ETF funds have become very popular with the investing public over the last few years. What are ETF funds? What are their advantages and disadvantages? Can ETFs be used effectively as the underlying vehicle for covered calls and cash-secured puts? This section will discuss these issues and enable you to assess whether they can form part of your safe-options-selling program.
ETF is short for “Exchange-Traded Fund”. These exchange-traded funds hold assets such as stocks, bonds, currencies, etc. They are similar in some respects to open-ended mutual funds in that they invest in a wide variety of securities and therefore provide some measure of diversification compared to individual issues. They are traded on the major stock exchanges just like individual stock issues. ETFs have been available in the U.S. since the early 1990’s.
The most popular types of ETFs are Index ETF, such as QQQ, DIA, and SPY. These are highly diversified and very actively traded. We have discussed these elsewhere on this site and they can make good underlying vehicles for safe-option sellers in many cases. Over the last ten or so years, a wide variety of ETF types have emerged, focusing on specific market niches and sectors. The links below will provide additional information about a number of ETF types of potential interest to us. We will explore their use to conservative options sellers.
Don't limit investing to the financial world. Invest something of yourself, and you will be richly rewarded.
-Charles R. Schwab
ETF's make excellent vehicles for covered calls.