Options Trading Has Become Obscenely Popular


In fact, according to The Economist, in 2020 about 30 million equity options were trading every day—50% higher than 2019. And so far in 2021, notes the Option Clearing Corporation (OCC), options volume is up to 39.2 million a day.

options trading

While simple call and put buying is popular, traders are also turning to covered calls, which involve selling or writing a call option against a stock you already own—or, as explained by Ally Financial:

…when you write a covered call, you are selling someone else the right to purchase stock that you already own, at a specific price (called the strike price) and within a specific time frame. Since a single option contract usually represents 100 shares, you have to own at least that amount (or more) for every call contract you plan to sell to utilize this strategy.

It’s easier than it sounds.

You’d write a covered call if you plan to hold an underlying stock for the long term. As Ally further explains: “Writing covered calls allows you to make income through the premium while you hold on to the stock, because as a result of selling (aka writing) the call, you pocket the premium right off the bat.”

While covered calls aren’t for everyone, another great way to gain exposure is with an ETF. Here are three that traders may want to consider.

  • The NASDAQ 100 Covered Call ETF (QYLD) writes call options on the NASDAQ-100 Index. Some of its top holdings include positions in Apple, Microsoft, Amazon.com, Facebook, Alphabet, and Tesla.
  • The Global X S&P 500 Covered Call ETF (XYLD) writes call options on stocks in the S&P 500 Index. It also has holdings in Apple, Microsoft, Amazon.com, and Facebook.
  • Global X NASDAQ 100 Covered Call and Growth ETF (QYLG) writes calls on stocks in the NASDAQ 100 Index, including the tech stocks mentioned above.

The beauty of a covered call ETF is that the fund does all the work. All you have to do is invest in the fund, and hopefully rake in the returns.

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