Verizon options strategies hinge on three things: your outlook on the stock, your comfort with risk, and where implied volatility sits at the time you open a trade. For a stock like VZ, which tends to move slowly and pay a steady dividend, strategies like covered calls and protective puts are popular because they let shareholders generate income or hedge downside without abandoning their position. Here's how to think through each approach.
Key takeaways
- Covered calls on VZ work best when you expect the stock to trade sideways or drift slightly higher, and they let you collect premium on shares you already own.
- Protective puts act as insurance against a meaningful drop in Verizon's share price, but the cost of that protection eats into your total return.
- Implied volatility on a stable, dividend-paying stock like Verizon is typically low relative to the broader market, which affects how much premium you can collect or how much protection costs.
- Strike selection and expiration timing should reflect your personal risk tolerance and price targets, not arbitrary rules.
- Neither strategy is inherently better. The right one depends on whether your primary goal is income generation or downside protection.
Why is VZ a common candidate for options strategies?
Verizon is a large-cap telecommunications company with a long dividend track record and relatively low stock price volatility compared to, say, a high-growth tech name. That profile makes it a natural fit for certain options approaches. Investors who own VZ shares often look for ways to squeeze extra income from a position that moves slowly, or they want to protect against a pullback without selling and triggering a taxable event.
The low volatility profile matters because it directly affects options pricing. When a stock doesn't swing much, option premiums tend to be smaller. That's a tradeoff: you collect less income from selling calls, but you also pay less for protective puts. Understanding this dynamic is the starting point for any VZ options trading decision.
You can pull up Verizon's fundamentals and price history on the VZ research page to get a sense of how the stock has behaved across different market environments.
How Verizon covered calls work
A covered call means you own at least 100 shares of VZ and sell a call option against that position. You collect the option premium upfront. In exchange, you agree to sell your shares at the strike price if the stock reaches that level before expiration.
Covered call: An options strategy where a shareholder sells a call option on a stock they already own. The premium received provides income, but the seller caps their upside at the strike price. It's one of the most conservative options strategies available.
Here's the thing about covered calls on a stock like Verizon: you're essentially betting the stock won't surge past your strike. Given VZ's typical price behavior, that bet works out more often than not. The stock tends to stay within a relatively narrow range over short periods, which is exactly the environment where selling calls shines.
Say you own 100 shares of VZ and sell a call with a strike price a few dollars above the current share price, expiring in 30 to 45 days. If VZ stays below the strike at expiration, you keep the premium and your shares. If it rises above the strike, your shares get called away at that price. You still profit (you sold at a higher price plus collected the premium), but you miss any gains beyond the strike.
Picking the right strike for a VZ covered call
Strike selection is where most of the decision-making happens. A strike close to the current price (at-the-money or slightly out-of-the-money) pays more premium but increases the chance your shares get called away. A strike further out-of-the-money pays less but gives the stock more room to appreciate before you lose the position.
Think about it this way:
- Aggressive income: Sell a call close to the current price. Higher premium, higher probability of assignment.
- Balanced approach: Sell a call one to two strikes above the current price. Moderate premium, moderate room for upside.
- Conservative: Sell a call well above the current price. Less premium, but you're unlikely to lose your shares.
There's no universally correct answer. If you're fine parting with the shares at a certain price, pick that price as your strike. If you want to hold VZ for the dividend long-term, lean toward higher strikes even if the income is smaller.
Choosing an expiration date
Expiration timing affects how much premium you collect and how often you need to manage the position. Options lose time value fastest in the final 30 to 45 days before expiration, a concept called theta decay. That's why many covered call sellers target that window: you capture the steepest part of the decay curve.
Shorter expirations (weekly or biweekly) generate less premium per trade but let you adjust more frequently. Longer expirations (60 to 90 days) pay more upfront but lock you into the position longer. For a relatively stable stock like VZ, the 30-to-45-day range is a common sweet spot.
