Surprising safe haven delivers 51% annualized ROR

July 20, 2023

Exchange-traded funds (ETFs) may be solid choices for investors looking to diversify, but no one is accusing them of being exciting. And they certainly aren’t the first thing you think of when selling options for income either.

Yet, ETFs do have a few advantages for option sellers. One advantage that is of particular significance right now is that they do not report earnings. With earnings season in full swing, option sellers can find their trading universe shrinks if they are looking to avoid taking on undue risk.

While many ETFs don’t offer enough premium for an options-selling strategy, one that does is the SPDR S&P Biotech ETF (XBI). The modified equal-weighted fund has 141 holdings and $6.5 billion in net assets.

In the past, biotech has often been thought of as a volatile, and perhaps even risky, sector. But over the past year and a half, it has become a safe haven for institutional money and retail traders alike.

In Income Masters, we’ve booked four winning trades in a row on XBI since mid-April, closing out our most recent trade earlier this week, and generating a total of $185 in cash with just one contract sold.

What we like about XBI is that it’s been on a gentle upward slope while providing enough premium for us to average a 0.6% return per trade. And with an average holding time of just over four days, our average annualized return per trade is an impressive 51%.

We will continue to look for option-selling opportunities in this biotech ETF. In fact, one day after we closed our latest winner on XBI, we recommended a new trade to Income Masters members.

This time, we brought in $83 per contract by selling a put with an Aug. 4 expiration. We’ll be looking to exit that position once the put premium falls to our target exit price of $0.40 for a 0.5% return.

As you look to generate income by selling options this earnings season, you may want to consider an ETF like XBI. While ETFs might be boring, cash is cash.

Trade smart,

Emily Norris
Managing Editor
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