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  1. #1
    Member
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    Nov 2011
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    Coral Springs, Florida
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    Recommendations for ETFs for covered calls

    Other than SPY and DIA, does anyone use any other index ETF for writing calls? I was thinking about XLU and XLP but was wondering if anyone used any others. I wanted to get something trading in the 50-60 range so I could buy enough to write several calls. I also want something that has a lot of volume/liquidity.

  2. Stocks/Investments Moderator boneil's Avatar
    Join Date
    Jul 2010
    Location
    Aberdeen, MD
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    12,147
    #2
    The problem with selling calls on ETFs especially boring ETFs is that there is very little Implied Volatility. A call selling strategy would be selling the calls after a big up move, but with ETFs, usually the VIX goes lower the higher the ETF goes up, which decreases the value of what you would be selling.

    The USO or the XLE might be worth your interest. Imp Vol is pretty decent. Just don't chase the Bid, pay attention to the spreads. Place a sell order at or near the Ask and let someone buy your contracts.

    Selling calls can be really effective around earnings for stocks. You can sell Vol, and/or sell calls to protect gains. Might be something worth thinking about with your AAPL position.
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