EEM (emerging markets etf) - selling covered calls, condors?

R

RandomZen

Hi guys,

Has anyone ever looked at this etf from an options perspective?
Looks like the options are actively traded. I am thinking of selling 2-3 June at the money calls.

Say, are there any rules of thumb for which ETFs are better for writing calls? For example, if I had to chose among QQQQ, SPY, IWM for US equities.

EFA (global ex Japan), EEM (emergin) for global equities. I mean EEM is more volatile (~40% volatility currently), but other than that, any reason to prefer some over the others?

I know Mark Wolfinger is the ultimate expert on ETFs/options, and has written extensively on this subject.

Mark, if you read this, any general suggestions? I know you have a book on etfs/options, which I am planning to buy. Any thoughts on EEM specifically?

Many thanks !

RandomZen
 
Quote from RandomZen:

Hi guys,

Has anyone ever looked at this etf from an options perspective?
Looks like the options are actively traded. I am thinking of selling 2-3 June at the money calls.

Say, are there any rules of thumb for which ETFs are better for writing calls? For example, if I had to chose among QQQQ, SPY, IWM for US equities.

EFA (global ex Japan), EEM (emergin) for global equities. I mean EEM is more volatile (~40% volatility currently), but other than that, any reason to prefer some over the others?

I know Mark Wolfinger is the ultimate expert on ETFs/options, and has written extensively on this subject.

Mark, if you read this, any general suggestions? I know you have a book on etfs/options, which I am planning to buy. Any thoughts on EEM specifically?

Many thanks !

RandomZen
More...

RZ,

Thanks.

To me, there is one very important rule of thumb when writing covered calls: You must want to own the specific ETF you are buying - because the covered call is a long position. It's long delta, and profits when the market rises.

I have no specific opinion on EEM, but I always recommend that you buy the ETF you want to own.

If you want emerging market investments, then your idea is good. But if you are doing it only because the option premium is high - that's not a good enough reason. At least it's not good enough for me. you must decide for yourself if owning a high IV ETF is what you want to do.

I appreciate that you plan to buy Create Your Own Hedge Fund, but I want you to understand that the book is more about writing covered calls and selling naked puts than it is about hedge funds. The discussion on hedge funds will not help you choose which one to buy.

The Rookies Guide to Options is less expensive, covers more ground and although it does not specifically cover trading ETFs, IMHO it is better book.

Mark
 
Quote from RandomZen:

Has anyone ever looked at this etf from an options perspective?
Looks like the options are actively traded. I am thinking of selling 2-3 June at the money calls.

I mean EEM is more volatile (~40% volatility currently), but other than that, any reason to prefer some over the others?
More...
When EEM was around 150 a year ago, it was a great underlying for gamma scalping because of that volatility. Sometimes, you could get 2-3 trades intraday. I've lost track of it but if it's still as volatile, I'd be hesitant to get involved in its covered calls unless you had a really strong belief in the upside... or perhaps not in the downside.
 
zen,

you have some interesting ideas, but you need to read up on options, you really do.

you are lucky mark wolfinger is generous enough to answer your childish questions here for free . . .

really, get one of wolfinger's books, which are, incidentally, very clearly written and honest, and see what to do with options. and most importantly, how

look at mcmillan, other authors, but make sure you are better prepared before asking such basic qustions

don't hope to find a reliable one day crash course in options, that will make you rich in a week. this is not meant as a criticism, just don't be afraid to learn, that's all

best,

varima-garch
 
Quote from spindr0:

When EEM was around 150 a year ago, it was a great underlying for gamma scalping because of that volatility. Sometimes, you could get 2-3 trades intraday. I've lost track of it but if it's still as volatile, I'd be hesitant to get involved in its covered calls unless you had a really strong belief in the upside... or perhaps not in the downside.
More...


spindr0 = u mean EEM was 50.. right.

http://finance.yahoo.com/echarts?s=EEM#symbol=EEM;range=1d

it was never 150 range.



and to the OP. yes.. the nice premiums u can make are due to the fact that it was in the 20s some time back and could re visit it . who knows..

as mark says. if u feel it is worth it to hold this ETF, for the Long term. then try selling CC or puts.. . personally prefer selling puts.. OTM puts.
 
Quote from spindr0:

That's a very interesting concept. Would it be possible for you to explain what happens to the price of a stock when it undergoes a 3 for 1 split? Would you also explain what the subsequent historical chart looks like? I'm always interested in learning. Thanks.

:)
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sorry.. my bad... i did not trade it.. just looked at the yhoo chart .
yes. it was in the 150 range..

Jan-08 151.32 152.26 ...
 
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