Premium Per Day (PPD): The Most Important Covered Call Metric

What Is Premium Per Day?

Premium Per Day (PPD) normalizes covered call income across different expirations, making it the single best metric for comparing trades.

Formula: PPD = Total Premium / Days to Expiration

Examples: • Trade A: $300 premium over 30 days = $10.00 PPD • Trade B: $450 premium over 60 days = $7.50 PPD • Trade C: $100 premium over 7 days = $14.29 PPD

Trade C has the highest PPD, meaning it generates the most income per day of capital commitment. Without PPD, you might think Trade B is best because it has the highest total premium — but your capital is locked up twice as long.

Why PPD Beats Annual Return

Annual return is commonly used but can be misleading:

Annual Return = (Premium / Stock Price) × (365 / DTE)

The problem: annual return assumes you can consistently replicate the same trade for an entire year. A 7-DTE call with 2% return annualizes to 104% — but you'd need to successfully sell 52 weekly calls at the same premium, which is unrealistic.

PPD is more honest. It tells you exactly how much income you earn each day the trade is active, without extrapolation.

Use PPD for daily comparison. Use annual return as a rough benchmark for portfolio planning.

How to Use PPD in Practice

PPD decision framework:

1. Screen all available calls across multiple expirations for your stock 2. Calculate PPD for each one 3. Among the top PPD options, filter for your preferred delta (risk level) 4. Choose the trade with the best PPD within your delta range

Real example on AAPL ($230): • $240 call, 14 DTE, $2.50 premium → PPD = $17.86 • $240 call, 30 DTE, $4.50 premium → PPD = $15.00 • $245 call, 45 DTE, $5.00 premium → PPD = $11.11

The 14-DTE option has the best PPD, but check the delta — if it's 0.35, you might prefer the 30-DTE at 0.20 delta for lower risk.

Covered Call Pro calculates PPD for every opportunity and ranks trades by this metric automatically.