I've Been Selling Covered Calls WRONG For Years (I Fixed It)

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1:02With over 30 million pair sold, there are thousands of men out there more comfortable than you. Don't settle for less. Go to TommyJohn.com today for 25% off your first order with code comfort. That's TommyJohn.com code comfort. Tommy John. Comfort. Perfected. I think we can all agree that running the wheel strategy or covered calls primarily, the biggest risk is finding the right stock, right? Being able to pick the correct stock that we can hold on to and run covered calls against. Picking individual stocks, as we know, can be incredibly risky. And I like to believe that right now, we have an opportunity to be able to invest in different kinds of vehicles right now while still taking advantage of diversification, while also still being able to run our traditional wheel strategy and arc option strategy. And that's what we're going to be talking about in today's video, guys. And I don't know about you, all right? But when I first came across something called income ETFs, just about probably close to 10 years ago. And as some of you know, when I first got started with investing,

2:05I was working at a high-frequency trading firm. And it was great, right? I got exposed to a lot of cool stuff. I was an IT guy, not a trader. But during that time, I really wanted to make enough money to be able to retire or retire or make enough money that I don't have to necessarily work or just make some extra money to go buy beer. Right? So let's just be real. But I heard about this company, company, right? And it was a covered call ETF. And this was about 10 years ago that I got involved in this thing. And for lack of a better word, I got screwed, okay? And it left a terrible taste in my mouth. Now, listen, we all have made terrible mistakes over our course of investing. I didn't know what I was really buying here, right? I was blinded by the yield that I was going to be getting. I was like, 12% I'm going to be getting a 12% yield. Oh my gosh, why would I invest in Coca-Cola, Pepsi, J&J, or dividend kings and aristocrats when I could just go buy QILD and just rake in 12%.

3:06I'm a genius. I know what I'm doing. Back then, I didn't even know what covered calls were. And if you don't know what a covered call is or what an income ETF is, essentially what these ETFs allow you to do or what the way they make money is they do what we talk about on this channel, right? They're picking out individual stocks primarily here on the NASDAQ, obviously the NASDAQ 100. That's what this is, you know, the QQQ, as you guys know. And they're selling covered calls. So, you know, when you look at an income ETF, they are not all created equal. They're still, I almost want to, I don't want to say something like, there are some can be extremely risky borderline, like leverage GTF tour, and you guys know, I don't like that kind of stuff. But a lot of these can be, you know, very risky. Remember, you're capping your upside when you are running a covered call, right? So, we compare like a QILD. And let me see if I have my stock analysis tool here. And then I put QILD here, okay. And I compare it against, if I compare it against the, you know, JEPQ, as well as QQQ, and let's just go over the course of like a year.

4:09You could see how QILD isn't really having a good time here, okay? At all. And I got really screwed with this over, over the course of many, many years with, with QILD. Obviously, I ended up waiting, sold some covered calls against it, tried to make my money back, and all is well and good now. But I fell for that trap, high yield, right? That means that it's safe, right? And instead, what I'm actually doing right now, and I blame the market, and I think it's just, you know, and this channel for me is just documenting stuff that I'm doing, well, you know, how I'm learning from people that I'm surrounding myself within my community. And we have, we're in a very volatile market right now, okay? We are. There's no questions asked. A lot of my favorite stocks right now that I've been selling options on for years have gone parabolic, right? J&J Pepsi's Cokes, right? They are so over, so overbought right now that I am nervous buying individual stocks right now. I just am. I don't, I don't know what to do. Now, I'm selling a lot of puts on like smaller positions.

5:12Obviously, I'm continuing. So if I AAL, right, there's still a lot of these, there's still a lot of great companies that I'm, that I'm selling on here, just looking at my, my full watch list. Now, I'm still selling individual stocks. Those ones that I like, those decent dividend payers, especially with the airlines, the stuff that we talk about, right? And then something when things pop up, I'm always jumping to something. But what I found and what I'm actually starting to do a little bit is creating a little side project. It's a separate portfolio, so you be it. And basically, what this portfolio now has, it's going to have income-focused ETFs that I'm running covered calls against, okay? Now, not obviously all income ETFs are created equal. So I will be obviously testing a whole bunch of different ones that I want in there. But the big three that I'm focusing in on right now are primarily going to be JEPQ, JEPI, as well as SHD. I know SHD, it's not the same. It's not an income ETF, but it's a dividend. You guys already know I'm obsessed with dividend investing and selling covered calls at the same time. I think it's crazy for a lot of people

6:13to not be doing that as income investors. That's what I would identify myself as when I step into the markets as an option seller. I want to make income no matter what. Buy and hold separate story, right? I buy and hold my QQQs, my spies, my Vanguard stuff every week. I'm not selling covered calls on that. In the future, I will when I've accumulated them and I have plenty of videos on my retirement income strategies and stuff like that. But what I'm going to be doing right now, heavily, especially in volatile markets right now, where I'm just not confident stepping into stuff and sizing bigger is buying into these income ETFs, spread my risk out across a little bit across them and then be selling my covered calls. So to give you guys a quick little example of what this is actually going to look like. So for example, today I actually ended up buying a little bit of JEPQ today and I'm shooting this at night because I'm going golf and tomorrow and I'm not going to have time to shoot content if you guys care to know. But I ended up buying a little bit of JEPQ and what I like about these income ETFs

