Playing More Conservative: 80 ETF Buy-Write Option Strategies & Ranked Spreadsheets

As posted previously in my blog, ETF's are some of the safest securities to purchase when planning on investing. An even more conservative way to buy ETF's is to write covered calls on them once purchased. Writing call options allows you to get some of your investment back immediately and gives you some downside protection, however if the stock really takes off you cap your upside.

The buy/write option strategy seems ideal when purchasing diversified ETF's. This is because diversified ETF's are less volatile than purchasing specific stocks (however leveraged ETF's are extremely volatile and as I state here I don't believe are investment vehicles).

I have put together a list of 80 ETF's (yes 80!) and calculated each of their % probability of expiring above the indicated strike, as well as the % return if they expire above the indicated strike. The list below is sorted alphabetically, and all options are for the July expiration (July 18, 2009). All strike prices are near the money unless indicated they are in the money (IN $).

Below is a list of the 80 Exchange Traded Funds. (All data priced as of pre-market Thursday June 4, 2009).

Stock	Ticker	Strike	% Probability	% Return
Consumer Discret Select Sector SPDR	XLY	24	54.2	4.3	IN $
Consumer Staples Select Sector SPDR	XLP	24	42.2	3
DIAMONDS Trust, Series 1	DIA	88	44.4	3.9
Direxion Daily 10 Yr Trsy Bear 3X Shares	TYO	70	61.2	3.2	IN $
Direxion Daily 10 Yr Trsy Bull 3X Shares	TYD	50	46.5	4.8
Direxion Daily 30 Yr Trsy Bear 3X Shares	TMV	85	53.8	9.2
Direxion Daily 30 Yr Trsy Bull 3X Shares	TMF	40	50	9.9
Direxion Daily Devlpd Mrkts Bear 3X Shrs	DPK	30	61.1	9.7	IN $
Direxion Daily Devlpd Mrkts Bull 3X Shrs	DZK	55	57.4	12	IN $
Direxion Daily Emrg Mrkts Bear 3X Shares	EDZ	14	58.7	17.2
Direxion Daily Emrg Mrkts Bull 3X Shares	EDC	90	53	17.7
Direxion Daily Energy Bear 3X Shares	ERY	20	53.9	15
Direxion Daily Energy Bull 3X Shares	ERX	35	58.1	12.7	IN $
Direxion Daily Financial Bear 3X Shares	FAZ	5	56.3	20.7
Direxion Daily Financial Bull 3X Shares	FAS	10	55	18
Direxion Daily Large Cap Bear 3X Shares	BGZ	35	53.8	12.3
Direxion Daily Large Cap Bull 3X Shares	BGU	35	58.4	9.5	IN $
Direxion Daily Mid Cap Bear 3X Shares	MWN	30	51.4	12.4
Direxion Daily Mid Cap Bull 3X Shares	MWJ	60	60.1	10.5	IN $
Direxion Daily Small Cap Bear 3X Shares	TZA	22.5	53.2	18
Direxion Daily Small Cap Bull 3X Shares	TNA	32	51.2	15.3
Direxion Daily Technology Bear 3X Shares	TYP	22.5	58.1	10.8	IN $
Direxion Daily Technology Bull 3X Shares	TYH	85	55.1	9.7	IN $
Energy Select Sector SPDR	XLE	53	40.9	6.3
Financial Select Sector SPDR	XLF	12	52.4	6.7	IN $
Industrial Select Sector SPDR	XLI	23	53.2	4.3
iShares Dow Jones US Energy	IYE	30	57.4	4.1	IN $
iShares Dow Jones US Real Estate	IYR	35	48.5	7.4
iShares MSCI EAFE Index	EFA	48	47.2	4
iShares Russell 2000 Growth Index	IWO	59	42.7	5.7
iShares Russell Midcap Growth Index	IWP	35	70.5	2.2	IN $
iShares Russell Midcap Index	IWR	65	60	3	IN $
iShares S&P 100 Index	OEF	44	46.6	3.4
iShares S&P 500 Index	IVV	95	45.5	4
iShares Silver Trust	SLV	15	55.9	4.9	IN $
Materials Select Sector SPDR	XLB	28	43.3	2.6
MidCap SPDRs	MDY	110	42.5	5.6
PowerShares QQQ	QQQQ	37	44.8	4.9
Retail HOLDRs	RTH	80	56.9	3.7	IN $
Short Dow30 ProShares	DOG	66	46.9	4.8
Short Financials ProShares	SEF	59	47.6	9
