NFLW or Netflix Covered Calls? Earning a Yield on NFLX
By Stephen Manning · @StephenCFU on X · · 9 min read
How to earn a yield on Netflix stock with covered calls: choosing strikes and expirations, the cost of capped upside, and how it compares with the NFLW ETF.
Netflix does not pay a dividend, so if you own 100 NFLX shares, the most direct way to earn a yield on them is to sell covered calls. This guide covers how that works, how to pick strikes and expirations, what the premium costs you in capped upside, and how it compares with buying NFLW, a fund that pays out weekly income tied to Netflix.
Covered call income comes in small, repeatable amounts, and that is the point: consistent options income comes from steady trades, not big wins. Start with the mechanics, since that is where beginners make most of their mistakes with stock options.
How a covered call earns a yield on NFLX
An option is a contract that gives the buyer the right, but not the obligation, to buy (a call) or sell (a put) 100 shares at a set price, the strike, until the option expires. When you sell a call against 100 shares you own, you take the other side: you collect the premium up front and agree to sell your shares at the strike if the buyer exercises. The call loses some of its time value every day, and that time decay works for you as the seller. For the strategy beyond Netflix, see our guide to covered calls on stocks you own.
A worked example (hypothetical)
Suppose you bought 100 Netflix shares at $100 and NFLX still trades at $100. These are round numbers for illustration, so check the live price before you run your own math. You sell one call that expires in 35 days with a $105 strike and collect $2.00 a share, or $200 for the contract.
- NFLX stays below $105: the call expires worthless. You keep the $200 and your shares, and you can sell another call.
- NFLX finishes above $105: your shares are called away at $105. You make $500 on the shares plus the $200 premium, $700 in all, and that is the most this trade can make however high Netflix goes.
- NFLX falls: your breakeven is $98, the $100 you paid less the $2 premium. Below it you lose $100 for every $1 the stock drops. At $80 the shares are down $2,000 and the premium covers only $200 of it.
Selling covered calls on Netflix, step by step
The covered call is one of the most widely used income strategies, and on NFLX it takes four steps:
- Buy or already own 100 shares of Netflix.
- Sell one call option for every 100 shares owned.
- Select the strike price and expiration date that balance income (higher premium) and the likelihood of being called away.
- Collect the option premium immediately.
Choosing the strike and expiration
CFU's covered call rules make a sensible starting frame: an expiration 21 to 45 days out, aiming for about 35; a strike near 0.25 delta (between 0.20 and 0.30); a call liquid enough to sell near its quote; and an expiration that ends before Netflix's next earnings report. The free CFU Covered Call Scanner applies those rules to NFLX and shows the call that fits them today, priced at the bid, with each expiration checked against the earnings date. If you own 200 shares, you sell two calls and the math scales.
One more check before you sell: keep the strike plus the premium at or above what you paid for the shares. Otherwise being called away locks in a loss.
Netflix earnings and implied volatility
Premiums on NFLX are richer when implied volatility is high, and it usually climbs into Netflix's quarterly earnings report. That extra premium pays for a real risk. A gap down on the report hits your shares while the premium covers only a sliver of the drop, and a gap up runs past your strike, where your upside stops. That is why CFU's rules end the call before the report.
Some traders buy a straddle or a strangle (a call and a put, at the same strike or at different strikes) before Netflix reports, to bet on the size of the move. That is a bet on movement, not a yield. You pay premium inflated by the coming report, implied volatility usually collapses once the news is out, and the stock has to move more than the market expected just to break even. Selling the straddle or strangle instead leaves the loss open-ended if Netflix moves a lot.
The cost: capped upside and full downside
- Capped upside: if NFLX surges past your strike, your shares may be called away and the rest of the rally belongs to the call buyer. Choose strikes you would be happy selling at.
- Full downside: the premium cushions only the first part of a drop, and your shares carry the rest. A covered call is not a defined-risk trade. CFU's house rule is to risk 1 to 2% of the account per trade, measured by max loss (how much to risk per trade), and a plain covered call's max loss is the value of the shares less the premium. Treat the shares as an investment you would hold anyway, or buy a put below the stock (a collar) so the worst case is known.
- No naked calls: never sell calls on more shares than you own. A call with no shares behind it has unlimited risk.
