Q and A about selling covered calls and cash-secured puts

On June 18, 2020, from John G.  …ON, Canada

Question:

Are you still selling covered calls cash-secured puts?

Monday Morning Millionaire Program Answer:

No, not anymore. Here is the reason behind that decision.

Selling derivatives (covered calls and cash-secured puts) works well when the volatility index (VIX) is high.  We have had two such opportunities in the last 12 years, as you can see in the chart above. This March just past, selling derivatives earned more than 2% per week!

Those days are gone! You can see today’s VIX in greater detail in the chart below — VIX is at about 33 compared to nearly 80 in March!

Based on history, simply dollar-cost averaging an exchange-traded fund which parallels the S&P 500 will outperform selling derivatives in a portfolio.

Nevertheless, a good derivatives selling time might come sooner than 12 years from now. Keeping an eye on the Chicago Board of Options Exchange Volatility Index (CBOE VIX) is worthwhile.


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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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