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Covered Calls on Optionable ETFs

Casual investors often love the simplicity of index mutual funds and dollar cost averaging. Option investors love the excitement of a more exotic trade and the downside protection offered by common trades such as Covered Calls and in the money spreads. Exchange Traded Funds are a fund tracking an index, but can be traded like a stock.

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ETFs with derivatives take this to the next level. They allow traders to speculate on the future of a stock index. Below is a list of some of the optionable ETFs currently available to traders.

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List of Optionable EFTs
ETF Ticker
Biotech HOLDRS BBH
Broadband HOLDRS BDH
DIAMONDS (DJIA) DIA
Fidelity NASDAQ Composite Index ONEQ
Internet Architecture HOLDRS IAH
Internet HOLDRS HHH
iShares Cohen & Steers Realty Major ICF
iShares Dow Jones US Energy Sector IYE
iShares Dow Jones US Financial Sector IYF
iShares Dow Jones US Healthcare Sector IYH
iShares Dow Jones US Technology Sector IYW
iShares Dow Jones US Telecommunications Sector IYZ
iShares Dow Jones US Utilities Sector IDU
iShares Goldman Sachs Networking Index IGN
iShares Goldman Sachs Semiconductor Index IGW
iShares Goldman Sachs Software Index IGV
iShares Goldman Sachs Technology Index IGM
iShares MidCap 400 BARRA Growth Index IJK
iShares MidCap 400 BARRA Value Index IJJ
iShares MidCap 400 Index IJH
iShares MSCI EAFE Index EFA
iShares NASDAQ Biotechnology Sector IBB
iShares Russell 1000 IWB
iShares Russell 1000 Growth IWF
iShares Russell 1000 Value IWD
iShares Russell 2000 IWM
iShares Russell 2000 Growth IWO
iShares Russell 2000 Value IWN
iShares Russell 3000 IWV
iShares Russell MidCap IWR
iShares Russell MidCap Growth IWP
iShares Russell MidCap Value IWS
iShares S&P 100 Index Fund OEF
iShares SmallCap 600 BARRA Growth Index IJT
iShares SmallCap 600 BARRA Value Index IJS
iShares SmallCap 600 Index IJR
MidCap SPDRS MDY
NASDAQ 100 Index Tracking Stock QQQQ
Oil Service HOLDRS OIH
Pharmaceutical HOLDRS PPH
PowerShares Dynamic Market Portfolio PWC
PowerShares Dynamic OTC Portfolio PWO
Regional Bank HOLDRS RKH
Retail HOLDRS RTH
Select SPDR – Consumer Discretionary XLY
Select SPDR – Consumer Staples XLP
Select SPDR – Energy XLE
Select SPDR – Financial XLF
Select SPDR – Health Care XLV
Select SPDR – Industrial XLI
Select SPDR – Materials XLB
Select SPDR – Technology XLK
Select SPDR – Utilities XLU
Semiconductor HOLDRS SMH
Software HOLDRS SWH
StreetTRACKS Dow Jones Global Titans Index DGT
Telecom HOLDRS TTH
Utilities HOLDRS UTH
Vanguard Total Market VIPERS VTI
(For more details click the ticker symbol above)

Exchanges Welcome EFTs to their Ranks:
Exchanges are encouraging ETFs into their equity ranks. In fact, they often recruit them. Stephen Bloom, Senior Vice President of the NASDAQ, says his exchange is committed to ETFs’ success and the success of the investors who want them.

ETFs now number over 500 and the equity in them has increased over 40% in the last year. Also, ETFs may represent a way for investors to quickly trade pseudo mutual funds with a lower overhead.

ETFs, however, trade on an exchange. Therefore each transaction may be subject to the broker’s fee. Mutual funds typically do not charge a brokerage fee. If an investor conducts frequent transactions for small amounts, brokerage fees may erode gains and make mutual funds a more attractive alternative. However, low or no-cost brokerage transactions or a more profitable option strategy may make them more viable for small investors.

Options and ETFs:
For those interested, ETFs are a way to diversify risk when conducting option trades. Below we have a list of covered calls on ETFs for the months of November and December.

PowerOptions search made this quickly possible; we simply cut and pasted the ticker symbols from the previous chart into a personalized recommended list. We then saved the list and used a simple generic covered call search to identify trades with greater than 3% potential profit and greater than 3% downside protection for the desired months.

Here are the results:

Power Options Covered Call Search Data – ETFs
Symbol Stock
Price
Option Option
Details
Opt.
Bid
Net
Debit
%
Dnsd
Prot
%
if
Unch
%
if
Asgnd
XLE 74.80 (+0.33) XBTLW 07 DEC 75.0 (79) 3.8 71 5.1 5.4 5.6
XLB 42.20 (+0.15) XLBLP 07 DEC 42.0 (79) 2.15 40.05 5.1 4.9 4.9
OIH 193.96 (+1.36) ODLKS 07 NOV 195.0 (44) 7.6 186.36 3.9 4.1 4.6
QQQQ 51.77 (+0.12) QQQLZ 07 DEC 52.0 (79) 2.02 49.75 3.9 4.1 4.5
ONEQ 107.32 (+0.14) ONQLD 07 DEC 108.0 (79) 3.7 103.62 3.4 3.6 4.2
EFA 83.29 (+0.23) EFMLF 07 DEC 84.0 (79) 2.65 80.64 3.2 3.3 4.2
MDY 163.55 (-0.29) MDYLH 07 DEC 164.0 (79) 6.1 157.45 3.7 3.9 4.2
XLU 40.73 (+0.37) XKJLO 07 DEC 41.0 (79) 1.35 39.38 3.3 3.4 4.1
XLE 74.80 (+0.33) XBTKW 07 NOV 75.0 (44) 2.72 72.08 3.6 3.8 4.1
MDY 163.55 (-0.29) MDYLG 07 DEC 163.0 (79) 6.7 156.85 4.1 3.9 3.9
IGN 37.24 (+0.18) IGNLU 07 DEC 37.5 (79) 1.15 36.09 3.1 3.2 3.9
ONEQ 107.32 (+0.14) ONQLC 07 DEC 107.0 (79) 4.3 103.02 4 3.9 3.9
IBB 84.59 (+0.24) IBBLQ 07 DEC 85.0 (79) 2.75 81.84 3.3 3.4 3.9
XLY 37.36 (-0.15) XLYLK 07 DEC 37.0 (79) 1.7 35.66 4.6 3.8 3.8
XLK 27.09 (+0.05) XLKLA 07 DEC 27.0 (79) 1.05 26.04 3.9 3.7 3.7
EFA 83.29 (+0.23) EFMLE 07 DEC 83.0 (79) 3.2 80.09 3.8 3.6 3.6
IGM 60.33 (-0.11) IGULL 07 DEC 60.0 (79) 2.4 57.93 4 3.6 3.6
XLI 41.09 (+0.10) XLILO 07 DEC 41.0 (79) 1.5 39.59 3.7 3.6 3.6
VTI 152.95 (+0.29) VTILW 07 DEC 153.0 (79) 5.2 147.75 3.4 3.5 3.6
IYE 130.52 (+0.57) IYEKF 07 NOV 130.0 (44) 4.9 125.62 3.8 3.5 3.5
(For more details click the ticker symbol above)

For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.

PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

[tags] covered call investment strategy, investment strategy, poweroptions [/tags]

One comment

  1. Domingo Boutros

    A powerful share, I simply given this onto a colleague who was doing a bit of similar evaluation on this. He actually purchased me breakfast because I discovered it for him.. smile.

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