- Attention: review your positions at least weekly, keep only as many open as you can watch (how many option trades to have open at once), and set aside part of your premium as a buffer for drawdowns.
When NFLX runs through your strike
When Netflix rises through your strike, you have two choices. You can let the shares go: you sell at the strike, keep the premium and book the most the trade could make. Or you can roll up and out: buy back the call and sell one at a higher strike in a later expiration, in a single order, ideally for a net credit. A roll that costs a debit means paying to keep shares you already agreed to sell. CFU's rolling rule is one roll and done, or none: if Netflix threatens the rolled call too, let the shares be called away or buy the call back. Here is more on managing a stock that runs above your strike.
Because Netflix pays no dividend, the usual reason for early assignment on a call, capturing the dividend, does not apply. A deep in-the-money call with little time value left can still be assigned before expiration, so be ready for that once the stock is well above your strike.
NFLW vs selling covered calls on NFLX yourself
NFLW is Roundhill's NFLX WeeklyPay ETF. It does not sell covered calls (Roundhill states that none of its WeeklyPay funds do). Instead it aims for about 1.2 times Netflix's weekly total return, before fees and expenses, mostly through swaps, and it pays a distribution every week. That payout comes out of the fund's assets, so the share price drops by about the amount paid on each ex-date, and part of it may be return of capital, which simply hands back some of your own money. Our look at how WeeklyPay funds like COIW work shows how much those weekly payouts can swing, and our breakdown of AMZW, Roundhill's Amazon version, covers the weekly reset, swap costs and taxes.
| Own NFLX shares | Hold NFLW | Sell a covered call on NFLX | |
|---|---|---|---|
| Upside | Full | About 1.2x each week, no cap | Capped at the strike, plus the premium |
| Downside | Full | About 1.2x each week | Full, less the premium (not defined risk) |
| Cash paid to you | None (no dividend) | A weekly distribution that varies and may include return of capital | Premium each time you sell a call |
| Capital needed | One share | One ETF share | 100 shares per call |
| Costs | Trading costs | Fund expenses plus swap financing | Trading costs |
If you own 100 shares and want to be paid while you hold them, the covered call is the yield, and you control the strike and the date. If you want leveraged Netflix exposure with a weekly payout, NFLW does that, but judge it on total return (price change plus distributions) rather than the size of the payout, and expect its weekly reset to drift from exactly 1.2 times Netflix over longer periods. Check Roundhill's NFLW page for its current expense ratio and distribution history before you buy.
Netflix covered call FAQ
Is income from selling calls on Netflix stock taxed?
In the US, premium from a call that expires worthless, or that you buy back, is generally a short-term capital gain or loss. If the shares are called away, the premium is added to the sale price instead, and the shares' holding period decides whether that gain is short or long term, though selling in-the-money calls can affect the holding period. Rules differ by country, so check your situation with a tax professional.
What's the minimum to get started?
You need 100 Netflix shares for each covered call you sell, because one contract covers 100 shares. Netflix's 10-for-1 stock split in November 2025 cut the cost of 100 shares to a tenth of what it had been, so check the live price and make sure the position fits your plan for the account.
How often should I sell covered calls on Netflix?
That depends on how much attention you want to give it. Calls 21 to 45 days out decay more steadily and need fewer decisions, while weekly calls pay more often but each pays less and, at the same delta, sits closer to the stock price and swings harder with every move. Whichever you choose, end the call before the next earnings report or accept the gap risk knowingly.
How do I manage a losing covered call?
Most covered call losses come from the stock falling, not from the call. Let the call decay or expire, then sell a new one closer to the current price, minding your cost basis as above. Decide before you open the trade at what price you would sell the shares or protect them with a put, and if Netflix instead runs through your strike, follow the one-roll rule above.
Next steps
- Look at your Netflix holdings and answer two questions before you look at any premium: would you be happy selling at the strike, and would you be happy holding the shares below your breakeven?
- Practice in a paper trading account if you have never sold a call.
- Compare a few strikes and expirations to see how the premium, the breakeven and the cap move together.
- Track results on the whole position, shares and premium together, not just the premium collected.
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Filed under: Income Strategies, Covered Calls, Options Trading