SpreadEdge Capital specializes in covered call writing on carefully screened stocks. Subscribe to our FREE weekly Bull Strangle Newsletter for investment opportunities. Email info@SpreadEdgeCapital.com for a copy. The newsletter covers the strategy from this article and other options for different risk profiles.

Strategy Overview
This article explores an investment strategy using a covered call and a naked put. Variations may involve a simple covered call or a covered call with a put credit spread.

Variations to the Strategy Include:

• Covered call with a put credit spread (illustrated in the “Additional Detail” section)
• Covered call only (same as covered call with naked put except without the naked put)
• Long stock only

Profit Diagrams for the Various Strategies

Strategy Cycle

The various option strategies covered leverages monthly and weekly options sold in 4–5-week cycles.  Weekly options enables a continuous (more diversified) expiration cycle.

Market Overview

The current market environment is a crucial consideration before executing strategy trades. By back testing the past 31 years of the S&P 500, a proprietary model has been developed that classifies the market as either green, yellow, or red. Historically, the market has been categorized as "green" 86% of the time. During "green" weeks, expected performance is favorable, with portfolio volatility at acceptable levels, leading to the deployment of 75% of strategy capital.
 

In "yellow" weeks, while expected performance remains favorable, portfolio volatility significantly increases, hence only 50% of strategy capital is deployed. In "red" periods, expected performance is unfavorable and portfolio volatility is extreme, suggesting that strategy capital should generally not be deployed or deployed very selectively. Yellow and red statuses each account for approximately 8% of the modeled weeks.

Watch List

Entry: Monday, April 14. Expiration: Friday, May 9. Only stocks with weekly options were considered for this cycle.

Last week I opened a covered call naked put on SVIX and IBIT.  These are still my favorites this week given the current environment.  In fact, I will likely add to my SVIX position on Monday.

Additional Detail On Watch List Favorites

Past Performance

Performance on closed trades through April 11, 2025, since inception in February 2024

More Information

For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com

Darren Carlat

SpreadEdge Capital, LLC

(214) 636-3133

Darren@SpreadEdgeCapital.com

Disclaimer

This information is for informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results, and all investments carry inherent risk. Consult with a financial advisor before making any investment decisions.