Protective puts on Verizon: when do they make sense?
A protective put is the opposite side of the coin. You own VZ shares and buy a put option, which gives you the right to sell at a specific price. If the stock drops below your strike, the put increases in value and offsets some or all of your losses on the shares.
Protective put: An options strategy where a shareholder buys a put option as insurance against a decline in the stock's price. It establishes a floor on potential losses but costs money upfront, which reduces overall returns if the stock doesn't fall.
The honest answer on protective puts for VZ is that they're expensive relative to the protection they provide, precisely because VZ doesn't move much. When implied volatility is low, puts are cheap in dollar terms, but the stock also isn't likely to make the dramatic move that would make the put pay off. It's a bit like buying flood insurance in a desert. Not useless, but the odds are tilted against you needing it.
That said, there are situations where a protective put on Verizon makes real sense:
- You have a large, concentrated position and can't afford a meaningful drawdown.
- You're worried about a specific risk event (sector regulation, a credit downgrade, a dividend cut) but don't want to sell.
- You plan to hold through a period of broader market uncertainty and want a defined worst-case scenario.
How to pick a strike for a VZ protective put
The strike you choose determines how much downside you're willing to absorb before the insurance kicks in. A put with a strike close to the current price offers more protection but costs more. A put with a strike well below the current price is cheaper but only helps in a severe decline.
A common framework: pick a strike at or near the maximum loss you're willing to tolerate. If you'd start losing sleep at a 10% drop, buy a put with a strike roughly 10% below the current share price. The premium you pay is the cost of that peace of mind.
What does implied volatility mean for Verizon options strategies?
Implied volatility (IV) is the market's estimate of how much a stock's price will move over a given period, baked into the price of options. Higher IV means pricier options. Lower IV means cheaper options.
Implied volatility (IV): A forward-looking measure embedded in options prices that reflects the market's expectation of future price movement. It doesn't predict direction, only magnitude. For options sellers, high IV is generally favorable; for buyers, low IV means cheaper contracts.
Verizon typically sits at the lower end of the IV spectrum among large-cap stocks. Telecom companies with stable cash flows and predictable business models just don't generate the kind of uncertainty that inflates option premiums. That has direct implications for your strategy choice:
- For covered call sellers: Low IV means smaller premiums. You'll collect less income per contract, but the probability of keeping your shares is higher. Some investors compensate by selling calls more frequently (shorter expirations) or choosing strikes closer to the current price.
- For protective put buyers: Low IV means cheaper protection. The flip side is that the stock is less likely to make the kind of move that would make the put valuable.
One thing to watch: IV can spike even on "boring" stocks if something unexpected happens. A surprise earnings miss, a regulatory change, or a dividend adjustment could temporarily inflate VZ option premiums. If you're a put buyer, you'd ideally buy before such a spike. If you're a call seller, a spike can be an opportunity to collect unusually rich premiums.
You can explore how different stocks compare on volatility and other metrics using the Rallies Vibe Screener.
Covered calls vs. protective puts: which Verizon options strategy fits your goal?
This comes down to what you're trying to accomplish. The two strategies solve different problems.
- Goal is income generation: Covered calls. You're monetizing the stock's low volatility. The tradeoff is capping your upside.
- Goal is downside protection: Protective puts. You're paying for insurance. The tradeoff is the premium cost reducing your total return.
- Goal is both: Some investors use a collar, which combines selling a covered call and buying a protective put simultaneously. The premium from the call offsets part or all of the put cost. The tradeoff is you're capped on both sides.
Collar: An options strategy that combines a covered call with a protective put on the same stock. The call premium helps pay for the put, creating a defined range of outcomes. It's a way to get downside protection with little or no out-of-pocket cost.
For a stock like VZ, where many shareholders are in it for the dividend, covered calls are the more popular choice. You keep collecting the dividend, you collect call premium on top, and you accept that your shares might get called away if the stock rallies. Protective puts tend to show up more when investors have a specific concern or a very large position they need to hedge.
