I've cracked the code...

[nwoptions]

Hi everyone, I've been exploring selling covered calls on the SPY for income. I've recently discovered how powerful selling covered calls or writing CSPs are for generating income.

This strategy is appealing because I can make income in both bull markets and bear markets.

If the ETF goes up, I make money via market action as well as collecting premium. We recently got a Golden Cross (50sma crossed 200sma). This signifies typically the beginning a bull market.

If the ETF goes down, I still collect premium even though I have an unrealized loss. The market will go up eventually. I won't sell my shares. I buy and hold forever.

What do you guys think of covered call writing? Is it a great way to make passive income?

Thanks

P.S. Can someone please tell me how the IRS treats income received from covered call premium? Is it taxed as a capital gain? Regular income?

 

[Spike Trader]

Writing covered calls is common knowledge....


no 'secret code' there.

 

[maxinger]

Hi everyone, I've been exploring selling covered calls on the SPY for income. I've recently discovered how powerful selling covered calls or writing CSPs are for generating income.

This strategy is appealing because I can make income in both bull markets and bear markets.

If the ETF goes up, I make money via market action as well as collecting premium. We recently got a Golden Cross (50sma crossed 200sma). This signifies typically the beginning a bull market.

If the ETF goes down, I still collect premium even though I have an unrealized loss. The market will go up eventually. I won't sell my shares. I buy and hold forever.

What do you guys think of covered call writing? Is it a great way to make passive income?

Thanks

P.S. Can someone please tell me how the IRS treats income received from covered call premium? Is it taxed as a capital gain? Regular income?

Even though you cracked the code, the probability of earning $$$ is only 10%.

You have to crack many many much more things.

So stop daydreaming.

 

[nwoptions]

Writing covered calls is common knowledge....


no 'secret code' there.

Thanks for the reply.

One of the things that I've learned about writing covered calls/wheels flies in the face of what I've learned about dealing with realized losses and unrealized losses.

William O'neil, who was the founder of Investor's Business Daily, said that unrealized losses are no different than realized losses. They're both detrimental to one's portfolio. But he was talking about losses in the context of individual stocks. Not a diversified ETF like the SPY.

After studying how to write CCs on SPY, it's actually "ok" to have a unrealized loss when a bear market occurs because it's likely that the stock market will trend up again later. I don't have to worry about whether the SPY is another Enron or Worldcom and will go to $0. A bull market in the SPY is inevitable after a bear market. The loss is only temporary and I can make income from selling calls.

 

[maxinger]

Thanks for the reply.

One of the things that I've learned about writing covered calls/wheels flies in the face of what I've learned about dealing with realized losses and unrealized losses.

William O'neil, who was the founder of Investor's Business Daily, said that unrealized losses are no different than realized losses. They're both detrimental to one's portfolio. But he was talking about losses in the context of individual stocks. Not a diversified ETF like the SPY.

After studying how to write CCs on SPY, it's actually "ok" to have a unrealized loss when a bear market occurs because it's likely that the stock market will trend up again later. I don't have to worry about whether the SPY is another Enron or Worldcom and will go to $0. A bull market in the SPY is inevitable after a bear market. The loss is only temporary and I can make income from selling calls.

 

[BKR88]

Hi everyone, I've been exploring selling covered calls on the SPY for income. I've recently discovered how powerful selling covered calls or writing CSPs are for generating income.

This strategy is appealing because I can make income in both bull markets and bear markets.

If the ETF goes up, I make money via market action as well as collecting premium. We recently got a Golden Cross (50sma crossed 200sma). This signifies typically the beginning a bull market.

If the ETF goes down, I still collect premium even though I have an unrealized loss. The market will go up eventually. I won't sell my shares. I buy and hold forever.

What do you guys think of covered call writing? Is it a great way to make passive income?

Thanks

P.S. Can someone please tell me how the IRS treats income received from covered call premium? Is it taxed as a capital gain? Regular income?

Plenty covered call ETFs available. Expense ratios are pretty low for most so easier to just buy the ETFs rather than doing it yourself IMO.
XYLD, QYLD, DIVO, JEPI, JEPQ, SPYI, etc...
https://money.usnews.com/investing/...-covered-call-etfs-income-investors-will-love
This article talks about tax implications.
https://www.simplysafedividends.com...ts/5625-covered-call-etfs-too-good-to-be-true

 

[Nine_Ender]

We recently got a Golden Cross (50sma crossed 200sma). This signifies typically the beginning a bull market.

This is nonsense. The bull started well before that.

 

[getthatintoya]

You would be better off creating a short syn straddle: buy 100 shares sell 2 calls. It will outperform the CC in all aspects.

 

[Drawdown Addict]

https://www.investopedia.com/trading/cut-down-option-risk-with-covered-calls/

-> Go to Risk of covered call writing.

Not quite a low risk strategy if the stock depreciates heavily. It might work on the SPY but so it will a simple buy and hold strategy.

 

[rb7]

Thanks for the reply.

One of the things that I've learned about writing covered calls/wheels flies in the face of what I've learned about dealing with realized losses and unrealized losses.

William O'neil, who was the founder of Investor's Business Daily, said that unrealized losses are no different than realized losses. They're both detrimental to one's portfolio. But he was talking about losses in the context of individual stocks. Not a diversified ETF like the SPY.

After studying how to write CCs on SPY, it's actually "ok" to have a unrealized loss when a bear market occurs because it's likely that the stock market will trend up again later. I don't have to worry about whether the SPY is another Enron or Worldcom and will go to $0. A bull market in the SPY is inevitable after a bear market. The loss is only temporary and I can make income from selling calls.

Ask the Japanese what they think about that.
Their index took 30 years to recover from the low of 1989!!!