Many covered call writers and put-sellers favor a portfolio mix of blue-chip and tech companies and turn to the S&P 500 and the Nasdaq exchange for locating the best underlying securities. Since this benchmark and exchange total nearly 4000 stocks, locating an elite portfolio can be an overwhelming task. This article will present an approach that is both user-friendly and time-efficient for retail investors.
What is the Invesco QQQ Trust (NASDAQ: QQQ)?
This is an exchange-traded fund (ETF) that trades on the Nasdaq exchange. It offers broad exposure to the tech sector by tracking the Nasdaq 100 index, which consists of 100 of the largest non-financial stocks on the Nasdaq. It is also known as the triple Q. Here is a chart of the top-holdings of QQQ as of June 1, 2020:
QQQ: Top Holdings as of 6/1/2020
What are the SelectSector SPDRs?
Select Sector SPDRs are unique ETFs that divide the S&P 500 into 11 sector index funds. They have the diversity of a mutual fund, the focus of a sector fund, and the tradability of a stock. Together, the 11 Select Sector SPDRs represent the S&P 500 as a whole. However, each Select Sector SPDR can also be bought individually, providing us with exposure to a particular sector or industry group.
These securities all have options and can be used with a covered call or put-selling strategy.
The 11 Select Sector funds and their ticker symbols are:
- Consumer Discretionary (XLY)
- Consumer Staples (XLP)
- Energy (XLE)
- Financials (XLF)
- Health Care (XLV)
- Industrials (XLI)
- Materials (XLB)
- Real Estate (XLRE)
- Technology (XLK)
- Utilities (XLU)
- Communications (XLC)
By choosing the top- 3 performing SelectSector SPDRs, we will own the top-performing 27% of the S&P 500 (also known as “the market”). This gives us an immediate advantage over those who own the index as a whole.
Tech: Make sure QQQ is trading at or above the S&P 500 benchmark over the past 3-months using a comparison chart
QQQ/S&P 500 Comparison Chart as of 6/5/2020
Blue-chip: Use the SelectSector SPDR Tracker to determine the top-3 performers
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
SelectSector SPDR Tracker on 6/1/2020
XLV, XLK and XLU are the top-3 performers
Using the Ellman Calculator to ensure our initial time-value return goal range of 1% -2% is satisfied
ETF Calculations on 6/1/2020
The yellow field shows initial time-value returns and the brown field shows modest upside potential.
Discussion
A practical way of selecting blue-chip S&P 500 stocks is by locating the top-3 performing SelectSector SPDRs. Similarly, a time-efficient way of incorporating tech companies into our option-selling portfolios is by using the Qs. A initial time-value return goal range between 1 to 2 % (up to 3% when market volatility is high) is reasonable and achievable by using slightly out-of-the-money strikes.
New Educational Products Now Available at a Discount
To our BCI community,
Many of our members benefit from video products, others from books and a good percentage prefer to use both.
The BCI team is proud to announce the creation of 3 new online streaming DVD programs with downloadable workbooks. They are based on our book, Covered Call Writing Alternative Strategies, co-authored by me and Barry.
The new online streaming DVD products are:
The Collar Strategy: Covered call writing with protective puts:
https://thebluecollarinvestor.com/minimembership/video-the-collar-strategy/
Portfolio Overwriting: Covered call writing long-term buy-and-hold portfolios:
https://thebluecollarinvestor.com/minimembership/video-portfolio-overwriting/
Poor Man’s Covered Call: Covered call writing with LEAPS options, instead of stocks:
https://thebluecollarinvestor.com/minimembership/video-poor-man-covered-call-program/
SAVINGS + Early-Order Promo Code
These programs are available individually ($49 each) or as a discounted bundle package of all 3 ($125), a $22 savings:
We are also offering an early-order discount of $10 for this bundle package, good through June 10th. Use promo code: newdvd10-2
To celebrate the launching of these new products, we are also offering discounts to these related book and calculator products:
Covered Call Writing Alternative Strategies:
https://thebluecollarinvestor.com/minimembership/covered-call-writing-alernative-strategies/
Use promo code: ccwas10% for a 10% discount on this book, good through June 10th.
Covered Call Writing Alternative Strategies Calculator Package:
https://thebluecollarinvestor.com/minimembership/calculator-package/
3 calculators, one for each of the 3 strategies. Use promo code 3calculators10 for a $10 discount on this package, good through June 10th.
For the past 14 years we have been listening to your feedback and respond accordingly. The BCI team will never lose sight of the fact that it is you, our members, that put us on the financial map, and we thank you for that.
Summary of the promo codes good through June 10th:
New DVD bundle package:
newdvd10-2
- Covered Call Writing Alternative Strategies (Book):
https://thebluecollarinvestor.com/minimembership/covered-call-writing-alernative-strategies/
ccwas10%
- Covered Call Writing Alternative Strategies Calculator Package:
https://thebluecollarinvestor.com/minimembership/calculator-package/
3calculators10
It is our mission that you both enjoy and benefit from our new and existing educational products.
Your generous testimonials
Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:
Hi Alan,
My name is Gil and I’ve been watching your YouTube channel for beginner covered call options. It has been very helpful and eye-opening.
Thank you very much for all this information.
Gil
Upcoming events
1. Michigan AAII Chapter webinar
Trading in a Low Interest-Rate Environment
Creating a 3-income stream strategy
Wednesday June 24th
7 PM
Login information to be sent to registered members (club and premium members)
2. Greensboro North Carolina AAII Chapter webinar
Covered Call Writing to Generate Monthly Cash-Flow
Option Basics and Practical Application
Saturday June 20, 2020
10 AM
Login information to be sent to registered members (club and premium members)
This presentation will include the basics of trading option, an overview of covered call writing and 4 practical applications of the strategy.
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Market tone data is now located on page 1 of our premium member stock reports and page 8 of our mid-week ETF reports.
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