Short QQQ ProShares	PSQ	55	63.5	2.8	IN $
Short Russell2000 ProShares	RWM	55	56.8	4.8	IN $
Short S&P500 ProShares	SH	66	46.1	4.8
SPDR Barclays Capital High Yield Bond	JNK	34	54.5	1.4	IN $
SPDR DJ EURO STOXX 50	FEZ	36	44.3	4
SPDR Gold Shares	GLD	96	45.4	4.7
SPDR S&P 500	SPY	95	44.5	4.3
SPDR S&P Metals & Mining	XME	40	44.8	10.8
SPDR S&P Oil & Gas Equipment & Services	XES	24	52.8	6
SPDR S&P Retail	XRT	30	43.5	7.1
Technology Select Sector SPDR	XLK	18	50.6	4.1	IN $
Ultra Basic Materials ProShares	UYM	21	47.1	12.6
Ultra DJ-AIG Crude Oil ProShares	UCO	12.5	49.7	12.1
Ultra Dow30 ProShares	DDM	31	47.8	7
Ultra Financials ProShares	UYG	4	56.5	10.9
Ultra Gold ProShares	UGL	37	46.9	8.8
Ultra Industrials ProShares	UXI	22.5	43.4	11.5
Ultra Oil & Gas ProShares	DIG	31	48.2	10.6
Ultra QQQ ProShares	QLD	40	43.1	9.7
Ultra Real Estate ProShares	URE	4	56.1	13.5	IN $
Ultra Russell2000 ProShares	UWM	21	49.3	10
Ultra S&P500 ProShares	SSO	28	44.4	9.1
Ultra Semiconductor ProShares	USD	20	46.8	11.1
Ultra Technology ProShares	ROM	30	59.2	5.7	IN $
UltraShort Basic Materials ProShares	SMN	17.5	54.8	11.5
UltraShort Dow30 ProShares	DXD	46	53.8	7.1
UltraShort Financials ProShares	SKF	44	50.7	14.7
UltraShort Industrials ProShares	SIJ	40	56.1	7.8	IN $
UltraShort MidCap400 ProShares	MZZ	38	50.2	10.4
UltraShort Oil & Gas ProShares	DUG	18	45.9	12.7
UltraShort QQQ ProShares	QID	34	45.3	11
UltraShort Real Estate ProShares	SRS	20	50.5	21.5
UltraShort Russell2000 ProShares	TWM	42	50.8	11.5
UltraShort S&P500 ProShares	SDS	55	51.7	8.4
UltraShort Semiconductor ProShares	SSG	40	44.6	15.1
UltraShort Technology ProShares	REW	45	41	12.4
United States Natural Gas	UNG	15	47.5	12.8
United States Oil	USO	37	47.5	7
Utilities Select Sector SPDR	XLV	26	52.2	2.6	IN $
Average			50.9725	8.75375

The July options expiration has 44 days left. Some people use the buy/write option strategy to write in the money covered calls and capture a 3% gain. If you write an in the money call every 2 months and happen to be called out every time, this would yield a return of 18% annually, not to mention dividends and capital gains distributions. The likelihood of continuously getting called out month after month is not too realistic, but not impossible either (and of course it depends on both the strike price and stocks volatility). For more information on options pricing, probabilities, check out my E-Book for under $4.99!

Among these ETF's are some which are very volatile such as the (TNA) and the (FAS), and some less volatile such as the (DIA) and the (SPY). As you'll see the greater the volatility of the underlying stock, the higher % return. You will also notice calls written in the money have a higher probability of expiring above the indicated strike (this should make sense).

Of these strategies I am most interested in the: (FAS), (IWJ), and (ERX). For one I am bullish on the underlying stocks (more reasons discussed on my blog), and their return % and probabilities of expiring above the indicated strike are both above the average for my analysis of these 80 ETF's.

Below is a spreadsheet I have created for 80 ETF's sorted by % return (click to enlarge).

Below is the same list but ranked in order by the current % probability they'll expire above the indicated strike price (click to enlarge).



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