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Non-Tech : QQQ - Nasdaq 100 Trust
QQQ 608.40-2.0%4:00 PM EST
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To: RoseCampion who wrote (328)6/12/2000 7:53:00 PM
From: Rocket Scientist   of 840
 
I've been playing with a buy-write strategy on QQQ for a few months. I like to sell calls a few percent out of the money...with a target income of about 3% for one month.

For example, in late Feb when QQQ was about 195, I sold March 204s for 6.50.

In late April, with QQQ at 82.75, I sold May90s for 3.50.

So buyers are willing to pay 3% per month for the right to a highly leveraged profit if the stock goes up more than 5% in a month. I feel pretty comfortable taking the opposite side of that bet.

If the index goes up enough that the call is ITM near expiration, I buy it back, sometimes taking a real loss, offsetting the repurchase price if needed for cash flow reasons by selling some of the underlying security (or others w/ CGs).

This approach of course limits participation in upswings, but seems to provide pretty good cash income, plus useful tax losses in event market goes up more than 5%/month.
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