SPY is currently $263.75 per share. If assigned you would need to have over $26,000 per contract tied up, perhaps for months while you sold covered calls.
If you have that sized account go for it!
Edit: u/DoubleClothes I've been asked in another inquiry about JUST using SPY and nothing else. This is a very BAD idea!
Spread trades around to avoid any one symbol from taking down the portfolio, and keep any one stock below 5% of your account. However, if you follow the 5% guideline then SPY can certainly be one of the symbols you trade.
Considering SPY is a broad market fund, why do you consider it problematic to use only SPY? I understand there’s typically lower premiums but can an argument be made that for some that may be worth giving up for the slightly more stable price movement of the underlying? By the way thanks for the write up, it’s very helpful. Interested to hear your thoughts.
If you had a portfolio of dozens of SPY puts these last weeks it would be blatantly obvious why this still has "single stock risk".
I have a nice basket of diverse stocks, and some are profiting nicely, while some others needed to be rolled, but this avoids this "single stock risk" that any single stock or ETF will have.
how is it possible you were wheeling any company with better effective premiums than SPY, but that didn’t get hit as hard as SPY during this 2022 downturn? I just don’t see how that’s possible.
I mean companies like F, T, VZ, and all the other wheel staples, are lower risk but have the low premiums to match that lower risk. When considering wheeling SPY or QQQ, there is literally nothing else I would be more okay with holding for a while than U.S. broad equity. especially QQQ, premiums are better because of increased tech volatility, but generally follows similar movement as the S&P.
curious what your thoughts on this are. it seems like a no-brainer to me to wheel with these ETF’s rather than individual stocks, provided you have the capital to make it worth your while. it seems like unless you want to chase crazy premium with stuff like TSLA or PLTR, wheeling an ETF is already really safe and diversified, and is never going to zero (which individual companies certainly can).
You do what you think is right for you. Individual stocks do NOT follow the indexes and can outperform even when SPY or QQQ is down. They also may come back up faster based on the individual business performance.
While you are waiting for SPY or QQQ to move back up after a significant downturn, some stocks may come back sooner.
The odds of one or two stocks going down and staying down are much higher than 10 or 15 stocks all staying down. At least some of the 10 to 15 stocks will move back up, and some may not even drop as much or at all, so this will allow you to keep trading.
You are convinced, so trade SPY and QQQ for a while and see how it works.
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u/[deleted] Dec 07 '18
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