for traders genuinely comfortable owning EV exposure at the strike price.
SoFi Technologies (SOFI) — $19.06
Historical probability: 77.1%. Open interest: 35,000+ contracts. Annualized ROI: approximately 40%. SOFI is a fintech name with active options trading and decent liquidity. At $19, it sits at the upper end of the sub-$20 range, meaning 100 shares requires about $1,900 — still well below large-cap alternatives. Premium is around $0.47 per share on a 23-day call. A recognizable business with real revenue, reasonable for traders who have a view on fintech.
The honest caveat on all three: the annualized ROI numbers look strong in percentage terms, but the dollar premiums are modest — $36 to $65 per contract. If you're looking for meaningful dollar income, you'll need to run multiple contracts or accept that sub-$20 covered calls are more of a cost-basis-reduction strategy than a primary income source.
How to Find These Yourself in Real Time
The examples above will be stale by the time you read this. Prices move. IV changes. New earnings dates enter the window. A static list is never the right tool for a dynamic market.
The right approach is to run the filter yourself on current data. In StrikeScan, you can filter the entire covered call screener by stock price — set the underlying price maximum to $20, add your IV rank minimum, set your probability threshold, and filter out anything with earnings before expiration. The scanner runs across 5,000+ tickers every 15 minutes and surfaces what actually meets your criteria today — not what met it last quarter.
That's the real answer to "best covered call stocks under $20" — not a list, but a live filter you can run yourself whenever you're ready to trade. The stocks that show up will be different every week as IV shifts, prices move, and earnings calendars change. The criteria stay the same.
The Quick Checklist
Before selling a covered call on any sub-$20 stock, run through these five checks:
1. IV rank above 30 — is premium elevated relative to this stock's own history?
2. Open interest above 500 on your target strike — is there enough liquidity to fill at a fair price?
3. Bid-ask spread under 15% of the mid price — are you keeping most of your premium?
4. No earnings before expiration — are you avoiding binary event risk?
5. Would you genuinely be comfortable owning 100 shares at the strike price if assigned?
Five yes answers means the setup is worth evaluating. Any no is a reason to look elsewhere.
Disclosure: I am the founder of StrikeScan, the platform referenced in this article. The examples above reflect data available at time of writing and are not current recommendations. Always verify current data before trading. This is not financial advice.