That is 554 names out of 1,708. On an ordinary Thursday, two thirds of the equities we track were not trending by the most commonly used measure of trend strength.
Anyone who has read about covered calls has read that they suit a flat or range-bound market and struggle in a strong trend. Held up against an actual scan, that guidance cleared most of the market at once.
A condition that is usually true is not a filter
A check that passes two thirds of the time is not selecting much. It is worth asking what it screens out, and on this day the answer was: about a third of the names, none of which you necessarily own.
The threshold itself is a convention rather than a law. A reading above 25 is the number most charting packages settled on for “trending”, and it has no special standing beyond common use. Move it to 20 and far more of the market qualifies as trending. Move it to 30 and far less does. The market did not change; the line did.
ADX measures strength, not distance
This is where the rule of thumb quietly breaks. ADX describes how orderly and persistent a move is. It says nothing about direction, and, more importantly here, nothing about how far the price goes.
A stock can climb a long way through a series of small, unremarkable steps and never once register as trending. A call contract is not settled on tidiness. It is settled on where the price actually sits relative to the strike.
A trend-strength reading is being used as a distance forecast. Those are different measurements, and only one of them is what determines whether the shares get sold.
The quiet market was also a rising one
On the same scan, 65.2% of the 1,677 names that have a 200-day EMA were trading above it. So the market was mostly untrending and mostly rising at the same time. Quiet, and drifting upward.
That combination is the one that reads as safest, and it is the one that takes the shares. A slow grind arrives at the same price as a sharp move. It just takes longer, and the contract does not care which route the price took.
Note the denominator. That figure covers 1,677 names rather than all 1,708, because a stock needs roughly 200 sessions of history before it has a 200-day average at all. Recent listings have no reading, so they are absent from the calculation rather than counted as failures.
How far an ordinary name moves in a day
The median daily range on the same scan, measured as ATR-14 expressed as a share of price, was 3.71% across 1,708 names. Half the universe moved more than that on a typical day, and half moved less.
That figure is a description of one day, not a projection of the next thirty. It is here because it makes a narrower point: a market can look calm by every trend measure it is scored on and still be full of names that cover ground.
The check is market-wide. The decision is not.
This is the gap the measurement exposes, and it is the reason to publish it. 32.4% is a fact about 1,708 companies. A covered call is written against one.
Knowing that two thirds of the market was untrending says nothing about whether the single stock in the account was among the 554 that were. The regime check gets handed around as a statistic about a population and then applied to a sample of one, which is a category error rather than a difficult judgement call.
The screener publishes the per-name ADX reading alongside every other indicator for exactly this reason. The market-wide number is context. The name-level number is the one the contract responds to.
What the trade actually is
Mechanically: the holder of 100 shares sells someone else a call, which conveys to the buyer the right to purchase those shares at an agreed strike price, and a premium is received up front. If the price stays below the strike, the contract expires and both the shares and the premium are retained.
If it does not, the seller of the call takes on the obligation to sell the shares at the strike if the contract is assigned, as FINRA sets out in its options overview. Standard equity options in the United States can be assigned before expiration rather than only at it, so that outcome does not necessarily wait for the last day.
The position is not neutral and it is not hedged. It is still long the stock, with the participation above the strike sold off. The break-even on the shares sits lower by the premium received, and the exposure below that point is unchanged.
What these numbers assume
- ADX here is the 14-period Wilder calculation on daily bars, and 25 is the conventional line for a trending reading rather than a rule.
- All 1,708 rows carried a genuine ADX value on this scan. We counted: none were the placeholder our code returns for names with too little history, so the denominator is real readings only.
- The 200-day EMA figure is computed from an exponential moving average. Our own macro breadth feature answers a similar question with a simple moving average and lands on a slightly different number, which is why the indicator is named here rather than left implicit.
- Every figure describes one scan on 20 August 2026, across the equities on this platform. A different day produces different percentages without anyone’s method having changed.
Frequently asked questions
What market conditions suit a covered call?
The usual answer is a flat or range-bound market, on the reasoning that a stock going nowhere will not run past the strike. Our scan on 20 August 2026 found 32.4% of 1,708 tracked stocks giving a trending ADX reading, so roughly two thirds of the market met that description on a single ordinary day. A condition that common is describing the weather rather than selecting an opportunity. The more useful question is not whether the market is quiet but how far the specific stock you hold tends to travel.
Does a low ADX reading mean a stock will stay below the strike?
No. ADX measures the strength and orderliness of a move, not its direction and not its size. A stock can climb a long way in a series of small, unremarkable steps and never register as trending, and the option is settled on where the price actually is, not on how tidily it got there. Treating a trend-strength reading as a distance forecast is the specific mistake this measurement exposes.
Why is a rising market a problem for covered calls?
Because the same scan that found most names untrending also found 65.2% of the 1,677 names that have a 200-day EMA trading above it. Quiet and drifting upward is the combination that reads as safest and is the one most likely to carry a price through a strike. A slow grind reaches the same level as a sharp move. It simply takes longer to get there, and the contract does not distinguish between them.
What happens to the shares if the stock closes above the strike?
The seller of a call takes on the obligation to sell the shares at the strike price if the contract is assigned, as FINRA sets out in its options overview. The premium received is kept either way. What is given up is participation above the strike, and because standard equity options in the United States can be assigned before expiration rather than only at it, that outcome is not always something that waits for the final day.
Is one day of data enough to draw a conclusion from?
For a general law about markets, no, and this page does not claim one. What a single dated scan is good for is testing whether a widely repeated rule of thumb actually discriminates between conditions. A filter that passes roughly two thirds of a 1,708 name universe on the day you check it is worth questioning regardless of what the next day looks like. The date and the sample size are published here so the figure can be weighed rather than taken on trust.
Related
The arithmetic of a single covered call position, including the strike and the premium received, is handled by the covered call calculator. For the same lesson about base rates applied to a different measurement, see what counts as a good Sharpe ratio, and for how rarely a fixed indicator threshold actually fires, what RSI overbought and oversold actually mean. More lessons are on the learn page.