Mag 7 covered-call backtest: Actually, buy-and-hold won 12 of 14 times

I wanted to test whether rolling approximately 20-delta covered calls could beat simply holding every Magnificent 7 stock over the past two years. So I reproduced the strategy using historical implied volatility surfaces to model each contract more precisely. # Methodology I tested: * AAPL * AMZN * GOOGL * META * MSFT * NVDA * TSLA For each stock, I separately tested: * 1-week calls * 2-week calls At each roll, I selected the available strike between 1% and 10% OTM whose estimated entry delta was closest to 0.20. The test covers July 2024 through July 2026. # Results |Stock|Buy & hold|1W 20Δ CC|Difference|2W 20Δ CC|Difference| |:-|:-|:-|:-|:-|:-| || |AAPL|\+45.7%|\+26.2%|−19.5%|\+29.5%|−16.2%| |AMZN|\+23.6%|\+16.7%|−6.9%|\+22.0%|−1.6%| |GOOGL|\+83.2%|\+49.0%|−34.2%|\+50.6%|−32.7%| |META|\+20.0%|\+12.1%|−7.9%|\+4.2%|−15.8%| |MSFT|−14.5%|−17.7%|−3.2%|−18.2%|−3.7%| |NVDA|\+61.3%|\+56.0%|−5.2%|**+87.0%**|**+25.7%**| |TSLA|\+51.4%|\+40.2%|−11.2%|**+80.6%**|**+29.2%**| Covered calls underperformed in 12 of the 14 tests. Weekly calls failed to beat buy-and-hold on every stock. The only winning strategies were biweekly calls on NVDA and TSLA. # Why did NVDA work? NVDA’s biweekly strategy collected enough premium during repeated flat and declining two-week periods to compensate for the upside lost during rallies. Over 53 calls: * 45 expired OTM * Only 8 finished ITM * Gross premium contributed +63.7% * Short-call payoffs cost −46.0% * The net option contribution was +17.7% The result was not driven by one lucky trade. It came from repeatedly collecting moderate premiums during a choppy uptrend, while the losses were concentrated in a relatively small number of strong rallies. It is also worth noting that NVDA did not trend as persistently during this particular period as it had over the preceding years. # Why did GOOGL perform so badly? GOOGL gained more than 83% during the test. The weekly covered-call strategy collected approximately 46.5% in cumulative premium, but surrendered approximately 71.1% through ITM call payoffs. Premium income was not enough to compensate for repeatedly capping the stock during a persistent rally. # The pattern Covered calls generally helped during flat, declining or volatile periods and struggled during strong, persistent rallies. But we all know this.  The point was to say that result depends heavily on: * The stock * The tenor * The strike or delta * Implied volatility * Whether the stock trends or repeatedly reverses, which can also be sector-driven A strategy that performs well during a choppy two-year period can still lag badly during a sustained bull market. # Caveats * The contracts were priced using historical implied-volatility surfaces rather than executable bid prices. * Fees, slippage and taxes are excluded. * The available strikes were limited to 1%–10% OTM. * TSLA frequently required a strike beyond that grid to reach a true 0.20 delta. Its average selected delta was approximately 0.22. * This covers one specific two-year market period. If you found this useful, let me know in the comments.