Trade of the Week: SPY

Options, Trade of the Week

Using covered calls on index ETFs is a popular way to produce additional cash flow from holding stocks.  For instance, the SPDR S&P 500 ETF (SPY) is not only the most heavily traded ETF in the world, but it’s also commonly used for covered call trades.  A large block of covered calls seemingly traded last week, which theoretically allows the trader to collect a large amount of cash from selling options while also being eligible to get the next dividend payment in the stock.