REI Covered Call Strategy
REI (Ring Energy, Inc.), in the Energy sector, (Oil & Gas Exploration & Production industry), listed on AMEX.
Ring Energy, Inc. operates as an oil and natural gas exploration and production firm, concentrating its efforts on the acquisition, development, and extraction of these resources across Texas and New Mexico. By the close of 2021, specifically December 31st, the company had established proved reserves totaling roughly 77.8 million barrels of oil equivalent. Its asset portfolio includes significant acreage: 18,882 net developed acres alongside 1,406 net undeveloped acres in Texas's Andrews and Gaines counties; an additional 18,437 net developed acres situated in Culberson and Reeves counties, Texas; and a combined 13,662 net developed acres with 11,993 net undeveloped acres located across Yoakum, Runnels, and Coke Counties in Texas, as well as Lea County, New Mexico. The company's oil and natural gas output is primarily distributed to end-users, marketing firms, and other various buyers. Incorporated in 2004, Ring Energy, Inc. was initially known as Transglobal Mining Corp. until its name was officially changed in March 2008. The company's principal office is located in The Woodlands, Texas.
REI (Ring Energy, Inc.) trades in the Energy sector, specifically Oil & Gas Exploration & Production, with a market capitalization of approximately $222.7M, a beta of 0.78 versus the broader market, a 52-week range of 0.72-2, average daily share volume of 5.8M, a public-listing history dating back to 2007, approximately 115 full-time employees. These structural characteristics shape how REI stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.78 places REI roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline.
What is a covered call on REI?
A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income.
Current REI snapshot
As of June 30, 2026, spot at $1.10, ATM IV 61.90%, IV rank 10.51%, expected move 17.75%. The covered call on REI below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 17-day expiry.
Why this covered call structure on REI specifically: REI IV at 61.90% is on the cheap side of its 1-year range, which means a premium-selling REI covered call collects less credit per unit of strike-width risk, with a market-implied 1-standard-deviation move of approximately 17.75% (roughly $0.20 on the underlying). The 17-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated REI expiries trade a higher absolute premium for lower per-day decay. Position sizing on REI should anchor to the underlying notional of $1.10 per share and to the trader's directional view on REI stock.
REI covered call setup
The REI covered call below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With REI near $1.10, the first option leg uses a $1.16 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed REI chain at a 17-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 REI shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $1.10 | long |
| Sell 1 | Call | $1.16 | N/A |
REI covered call risk and reward
- Net Premium / Debit
- N/A
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- Unbounded
- Breakeven(s)
- None on modeled curve
- Risk / Reward Ratio
- N/A
Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium.
REI covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on REI. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
When traders use covered call on REI
Covered calls on REI are an income strategy run on existing REI stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
REI thesis for this covered call
The market-implied 1-standard-deviation range for REI extends from approximately $0.90 on the downside to $1.30 on the upside. A REI covered call collects premium on an existing long REI position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether REI will breach that level within the expiration window. Current REI IV rank near 10.51% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on REI at 61.90%. As a Energy name, REI options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to REI-specific events.
REI covered call positions are structurally neutral to slightly bullish; the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. REI positions also carry Energy sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move REI alongside the broader basket even when REI-specific fundamentals are unchanged. Short-premium structures like a covered call on REI carry tail risk when realized volatility exceeds the implied move; review historical REI earnings reactions and macro stress periods before sizing. Always rebuild the position from current REI chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on REI?
- A covered call on REI is the covered call strategy applied to REI (stock). The strategy is structurally neutral to slightly bullish: A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income. With REI stock trading near $1.10, the strikes shown on this page are snapped to the nearest listed REI chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are REI covered call max profit and max loss calculated?
- Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium. For the REI covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 61.90%), the computed maximum profit is unbounded per contract and the computed maximum loss is unbounded per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a REI covered call?
- The breakeven for the REI covered call priced on this page is no defined breakeven on the modeled curve at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current REI market-implied 1-standard-deviation expected move is approximately 17.75%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a covered call on REI?
- Covered calls on REI are an income strategy run on existing REI stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
- How does current REI implied volatility affect this covered call?
- REI ATM IV is at 61.90% with IV rank near 10.51%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.