7:13is they aren't wrapping up a tremendous amount of collateral, right? We're all working with different portfolio size. For someone to 5,000 is a huge amount for another 5,000 is breakfast, right? Like, you know what I mean? So we all have different portfolios, but I think, especially getting into income ETFs, I think it's a wise idea to start with that 5 to 10,000 on mark especially if you're getting involved in something new, okay? And that's how I treat this kind of stuff as well. I've traded these in the past, but I want to make sure I'm spreading my risk across. So the three I'm, again, primarily focus on is JEPQ. That's a QQQ, JPI. That's a SMP 500 and the SHD, which is going to be a whole bunch of dividend paying stocks in their lower yield. Now, what we're getting with JEPQ, if you're going to go ahead over to ArcPix, right? I just love the way ArcPix displays data over like literally everything else because it just makes my life easier. That's why I built this tool. So many new features coming soon too. Guys, sign up for ArcPix. We are raising the price. Most likely it will double. We are adding in full options, chain features in here

8:14with ArcPix selections. We're also adding in a fundamental analysis of different individual stocks and stuff. But I always like to look obviously at some basic technicals with these. I'm not so much concerned about the price. I'm not, I'm not, you know, I'm genuinely not. I don't really care. That's why I like this strategy. I'm not too worried if I get stuck holding this thing. I'm just not. If I have to buy it and I have to hold it for a little bit of time, it's so what? I genuinely not going to, going to care too much. Now, with that said, I still want to see where am I at relative to the different moving averages that I pay attention to. So we are obviously below our 50 day or 200 and 300 day, just slightly above our 200 and 300 day, which is fine. Right? We're around 57, 60, 57, 62. Now, obviously, ArcPix will give me a cascure, put setup example, which I'm getting about a 1%, a little 1 1.5% return on my collateral in a 37 DTE. Here's where this strategy is different from everything that ArcOption strategy is. ArcOption strategy that we talk here on the channel

9:16is all about entering positions with cascure puts, collecting premium. Then if we get a sign collecting dividends, and then obviously with the cascure we're collecting interest on our collateral, right? So we're collecting interest on collateral, collecting premiums, our way to enter. Then we're doing our covered calls and collecting dividends. And appreciation. That's like the five income streams of the arc option strategy. That's why I talk a lot about on this channel. But what this strategy entails is not entering with a cash secured put. Okay. Now it's still going to be a part of the whole arc option strategy playbook. Definitely click the first link in the description of today's video. If you have no idea what I'm talking about there is a 90 minute training. And I give you a whole bunch of free resources at the end. My two premium calculators, trade lock templates, all that good stuff. Click that first link in the description. Get yourself registered. I promise you it's going to be a great 90 minutes for you, especially if you are a beginner or a veteran. But this is going to be another leg. This is going to give it as like a separate portfolio of the arc option strategy, right? Where we have a self-directed brokerage or a Roth IRA. This is honestly going to be fantastic. I'm going to do a lot of this stuff in my Roth IRA too.

10:16So here is what I'm saying. Is we are not doing a cash secured put with this? All right, we are simply buying outright 100 shares on one of these income-based ETFs. And immediately that is going to qualify us for that over 10.5% yield. Now this is not free. This is not free. Remember, we are not going to beat QQQ by holding JEPQ in order to beat or get close to it. Obviously, I don't make any income claims here. I'm not a financial advisor. I have little no idea what I'm doing. You will lose money listening to me. But my goal is to try to beat the QQQ by layering in my cover to call premiums on top of the dividends that I'm collecting. That is my target. Does that going to happen? No, because they're also doing cover to calls to generate premiums. You will cap your upside. This is a pure income investing play. This is why people invest in these.

11:18If you don't care about that, then you're better off just buying and holding. Me as an income investor, I like to be in the markets making money, redeploying capital, and having fun with it. OK, I just genuinely do enjoy it. But there's nothing wrong with just buying and holding. I buy and hold every week stuff as well. So JEPQ, let's go take a look at the options chain. So let's say we own 100 shares of JEPQ. Now, obviously, these are not as liquid options. You're not going to be able to do your weeklies on this thing. So you can see, it doesn't really matter, honestly. That's what's cool. It's kind of like a more relaxed selling option. You can't mess it up too much. You really can't. You don't have to babysit this thing at all. You genuinely don't. It really is, I believe, fantastic for the person that genuinely is like, I'm scared to pick individual stocks. I don't know what I'm doing. I want to kind of just lean into this. And worst case scenario, I get holding JEPQ. OK, I'm collectively a nice little dividend.

