Hello everyone, I hope you all had a terrific week and God is shining into your lives!

For today’s post I want to be brief because I don’t have much time to write. Honestly, this post may not be entirely useful for those who’ve been around the block a few times. However, for those relatively new to the options space the information below will be particularly valuable.

If you’ve been trading options for any duration then you know full well how important liquidity is and trading without it can be quite dangerous. As such, I thought tonight I’d compile a list of the top 10 best ETF’s for trading options. For those more experienced, you may find value just having an up to date list.

In any case, here are my top 10 best ETF’s for trading options as of September 2024.

1. SPY – SPDR S&P 500 ETF Trust

This one is too easy. If you’ve ever looked at a single options strategy then you’ve no doubt heard about the S&P 500 ETF or SPY. This ETF boasts the most liquid options market on this list and it’s capable of supporting any options strategy you can think up.

If you’re new to options trading, I would agree this is a great ETF to start with. If you’re experienced, I would also agree this is a great ETF to continue with. We really can’t go wrong trading SPY and I’ve never had one issue opening or closing an order at any time. Not even once.

2. QQQ – Invesco QQQ Nasdaq 100 ETF

Similar to number 1, the Q’s as some call it are a close second and possibly even first on many lists. Regardless the spot it’s placed, an options trader will find no issue trading these waters. It boasts an incredibly liquid market with generally higher volatility. Which may make it a more or less attractive depending on the preferred options strategy.

This ETF has been around as long as I’ve been trading and I cannot remember ever having a problem trading. That said, do be on the look out for that volatility I mentioned. The QQQ ETF is technology heavy so it tends to ebb or flow further in both directions than that of SPY.

3. IWM – IShares Russell 2000 ETF

Arguably just as liquid as numbers 1 or 2, I place it third on this list solely due to the index it tracks. Large cap stocks have mostly stolen the show over the last decade or more so it would make sense, in my opinion, to favor those ETF’s to this one. However, IWM offers many of the same benefits at a considerably lesser underlying price.

The IWM ETF is generally more stable than QQQ but that is, again my opinion and mostly a recent development. Historically, I think smaller cap stocks tend to move more erratically but that hasn’t really been the case in recent memory. Regardless, it’s a suitable ETF for virtually any options position you’ll prefer.

4. GLD – SPDR Gold Shares ETF

Checking in at number 4 is history’s favorite recession proof asset. Gold, only in an ETF wrapper. If you’re not able to own physical gold then this is a possible replacement. You may ultimately prefer owning the physical product but for us options traders the option market here is a winner.

That said, I find myself trading here less and less just due to the lower premiums. Volatility is about par for an ETF of this size and outside of an anomaly, I’m expecting it to stay that way. Either way, the liquidity is there to build some advanced level options strategies if you want to take advantage of a lesser correlated asset.

5. TLT – IShares 20 YR Treasury Bond ETF

Open interest has tailed off in recent years, I think mostly due to the higher interest rate environment. However, there is still ample liquidity for an options trader to enjoy the strategy of their choosing. Additionally, given the sizeable fall in value over the last 2-3 years the price per share is now around $100. Making TLT an ideal candidate for an options based strategy requiring share ownership.

Similar to GLD, you won’t find the highest premiums available here but as of this writing you won’t find extreme volatility either. That said, once rates or the economy starts to change I would also expect that to change. Still, all things considered, I think this is one of the top 5 best ETF’s for trading options.

6. SMH – Vaneck Semiconductor ETF

A few years ago this ETF wouldn’t have even been a consideration for this list but as the world changes so to does the assets at our disposal. With the rise of Nvidia and semiconductor chips everywhere, I think it important to keep this one in our sights. Liquidity is lower than our top 5 above but still more than adequate and above what I would call average.

Regardless, the world is changing and right now semi’s seem to be the direction everything is going. Should you find yourself ready to engage, this ETF will offer you exposure to the bleeding edge of technology with an attractive options market.

7. XLE – Energy Select Sector SPDR ETF

For anyone interested in trading the energy sector you really couldn’t find a better asset to trade. The options market boasts plenty of liquidity, premiums are reasonable, and volatility changes often. At under $100 it’s another candidate for one of the best ETF’s for trading options.

The energy sector has rebounded significantly since the covid lows of around $25 per share. It’s just crazy to me that only a few years ago XLE traded so low. It is as liquid or efficient an options market as a trader could ask for.

8. XLU – Select Sector Utilities SPDR ETF

Admittedly, I just like XLU. I always have. I own many shares outright and find myself cooking up strategies for trading options here all the time. Others may prefer different assets but I’ve never been disappointed here. XLU will never offer the greatest in premiums and the volatility is mostly consistent. However, the stability of this ETF is what draws me to it time and time again. Sometimes, you just want something you can rely on, you know?

9. BITO – Proshares Bitcoin Strategy ETF

If you’re on the crypto train but want to trade options then look no further than BITO. Honestly, I know very little about the ETF but from some cursory research they seem to have a lot going. Liquidity is stellar and volatility is higher than any other asset on this list.

At under $20 per share, there really isn’t any options strategy you couldn’t deploy. If there is, I would probably suggest to continue saving and learning until you have the capital to play. That said, I myself haven’t and won’t travel to far into the crypto waters. I just have a general distrust in it given the number of fraud cases we’ve all witnessed. Which honestly, isn’t really a great concern from an ETF, assuming they’re sufficiently diversified.

Either way, if you’re comfortable, then I think you’ll be pleasantly surprised with what this ETF has to offer.

10. EFA – IShares MSCI EAFE ETF

If you’re looking for something across the pond then EFA has you covered. I haven’t played this market much myself but the liquidity is as good as it gets and at a price that makes sense. You won’t find the stellar bull market performance of SPY here but you will find a very stable asset, similar in nature to XLU.

EFA doesn’t have the greatest premiums, largely due to its quiet nature but for a lesser priced ETF behemoth there are certainly worse ways to go.

Closing Thoughts

Well, there it is. Short and sweet. A list of the Top 10 best ETF’s for trading options. Whether you’re interested in highly volatile assets or stable growers this list has it covered. Sure, I could have created a list of 100 different ETF’s with excellent liquidity characteristics but in my opinion this list supersedes them all.

I’ve personally traded in every market listed here with the exception of BITO. Again, I just feel nervous around cryptocurrency. Honestly, I’m an options trader so the fact that I feel nervous should really say something. Regardless, each asset listed here I’ve personally verified and I cannot think of a single instance in which opening or closing a position has been a problem.

Lastly, it’s always important to check volume and open interest as there can be some strike contracts that are less liquid. Just be sure to verify the basic requirements and you’ll never have a single problem with these ETF’s.

I hope you enjoy the Top 10 best ETF’s for trading options list and I hope you find success from their use. Until the next post.

God bless,

Jeff