12 ETFs' Get Buy Momentum Ratings; 10 Show Bullish Price Objectives On Charts
For Traders who don't want to trade covered calls or puts on stocks during earnings season, DIA and XLE may be good alternative options trades for options premium income
By Donald E. L. Johnson
Cautious Speculator
Selling covered calls and puts on ETFs instead of stocks during earnings season is good risk management.
There are plenty of ETFs with active and liquid options to trade.
While DIA is looking bullish on the charts, SPY, IWM and QQQ are looking bearish. That divergence is bearish in the eyes of most stock market technicians.
Three of my four trades today filled.
Earnings report season is ramping up. Investors who do a lot of options trading for options premiums and dividend income tend to avoid having open positions on stocks the days that the underlying companies report earnings and offer new guidance. Nasty surprises can be expensive.
One way to still be in the covered calls and cash secured puts business during earnings seasons is to sell puts on exchange traded funds with actively traded puts and calls.
It also helps if those ETFs have bullish momentum and bullish point and figure price objectives.
The hottest 12 ETFs in terms of bullish momentum are XES, XLE, XME, ITB, XLF, DIA, XSD, MDY, RSP, IHI and maybe XLV and XLU. XLE is very actively traded and pays a good dividend. DIA is actively traded but it’s not as deep as I’d like. It is hard to get good premiums on DIA on strikes 10% to 15% out of the money.
That SPY and QQQ still are bearish makes me question how strong DIA and the markets really are. VTV is a Vanguard ETF and doesn’t have active nor liquid options.
The 10 ETFs with bullish price objectives are: DIA, IHI, ITB, RSP, XBI, XES, XLE, XLF, XLV and XME.
My Trades
Today’s trades are highlighted in yellow. My NEM trade is unfilled and may not get done today. I may change the trade to get a better premium.
I have cash secured XLE puts options that expire Jan. 13 and Jan. 20. Specifically, I sold XLE 1.13.23 (17 days) $81 strike puts (delta -.14, 84.6% OTM probability) for about an 11% annualized return on risk (AROR). And I sold XLE 1.2023 (14 days) $83 strike (delta -.18, 80.8% OTM probability) puts for about a 15.8% AROR. If I add ETF positions, I’ll report them in the Comments section of this post.
LINKs:
Home Page. See previous articles on other trades, stocks and watch lists. If you read several of these articles, you’ll learn how my strategy is meant to work. No guarantees. Links to useful web sites are on the lower right corner of the home page. Scroll down.
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I sold NEM 1.27.23 (18 days) $47 strike puts (delta -.10, OTM probability 88.4%, IV 37.11% for $0.22/share. RoR 0.42%; ARoR 8.514%. Earnings report is 2.23.22. Ex dividend 3.7.23; yield on $46.78 net debit would be 4.681% if the puts are assigned, which appears unlikely at the moment. I sold NEM last week when it was called. The market is closing weak so I won't do any more trades today.