Exchange traded funds, like stocks, are listed on an exchange and are accessed through a regular brokerage account. After years of growth, the deep liquidity in ETFs has allowed investors to execute stock options strategies, like covered calls.
ETF Trends’ Tom Lydon recently sat down with Dennis Clark, Managing Director for Shelton Capital Management, to discuss the growing usage of options strategies with ETF investments.
“It’s an approach that you couldn’t even talk about five years ago,” Clark said. “We’re writing covered calls on our ETF positions.”
Covered calls, or buy-writes, are some of the most conservative options available to investors. The strategy utilizes call options on a position to generate high income from option premiums.
An investor would write, or sell, a call option above the current price of a security. If the price of the security is below the option upon the expiry date, the investor would pocket the difference.
The covered call strategy is a good way to generate cash in a muted market environment.
Watch the video below to see the full interview with Dennis Clark.
To view past video interviews, visit our video section.