Viable income strategy? round two

Let’s say you have $100k of portfolio margin at around an 11% margin interest rate.

Getting into the trade (optional; feel free to proceed directly to main trade):

(1) sell 32 45DTE 18D IWM puts ($1.9 x 100 x 32 = $6080 credit). E.g. IWM is 220 now and your strike would be 205.

(2) take profit at 50%

(3) repeat process until assigned

Once assigned at a lower price (about 7% lower at the first iteration) proceed to the main trade below:

Portfolio margin grants about 7x account size for purchase of IWM. If assigned 3200 shares of IWM at 205, that would use just under 100k of BP ($656k of IWM). IWM pays a little over a 1% dividend, so you would be paying about 10% a year on $556k of margin, I.e., about $55k of interest per year.

(1) purchase 32 120DTE 25D puts, e.g., 190 strike for about $4.6 (around $14k) on the assumption price moved down from 220 to 205 and we were assigned. These puts will be closed or rolled out another 120 days at 30DTE and may have $2-3k remaining in the trade. Plus if you happened to have been assigned on the very first attempt selling puts above you would have collected $6k on premium reducing the cost of your long put by 59%. The long puts insure the IWM shares from a major market crash limiting your maximum downside risk and significantly reduces BP usage from the 3200 IWM shares.

(2) sell weekly (7DTE) covered calls slightly OTM, e.g., if IWM was assigned at 205, then sell 206 for about $2.5 ($8k premium)

You’ll need to purchase four sets of long puts over the course of a year, which might cost $40-45k plus the $55k margin interest. So that’s about $100k in costs for the trade and potentially up to $8k x 52 of covered call premium ($416k). $416k-$100k=$316k/yr.