Covered calls can be an excellent way to improve returns while holding ETFs or other index products. For instance, a trader recently place a large covered call trade in the iShares Russell 2000 ETF (IWM).  The trader purchased one million shares of IWM while simultaneously selling 10,000 calls that expire in two weeks. This strategy allows the position to make money on stock appreciation up to a certain point, while also generating cash from selling the calls. The premium collected works out to an annualized return of 12% for this trade.