Playing around with an idea in my head lately and wanted some input. Maybe someone out there who is great with data could back test this idea.
A popular strategy for large accounts is to take a percentage of capital and run the wheel on an ETF like Spy. Sell a OTM put and collect the premium each month and if assigned use the entry to then start selling covered calls against the position until called away and then rinse and repeat. Overall this mimics or closely mimics just being long the ETF but in theory provides a little larger return than just being long. Also known as the triple income strategy as during the periods when you hold the stock you're collecting the dividends as well. Of course there's downside risk but if you're long term want exposure to the broad market it seems like a solid strategy. And who wants to be long term bearish hoarding gold and bitcoin hoping there's another run on toilet paper. A miserable existence.
Would it enhance this strategy to use ratio spreads for entry and exit instead of the usual short option.
For example
If I'm short the 1/22/21 SPY 370 put at 2.24 I collect the $224 if we stay above 370 by exp but if assigned by long basis starts at $367.76
If instead I put on the 1/22/21 1:2 ratio +1 370 p -2 368 p I collect a credit of $1.43
But if we end up under 368 and am assigned my basis is $364.32 as the 370 put would net me an extra $200 at expiration.
Take the same logic and then apply it to exiting with the covered calls. This would give you a nice pop on the way in and way out.
I'm probably missing something but would be curious to hear everyone's thoughts.
A popular strategy for large accounts is to take a percentage of capital and run the wheel on an ETF like Spy. Sell a OTM put and collect the premium each month and if assigned use the entry to then start selling covered calls against the position until called away and then rinse and repeat. Overall this mimics or closely mimics just being long the ETF but in theory provides a little larger return than just being long. Also known as the triple income strategy as during the periods when you hold the stock you're collecting the dividends as well. Of course there's downside risk but if you're long term want exposure to the broad market it seems like a solid strategy. And who wants to be long term bearish hoarding gold and bitcoin hoping there's another run on toilet paper. A miserable existence.
Would it enhance this strategy to use ratio spreads for entry and exit instead of the usual short option.
For example
If I'm short the 1/22/21 SPY 370 put at 2.24 I collect the $224 if we stay above 370 by exp but if assigned by long basis starts at $367.76
If instead I put on the 1/22/21 1:2 ratio +1 370 p -2 368 p I collect a credit of $1.43
But if we end up under 368 and am assigned my basis is $364.32 as the 370 put would net me an extra $200 at expiration.
Take the same logic and then apply it to exiting with the covered calls. This would give you a nice pop on the way in and way out.
I'm probably missing something but would be curious to hear everyone's thoughts.
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