For Procter & Gamble employees, stock ownership is often a source of pride—and risk.
We often times help PG professionals manage that risk and generate income by implementing a
covered call strategy—an approach to reduce risk & volatility, generate cash flow, and retain long-term upside potential.
What Is a Covered Call?
A covered call involves selling call options against shares you already own. You receive cash upfront (called a “premium”), in exchange for agreeing to sell your shares if the stock rises above a certain price by a future date. It’s a way to get paid for staying invested—especially powerful with a stable, dividend-paying stock like PG. Think about this just like the stock options you receive as a P&G employee, only now you are selling the option to someone else!
Why PG Employees Should Consider This Strategy
We typically use this strategy for PG shares held in
taxable (non-retirement) accounts, where diversifying would trigger significant capital gains. Covered calls provide a way to reduce exposure and generate income
without
selling the stock or realizing taxes today.
While the strategy
can also be run in retirement accounts, our first preference there is usually to diversify the holding outright, as tax consequences are not a concern in those accounts. But, covered calls can be used in retirement accounts to reduce downside risk.
Key Advantages of Our Covered Call Approach
- Reduce overall stock exposure by roughly one-third without selling shares
- Generate consistent cash flow
— e.g., $27,290 (2.6%) in premium over 185 days, or an annualized yield of 5.17%
- Retain full dividend income
and upside up to the option strike price
- Avoid concentrated strike risk
— we actively manage a ladder of strike prices to reduce exposure to a single outcome
- Minimize call risk
— by dynamically adjusting contracts as market conditions change
- Protect against unwanted sales
— we can add margin to the account so that if shares are called, we borrow against them and deliver the borrowed shares, avoiding a taxable sale
Real-World Example
From a January 2025 analysis on a $1M PG stock position:
- Premium collected:
$27,290
- Net annualized yield:
7.21% (including 2.54% dividend)
- Risk reduction:
34.22%
This strategy allows you to stay invested in PG while reducing volatility and unlocking an income stream—ideal for those nearing retirement or looking for a tax-aware way to enhance returns from a concentrated stock position.
Let’s Talk
If you’re sitting on a large PG stock position and wondering what your next move should be, let’s connect. This strategy could be a simple but powerful way to enhance your plan.
Reach out for a personalized review of your holdings and see how this strategy might fit your goals.
