Hello everyone! Remember to keep hope alive this week. With Jesus there is always something new and incredible to look forward to. He doesn’t leave us nor forsake us and I’m so thankful for that!

With that, let’s take a few minutes today to uncover some of the very best ETF’s for covered calls based on their price point. For many of us we would love to trade the very best ETF’s but that sometimes isn’t a realistic endeavor considering the capital requirements. As such, provided below is a list of my favorite ETF’s for covered calls at various price levels. Making covered calls an option for any investor at any level. Additionally, these assets would be more than attractive for cash secured puts.

Regardless, we’ll limit our focus to just covered calls today as we uncover a few items of importance. I think you’ll be pleased to know that no matter what amount of capital you have available these are, in my opinion, the best ETF’s for covered calls currently available.

Before you move on, you may also enjoy another post I wrote, “Top 10 Best ETF’s for Trading Options”. In that list I don’t limit my preference to just covered calls as I’ve done here. Check it out and let me know if you agree.

Post Agenda

• Best ETF for Covered Calls above $50k
• Best ETF for Covered Calls between $40-50k
• Best ETF for Covered Calls between $20-30k
• Best ETF for Covered Calls between $10-20k
• Best ETF for Covered Calls between $5-10k
• Best ETF for Covered Calls between $0-5k

Best Covered Call ETF Above $50k

SPY – S&P 500 ETF

This ETF has been the most liquid optionable asset since I began trading over 15 years ago and that is still the case today. Many other ETF’s, such as QQQ, have become respectable in their own right but the S&P 500 is still the gold standard for the investing community.

As such, that makes SPY the absolute best ETF for covered call traders currently available. However, it is way out of reach for me and millions of other traders out there. Unfortunately, we just don’t have $60k sitting around waiting on this one single investment strategy. For those that do though, I wouldn’t stray to far from this path. SPY doesn’t seem like its going to lose its place at the top anytime soon.

With that, as of this writing, SPY is offering about 1.7% on a 1 month ATM call. Annualized that amounts to 20.7% on just one contract. Admittedly, in the old days 20.7% would have been an incredible return but just buying SPY outright may yield a better result by today’s standard. However, should the market find some level of normalcy a covered call campaign on SPY wouldn’t disappoint.

Best Covered Call ETF between $40-50k

DIA – DOW Jones Industrial Average ETF

If you haven’t quite achieved S&P 500 status just yet but you still want to sell covered calls on a quality ETF then I think DIA has you covered. No pun intended. The “Diamonds” as I’ve heard them called, haven’t shared quite the same level of upside that SPY has but the return has been stellar. Over the past year this ETF is up approximately 33% from the lows of October 2023.

When analyzing this ETF one thing that stands out to me is that volatility is higher than that of SPY but that’s on a relative basis. What I mean is that DIA trades for less so dollar to dollar you’re getting more bang for your buck here. That said, the options market might have been created at night but it wasn’t last night. The price per share is lower and thus the amount the asset moves is lower, even if volatility is “technically” higher. All that amounts to lesser premium available on an absolute basis.

Currently, the DIA ETF is offering just at 2% on the nearest strike to the money. As of today that’s just ITM but regardless, 2% annualized becomes 24% should discipline be maintained throughout. DIA may not be SPY and over the past 10 years may have lost a few traders to other popular ETF’s the “Diamonds” are still one of the best ETF’s for covered calls you’ll find out there.

Best Covered Call ETF between $20-30k

IWM – Russell 2000 ETF

Quickly becoming a formidable ETF in it’s own right IWM has gained popularity in recent years for it’s stability. I believe that may only be temporary but it’s certainly been more stable day to day than those ETF’s mentioned above. Therefore, at this price point and given the premium available I think we would all do well to keep it in our sights as we consider a covered call campaign.

That said, IWM is currently offering around 2.7% on the nearest to the money strike or an annualized amount of 32.4%! Incredible I’ll agree and for the price it certainly makes IWM more appealing but do tread carefully here. Historically, I feel like small cap stocks, even collectively, are considerably more volatile than their large cap brethren.

Best Covered Call ETF between $10-20k

XOP – Oil & Gas Exploration ETF

As we proceed with our list the subjectivity of each selection becomes even more pronounced as the number of assets increases significantly. However, if you have an additional 20k to play with I think you’ll find XOP more than likeable. The liquidity is solid and the premiums are very respectable.

Admittedly, it’s at this price point that you’ll likely have noticed the divergence into a specific sector or market rather than the broad based index ETF’s listed above. I prefer the broad based ETF’s personally but given capital availability focusing in on a unique market is the only choice. As such, there comes another level of complexity. Traders would now have to stay abreast of changes to, in this case, the oil market or markets that could impact the oil market. That’s also true for broad based indexes but less so in my opinion so do be aware going forward.

In any case, XOP currently offers around 3.2% for the just OTM strike for an annualized total of 38.4% Not bad if you enjoy staying in tune with the oil markets. That said, the risks here do begin to increase so always be on the lookout for events that could impact this subsection of the market.

Best ETF for Covered Calls between $5-10k

EFA – MSCI EAFE ETF

TLT – 20 Year Treasury Bond ETF

At this price point I actually favor two different ETF’s for covered call trading and each have their own advantages. First EFA provides the broad based exposure I like but TLT offers the stability inherent to bonds. Each offers more than enough expirations and liquidity, as well.

A key consideration here would be if you wanted exposure to the European or Asian markets with EFA. The benefit to TLT in that regard is at least with a domestic asset you’ll get news related to the US Markets. I don’t personally stay up to date with what’s happening in Europe day to day.

That said, currently EFA is offering 1.6% ATM on 30 days for an annualized total of 19.2%. TLT by comparison boasts 1.8% on approximately 30 DTE for an annualized total of 21.6%. Either has been acceptable for me and those metrics are well within a standard variance. To say that another way, as volatility changes within each market those premiums may adjust higher or lower as well. As it stands today, those are the premiums available.

Best Covered Call ETF’s under $5k

EEM – Emerging Markets ETF

Again, my preference is to own more diverse assets. Should you prefer otherwise, the list under $5k is really quite long and many of them very appealing in their own right. However, EEM offers me the best of every world I’m looking for as an options trader. They’re ultra liquid, they’re relatively stable, and they offer decent premiums. Sure they don’t offer the best of those but they’re competitive with each and that’s enough for me.

As of this writing, EEM is offering 2% monthly or 24% annualized on the ATM strike. More or less in line with every selection on this list. Should you just be getting started in the covered call arena I think you could do much worse than EEM and I know that from experience.

Final Thoughts

Well, there you have it a list at every price point starting at $50k and moving lower. If you’re interested in trading covered calls these ETF’s will help you avoid some of the pitfalls I have endured. Mostly, the allure of higher premiums that extract a heavy toll. That cost is called risk and it can be hard to see when the premiums look so attractive. Just keep in mind those premiums are healthy for a reason and that should help you navigate safely.

In all, I’ve traded each asset on this list personally and have been more than pleased with my results. As I mentioned several times throughout, I prefer assets that track a broad range of stocks. Should you be comfortable trading individual stocks then you can increase those premiums exponentially. Regardless, this is my personal list of the best ETF’s for covered calls currently available and if you look closely you’ll see why.

Until the next post.

God bless,

Jeff