12:19I'm kind of keeping pace with the QQQ, maybe a little lower. But OK, maybe I should be able to at least get out of this position and sell my shares at a profit eventually. You know what I mean? So I'm always trying to eliminate the risk. I'm trying to eliminate the risk as much as possible with getting stuck holding the stock. That's a big one. And I'm not, listen, look at SoFi. A great example, Fiverr, Snapchat. I'm holding the bag on some of these, and it's OK. I'm still going to do long day to cover calls on them and keep lowering that cost basis. But it sucks. It still stings, guys. I don't know about you. But I'm comfortable at least admitting that. So with that said, I like to also mix in a couple of these kind of income-based ETFs as well. So taking a look at, like, for example, JEPQ, we're selling the call. We're going out 38 days. OK, and let's say we do the 59 calls here, right? Let's say we did the 59 calls here, right? We collect, let's just say about 25 to $30 of premium, we'll toss it into our cover call calculator.

13:21All of these are free. Just attending our option strategy workshop. I give them to you at the very end. Our strike of the option is 59. Let's just say our cost basis is $57. We're not really looking to get sold here. This is what the target is. I am aiming for about 1,5% return in about a month is all of these. That is what my target is. I'm targeting about 1,5% a month on these. And that paired with the dividend makes me extremely, extremely happy, OK? Sometimes it'll be better. It really depends on when you do this contract. If you even want it to be even more passive, I don't recommend it, do what you want. You can go further out or closer to the money. I don't think that's worth it. You have a higher chance of assignment. The real play here is either going to be trying not to sell the shares, rolling them out, buying to close the position out. But again, trying to stick to that 1,5% a month target

14:22is at least what I'm trying to aim for without selling the shares, right? So even if I went, look, for example, if I went to April 17, 38 days out by the 58s here, there's a high chance to come collect the $7,000 premium. But you don't really want to sell your shares because then what we're doing is we're hurting ourselves. We're hurting ourselves because now we're missing out on that almost 11% dividend that we're going to be collecting from a JPQ or a JPI. And part of this strategy, too, is accumulation, OK? I've been talking a lot about this on a video that I did recently on my plan to have $1,000,000 portfolio, one of my $1,000,000 portfolio that's primarily going to be based on spy and QQQ. And right now, my plan is I just invest $1,000 a month and I buy 500 bucks of spy, 500 of QQQ. And I'm just going to accumulate, accumulate, eventually hitting 100 shares, do some covered calls, really, really far out of the money covered calls to just snowball things a little bit faster.

15:22You kind of have to do the same thing with an income ETF. I believe buying them on a weekly basis of few shares, whatever you're comfortable doing, to accumulate those additional shares to layer more of them into the covered call, right? Because of course, it's fun, you know, collecting, like, OK, you know, on a couple hundred bucks, whatever, right? But this gets a lot more lucrative when you're selling like 500,000 plus, you know, shares. Well, you know, let's say 10 contracts. You see what I'm saying. So, but it's like anything in life, right? It's the way it is, guys, the more money you have, the more money you can make, right? Like, the reality is, like, that's just how it is. I don't make the rules. But somebody's going to be able to play a lot further out of the money. If they're not really chasing, right, they don't need, they don't care about the return of capital. They're looking at, oh, I'm collecting you to $25,000 of premium by going towards the, you know, the 60 ones or whatever, most likely not going to get assigned of those in a month.

16:23And all they're looking at is like, OK, that's how much premium I can, like, they don't care about the return on collateral as much. So they're just looking to looking at, as I can purely focused income play. So I dive more into this, guys, attend the arch option strategy workshop. It'll be the first link in the description of today's video. I give you this full trade log template, an absolute must to keep yourself organized with this stuff, gives you your whole breakdowns of everything as well. I love seeing you guys in here and using this thing. And then also my two, my two premium calculators over the covered call one as well as the cash security put once you get all that at the end of the arch option strategy. Workshop guys remember sell options, collect premiums, repeat. I'll see you tomorrow. Springtime is almost here. And if you've been itching to redo every room in your home, Bob's discount furniture can help. When you shop at Bob's, you get well where the everyday low price is on fabulous furniture for every room. Everything from stylish mid-century dining sets and top-rated Bobo-Pedic mattresses with the best warranties in the business to pop up sleepers sectionals all for a fraction of what they cost elsewhere. So stop inner shop online and get well-worthy pieces for less.

17:26Only it bobs. Guys, it's no use putting it off. The best time for an underwear refreshes now. Tommy John underwear is designed for a perfect fit that stays put all day. There's zero shape thanks to four times more stretch than competing brands. And their innovative horizontal quick draw fly is a game changer. With over 30 million pair sold, there are thousands of men out there more comfortable than you. Don't settle for less. Go to TommyJohn.com today for 25% off your first order with Code Comfort. That's TommyJohn.com Code Comfort. Tommy John. Comfort, perfected.