Mike Khouw's Covered Call Strategy For Citigroup

On CNBC's "Options Action," Mike Khouw suggested a covered call options strategy for investors with a long position in Citigroup Inc C. The company is going to report earnings on July 14 and premiums are a bit elevated so Khouw wants to sell the Aug. 6 expiration, $75-strike call in Citigroup against a long stock position.

With the trade, he is collecting 71 cents or around 1% of the current stock price. Khouw is setting the selling price at $75.71 or 7.24% above the closing price on Friday. Collecting 1% maybe doesn't sound so great, but if you are doing so every 35 days, that actually creates a material amount of yield, said Khouw.