Micron covered call: harvesting extra income after a strong rally

Micron shares have risen sharply since the company reported earnings in mid-December. After such a strong move, many long-term investors start asking a very practical question:

How can I make my existing shares work a bit harder, without selling them outright or taking on excessive risk?

One possible answer is a covered call. This article explains that idea step by step, in plain language, using a real example from mid-January 2026. It is written for investors who already own Micron shares and have little or no prior experience with options.

First things first: what is a call option?

Before discussing covered calls, it helps to start with the basics.

A call option is a contract linked to a stock. It always has three key elements:

• a price (the strike price)
• a date (the expiry date)
• a number of shares (one standard option contract always represents 100 shares)

There are two very different ways to use a call option.

Buying a call option

When you buy a call option, you buy the right (but not the obligation) to buy 100 shares at the strike price before expiry.

• You pay money upfront.
• You benefit only if the stock rises strongly.
• If nothing happens, the option can expire worthless.

Buying a call is a directional bet on higher prices.

Selling a call option

When you sell a call option, you take the opposite role.

• You receive money upfront (the option premium).
• You give someone else the right to buy your shares at the strike price.
• You accept an obligation if the stock rises above that level.

In this article, we focus on selling a call option, not buying one.

What is a covered call?

A covered call is one of the most basic and conservative option strategies.

It combines two positions:

• You own at least 100 shares of a stock.
• You sell one call option on those same shares.

The word covered simply means that if the option buyer exercises their right, you already own the shares needed to deliver them.

By selling the call option:

• You receive cash upfront.
• You agree to sell your shares at a fixed price if the option expires in the money.

In simple terms, a covered call means:

“I am happy to sell my shares at a higher price, and I want to earn some income while I wait.”

The trade-off is clear and unavoidable: you earn income today, but you give up part of the upside if the stock continues to rise strongly.

Why Micron is a candidate for a covered call right now

Micron reported its fiscal first-quarter 2026 results on 17 December 2025. Since then, the share price has moved sharply higher, reflecting strong demand for memory linked to artificial intelligence infrastructure.

After such a rally, two things are often true at the same time:

• The long-term story may still be intact.
• Short-term uncertainty remains high.

That uncertainty shows up in the options market. Option prices on Micron remain elevated compared with calmer periods.

For covered call sellers, this matters because:

• Higher uncertainty usually leads to higher option premiums.
• Higher premiums mean more income for the same commitment.

This does not mean the rally must end. It simply means investors are willing to pay up for upside exposure, and existing shareholders can choose to sell some of that upside in exchange for income.

The example trade explained step by step

The following example is based on a platform snapshot from 13 January 2026. Important note: The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.

The setup in plain language

• Shares owned: 100 Micron shares
• Current share price (approx.): $346
• Action: sell 1 call option
• Expiry date: 30 January 2026 (about 17 days away at the time)
• Strike price: $400
• Cash received: about $3.85 per share, or $385 in total

Once this trade is placed, the $385 premium is yours immediately.

What do these numbers really mean?

Let’s translate the figures into everyday terms.

• Value of your shares: $34,600 (100 × $346)
• Cash received today: $385

That means you earn:

• About 1.1% of the share value in option income
• Over a period of roughly 17 days

You may sometimes see this expressed as an annualised number. That is only a comparison tool, not a promise. It simply helps compare short-term income with longer-term returns.

Another important concept is the downside buffer:

• If Micron falls, the first $3.85 per share of losses is offset by the option premium.
• Beyond that, you are fully exposed to further declines, just like any shareholder.

Three possible outcomes at expiry

1. Micron stays below $400

• The option expires worthless.
• You keep your shares.
• You keep the $385 premium.

This is the outcome most covered call investors aim for: extra income, with no change to the shareholding.

2. Micron rises above $400

• Your shares are sold at $400.
• You still keep the $385 premium.

Using the $346 reference price:

• Share gain: ($400 − $346) × 100 = $5,400
• Plus option income: $385
• Total result: $5,785

This is a good outcome only if you are genuinely comfortable selling your shares at $400. The trade-off is that you no longer participate in gains above that level.

3. Micron falls

• You still own the shares.
• The premium offsets only the first $3.85 of losses.

A covered call does not protect you from a major decline. It improves the outcome slightly, but it does not eliminate risk.

What if Micron moves up quickly before expiry?

If Micron rallies strongly before 30 January, you still have choices.

Accept assignment

If selling at $400 was your plan anyway, you can simply let the option run and accept assignment. This locks in the agreed result.

Roll the covered call

If you want to keep the shares, you can buy back the current call and sell another call with a later expiry (and possibly a higher strike). Rolling requires more active management and can reduce or eliminate some of the original income.

Some investors who are assigned later choose to sell cash-secured puts to potentially re-enter the position. A cash-secured put means selling a put option while keeping enough cash aside to buy the shares if assigned. This article is not about cash-secured puts; they are mentioned only for completeness. Further details can be found in the related educational resources.

Key risks to understand clearly

• You remain fully exposed to downside moves in the shares.
• Your upside is capped at the strike price.
• Fast rallies can make rolling more costly.
• Taxes, liquidity, and execution costs vary by market and investor.

A simple checklist before using a covered call

• Do I already own at least 100 shares of Micron?
• Am I comfortable selling those shares at $400 in the near term?
• Am I treating the option premium as extra income, not protection?
• Am I willing to manage the position if the stock moves quickly?

Final thought

Covered calls are not about predicting markets or chasing high returns. They are about making a clear decision in advance: selling some future upside at a known price in exchange for immediate income.

For Micron shareholders who are satisfied with the recent rally and comfortable selling at higher levels, a short-dated covered call can be a structured way to add incremental income while staying disciplined.