Common mistakes with VZ options trading
A few pitfalls worth knowing about:
- Ignoring the dividend: If you sell a covered call on VZ and the call goes in-the-money near the ex-dividend date, there's a higher chance of early assignment. The call buyer may exercise early to capture the dividend. Factor dividend dates into your expiration timing.
- Selling calls too aggressively: Picking strikes too close to the current price maximizes income but dramatically increases the odds of losing your shares. If your plan was to hold VZ for years, having your position called away for a small premium isn't a great outcome.
- Overpaying for puts: Buying long-dated, at-the-money puts on a low-volatility stock can be an expensive habit. The protection is real, but the cost adds up over time if the stock never drops significantly.
- Not having an exit plan: Know in advance what you'll do if the stock moves against you. Will you roll the covered call to a later expiration? Will you let the put expire and reassess? Deciding in the moment leads to worse outcomes.
For deeper research on how Verizon's business fundamentals affect its risk profile, the Rallies AI Research Assistant can help you dig into specific questions.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Walk me through options strategies for VZ — I'm interested in using covered calls or protective puts on Verizon shares I already own. How do I pick the right strikes and expirations, and what should I know about implied volatility for a stable stock like this?
- What options strategies do investors commonly use on Verizon? Walk me through covered calls and puts on VZ.
- How does Verizon's dividend schedule affect covered call timing and early assignment risk on VZ options?
Frequently asked questions
What are the most popular VZ options strategies for shareholders?
Covered calls and protective puts are the two most commonly discussed strategies for investors who already own Verizon shares. Covered calls generate income by selling upside potential, while protective puts provide a floor against losses. Some investors combine both into a collar for a defined range of outcomes.
How much premium can you expect from Verizon covered calls?
Premium amounts depend on the strike price, expiration date, and the current level of implied volatility. Because VZ tends to have relatively low IV, premiums are typically modest compared to more volatile stocks. Selling calls with 30-to-45-day expirations at strikes slightly above the current price is a common approach to balance income and the risk of assignment.
Is VZ options trading worth it given the stock's low volatility?
Low volatility means lower premiums, which can feel underwhelming. But it also means a higher probability that covered calls expire worthless (you keep the premium and the shares), making the strategy more consistent. Whether it's "worth it" depends on your expectations. Small, steady income on a dividend stock can compound over time.
What happens to my Verizon covered call around the ex-dividend date?
If your call is in-the-money shortly before the ex-dividend date, the call holder may exercise early to capture the dividend. This means your shares get called away sooner than expected. To manage this risk, some investors avoid selling calls that expire right around dividend dates, or they choose strikes far enough out-of-the-money to reduce the chance of early exercise.
How do I decide between buying puts and just using a stop-loss order on VZ?
A stop-loss order sells your shares automatically at a set price, but it offers no guarantee of execution at that exact price in a fast-moving market (this is called slippage). A protective put guarantees you the right to sell at the strike price regardless of how far the stock falls. The put costs money upfront; the stop-loss is free. The right choice depends on how precise you need your downside protection to be.
Can I use Verizon options strategies inside a retirement account?
Many brokerages allow covered calls and protective puts in IRAs because they're considered lower-risk strategies. More complex strategies like naked calls or spreads often require a margin account and higher approval levels. Check with your brokerage about which options strategies are permitted in your specific account type.
Bottom line
Verizon options strategies boil down to a clear choice: generate income with covered calls, protect against downside with puts, or combine both with a collar. The "right" strategy depends on your goals, your tolerance for risk, and where implied volatility sits when you open the trade. None of these approaches require you to predict the market. They require you to know what you want from your position.
If you're building or managing a stock portfolio and want to research how options fit into your broader approach, explore more in the stock analysis section or run your own questions through the Rallies AI Research Assistant.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.