Hey guys,
I have enough capital to get 100 shares of Tesla, Nvidia, Netflix, Meta, Google, Apple, Amazon, Microsoft and Spy
How much passive income can I realistically make from that by selling covered calls weekly?
And would this be a sustainable way to get passive income?
I’m looking to maybe get 2-3k monthly.
I think covered calls is what they’re called.
***I don’t plan on selling my shares unless I have to for whatever reason.
Passive income from Mag7?
byu/Public_Magician_9352 inoptions
Posted by Public_Magician_9352
13 Comments
Bout tree fiddy
Sustainable? Maybe
Passive? No
Covered calls allow you flexibility to select and balance your positions, though a major downside is having the share price blow right past your strike price. You can quickly be forced to come up with a lot out of pocket or risk having the shares called away. To reduce this risk, sell for less premium further OTM.
Picking up nickels: sustainable, low risk, but not really going to generate high premiums. Closer to the money will get the better premium, with added risk as detailed above. (In any event, your holdings dropping to $0 plus whatever premium collected is true max risk, but that’s present in any non hedged long position).
3K-4K a week is possible, but it will likely not be consistent enough. Collecting 10k in premium isn’t impossible, now is needing to spend that much to protect your position. Honestly, I think it sounds like far more work/risk than value to be found here.
I think following each individual company with the goal of trading weeklies is going to be very time consuming. Have you considered maybe buying 2-300 shares of SPY or QQQ instead of maybe Nvidia? Their market cap gives you pretty solid exposure to them, especially through QQQ. If you are already putting in the work, I would think weeklies or even shorter contacts on these are going to produce a better, safer premium all else considered.
Best of luck with whatever you choose.
It’s not going be passive and also depends heavily on the IV environment, but 2k monthly from what, $400,000? is definitely possible. It will be a challenge to track all of these though, why not just do QQQ and/or SPY/VOO?
Passive income is not selling covered calls . . .
It is buying the shares and then holding them. Options trading is very active and requires setting up proper trades and then managing them.
If you have the cash, put it in a money market fund and earn interest. Apply for margin just in case. Sell cash secured calls on the stock of your choice. If they get assigned, buy the stock then or just buy to close the calls.
selling covered calls and Cash seccured puts is easy, i dont know what everyone here is talking about, it takes about 5 min every monday at open for me to pick my CC strike price on AMZN, usually a .20 delta or lower is safest ive found, i sell weeklies and if my shares get called away i immediately open a cash secured put…. ‘the wheel’ i only have the shares to do 1 amzn contract weekly and im netting 80-100 bucks a week for 5 min of work and 1 contract only….. not hard, no stress.
sure SPY daily would be more income but i dont have 100 shares of that yet, sounds like you do so go for it.
So what you’re saying (mathematically speaking, of course) is that you’re looking to get about a 6% current return “passively” on your approximate amount of invested capital (full disclosure – this was a back of the envelope calculation on the fly). Why go through the brain damage to stare at a screen all week just for 6% returns? There are plenty of safe-yielding stocks out there that can achieve the same cash returns without all the brain damage. Just saying.
I think what you’re looking for more specifically is cash secured puts. The difference is instead of already owning the shares and collecting a premium is the broker set aside or put the amount to buy the 100 shares as collateral meaning you can’t use that money until you close the position but you’re still able to collect the premiums upfront. The cons is if it drop below your strike price you have to buy 100 shares times the amount of contracts you’re selling at whatever strike you chose and can incur a bigger loss than what you received in premium. I’m not an expert on this but there’s a lot of videos and sites that goes in detail on what it is and how to you can use it to generate income from it consistently. Keep in mind this only really works if the stock you’re trading is already in a bullish market and your expecting the stock price to stay above your strike price by expiration, there may be some others ways you can make money from it even in a bear market or side ways market but it just makes the most sense to only do it for bullish stocks mainly the big 7 that you mentioned
You’ll have to decide for yourself how frequently you’re willing to deal with your shares being called away, and have a plan for what to do when it happens. A good rule of thumb for thinking about the probability of the calls being exercised is to look at the delta, where -0.02 would represent a 2% chance, for example.
You might be better off just looking into dividend ETFs if you want something more passive and don’t have time to deal with the risk management aspect of options, though.
Let me tell you a story, I have TSLA from around $380. You can’t do covered calls on them at a $380 price. You basically get nothing in premium. You might be safer doing covered calls on the index.
If there is any such thing as passive options trading, and there is not in my view, you could trade .10 – .15 delta covered calls and make 10 – 15% of the account annually.
Might wanna try YMAG. It does this more or less except don’t actually own the underlying security.
Fyi
JEPQ 3 yr avg annual return 10% … owning the QQQ’s outright 10 yr avg annual return 20%