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Southwest Airlines — Top covered call setups ranked by yield and downside protection
Southwest Airlines (LUV) is a Industrials stock with actively traded listed options. Among current candidates, the strongest income setup sits at the $43 strike with 40 days to expiration. IV Rank at 67% means call premiums are rich versus the past year. This setup offers higher income potential, but caps upside at the strike. See Wheel Strategy for the full CSP-to-CC cycle.
Strike Placement
31.4% ann.Ranked #1 of 13 contracts by CC Score — balancing call yield, downside protection, and liquidity.
CC Score = Income (22%) + Safety (18%) + Liquidity (18%) + Quality (14%) + Event (12%) + IV (8%) + Execution (8%)Annualized return, delta, bid-ask spread, open interest, earnings proximity, IV rank, DTE
VolRadar proprietary composite score using ORATS chain data
CC Score optimizes for income generation, not total return. Covered calls cap upside — stocks that rally strongly will underperform a buy-and-hold approach. Past CC returns do not predict future yields.
Every covered call strike sorted by CC Score. Higher score = better risk-adjusted income potential.
★ = Highest risk-adjusted CC Score across all expirations and strikes.
| Strike | Premium | Ann. Yield* | Score |
|---|---|---|---|
| $43⚠️ Spans earnings | $0.30 | 24.4% | 70 |
| $42⚠️ Spans earnings | $0.37 |
Quantitative screening, not investment advice. Verify with your broker. Disclaimer
Southwest Airlines has earnings in 10 days. Selling covered calls into earnings carries IV crush risk — premiums are inflated by the event but collapse after the announcement. Consider expirations that expire before the earnings date, or accept that post-earnings IV contraction will reduce the remaining time value.
VolRadar's CC Score ranks every Southwest Airlines covered call opportunity from 0 to 100 across seven weighted dimensions: Income potential (22%), Safety (18%), Liquidity (18%), Underlying Quality (14%), Event Safety (12%), IV Opportunity (8%), and Execution Quality (8%). The score updates daily after market close, reflecting the latest option chain data.
The top-ranked covered call for Southwest Airlines is the $43 strike expiring 2026-05-15 (40 DTE), offering 31.4% annualized return with a delta of 0.31. It earns a CC Score of 84 out of 100. Data is updated daily after market close.
For Southwest Airlines, delta 0.20–0.30 is a common range for covered calls. This gives 70–80% probability of the option expiring worthless while collecting meaningful premium. Lower delta (0.15–0.20) is more conservative, while 0.30–0.40 generates more income but has higher assignment probability.
The CC Score (0–100) ranks covered call opportunities across 7 dimensions: Income potential (22%), Safety (18%), Liquidity (18%), Underlying Quality (14%), Event Safety (12%), IV Opportunity (8%), and Execution Quality (8%). Higher scores mean better risk-adjusted opportunities. Sort by CC Score to find the best strike and expiration combo for Southwest Airlines.
Free embeddable tool: IV Rank Gauge — add live IV data to any site. No signup, no API key.
This is ★ Top Ranked of 13 contracts across 5 expirations. ↓ Find it below
| 29.5% |
| 69 |
| $41⚠️ Spans earnings | $0.57 | 45.5% | 68 |
| Strike | Premium | Ann. Yield* | Score |
|---|---|---|---|
| $42⚠️ Spans earnings | $0.86 | 43.6% | 69 |
| $43⚠️ Spans earnings | $0.64 | 32.3% | 69 |
| $40⚠️ Spans earnings | $1.49 | 74.9% | 68 |
| Strike | Premium | Ann. Yield* | Score |
|---|---|---|---|
| $42⚠️ Spans earnings | $1.06 | 39.3% | 68 |
| $41⚠️ Spans earnings | $1.35 | 49.9% | 68 |
| $44⚠️ Spans earnings | $0.73 | 27.1% | 67 |
| Strike | Premium | Ann. Yield* | Score |
|---|---|---|---|
| $39⚠️ Spans earnings | $2.37 | 68.7% | 59 |
| Strike | Premium | Ann. Yield* | Score |
|---|---|---|---|
| $43★ TOP⚠️ Spans earnings | $1.31 | 31.4% | 84 |
| $45⚠️ Spans earnings | $0.76 | 18.2% | 71 |
| $40⚠️ Spans earnings | $2.15 | 51.4% | 70 |
*Annualized yield assumes hold to expiration with no early assignment. Actual results may vary.
Weekly covered calls (7–14 DTE) offer faster theta decay and more flexibility but require active management. Monthly covered calls (30–45 DTE) balance time premium with less frequent rolling. For Southwest Airlines, current elevated IV makes both viable — weeklies capture the rich premium faster. The CC Score ranks both DTE ranges so you can compare directly.
The primary risk is capped upside: if Southwest Airlines rallies sharply, you are obligated to sell at the strike price and miss gains above it. At the current top-ranked $43 strike (11.6% OTM), any rally beyond that level means you sell shares below market price. This risk is amplified with earnings in 10 days — a positive surprise can trigger a gap above your strike overnight, locking in the loss of upside before you can react. To contextualize: covered calls are best suited for sideways-to-mildly-bullish outlooks. If you expect a significant move higher, consider waiting to sell the call or using a wider strike. The CC Score penalizes strikes with elevated event risk to help you avoid the worst setups.
Southwest Airlines has earnings in 10 days. Selling covered calls into earnings is a double-edged sword: premiums are inflated by event IV, but post-earnings IV crush reduces remaining time value. Many traders choose expirations that expire before the earnings date or accept the crush as part of the premium collected.
Southwest Airlines's top covered call shows 31.4% annualized. High annualized returns typically result from elevated IV, shorter DTE (which amplifies annualization), or closer-to-the-money strikes. Always check the CC Score — it penalizes strikes with poor liquidity or excessive event risk that may inflate the headline yield.