/biz/ - Business & Finance

I have an idea. The is a CBOE "PUT" index which buys 1 to 3 month treasury bonds as collateral, and sells an ATM SP 500 put each month. Pic related. I can replicate this with SGOV as collateral, and SPY/XSP puts. Why can't I sell a daily ATM put instead of 30DTE? It should have more premium over the same amount of time, increasing profitability/lowering risk. Thoughts?

>>55065607
With the indexes like SPY and QQQ you have a volatility smirk, not smile. The ITM calls and OTM puts will have higher IV, which means you benefit from additional premium through selling. So you're basic theta selling/rolling strategies. Especially with level 4 options and portfolio margin which allow for great leverage. The CBOE website has a list of indices like PUT and BXM which you can backtest against each other (and SPX buy and hold). Some have on par returns with SPX but lower standard deviations. Meaning you can hypothetically leverage them during certain periods. Like an ATM covered call during lower volatility. But you use a deep ITM long call instead of shares for added leverage. Lots of ideas to play with.

>>54971906
Why not just sell covered calls on broad market ETF's like SPY and QQQ? You can backtest the strategy by looking at CBOE indices such as BXM or BXMD. There's also a dividend aristocrat index that outperformed SPX if I remember correctly.

Selling a monthly ATM put on the SP 500 (PUT) generates close to the same returns as buy and hold, with less volatility. What's to stop me from leveraging this strategy with an additional naked (or margin secured) put? It seems like it's a better way to leverage up versus paying margin interest on shares, or getting fucked by volatility drag with leveraged ETFs.