Here we go, month 4 of trying to beat the S&P 500 with cash secured puts and covered calls. If this happens to be the first post you’ve seen on this here’s what’s going on: I started a personal challenge to see if I could beat the results of investing in the S&P 500 using Vanguard’s S&P 500 ETF, ticker VOO, by selling cash secured puts and covered calls. For some it’s called a wheel strategy. You can read how I set everything up in my post: Cash Secured Puts and Covered Calls Sales, Can it Beat the S&P 500 and then see the each month’s results at the following links:
Cash Secured Puts vs S&P 500 Challenge. Month 1, June 2023.
Cash Secured Puts vs S&P 500 Challenge. Month 2, July 2023
Cash Secured Puts vs S&P 500 Challenge, Month 3, August 2023
Also, before we get started, I should give a disclaimer, you know the one you always hear when people are talking about investments. I need to let you know I’m not a financial advisor and these posts are not meant as investment advice. You’d be a month behind schedule anyway and it wouldn’t help to copy the trades. Especially since they’ve mostly all expired. These are for educational and entertainment purposes only. By the way if you are one of the ones who considers this entertaining you’re kind of a money nerd, like me. Sorry!
Here’s a really quick recap of how this personal challenge got going. I kicked off the challenge back at the beginning of June with a $6,000 deposit into a Roth IRA account and I’m selling cash secured puts or covered calls to collect the premiums and measure that against the performance of what I could have purchased in shares of the VOO. I’ll post all of the trades of the trades I made each week along with an image of the account value at the end of the month. Each month I’ll compare it to the performance of the shares in VOO and keep track of the cumulative value of both accounts. So here we go again.
To start the month I am beginning from an account value $6,132.29. It’s up from the beginning, but way down from the high point.
Week 1, Sept 1 – 9
There was only 1 trading day during this week but it was a Friday so I did have some activity. No selling of call or puts, but some options from the last month were expiring. If you remember last month, I ended up with Beyond meat and Marathon Digital Holdings, but I also had sold a put on Affirm Holdings at 17. It expired on the first worthless. Monday the 4th was Labor Day so the markets were closed. I didn’t get to sell any other puts until Tuesday. I decided to sell a put on Rivian (RIVN) at 23 for the week and collected a premium of $36.34. Both BYND and MARA had declined so quickly there wasn’t a premium at the strike price closest to my cost per share that it made sense to sell the calls, so the total premium collected for the week was only $36.34, a small 0.59% for the week and the RIVN put expired worthless so I had those same funds to work with at the beginning of the next week.
Week 2, Sept 10 – 16
Since the RIVN put worked out last week I decided to sell another one this week. On September 11, I sold the weekly RIVN put with a strike price at 23 again and collected a premium total of $42.34 after fees. This week both BYND and MARA were still down, but wanting to do something I decided to sell a call on BYND. I sold the 9/15 call at $12.00 for a premium of $0.04 netting me a whopping $3.34 after fees. Marathon Digital wasn’t worth it so no activity there. Marathon had closed at 10.07 that day, well below my cost of $18 per share. Both the RIVN put and the BYND call expired without assignment. The grand total collected this week was $45.68 which isn’t much but it’s something.
Thinking it through from a strategy standpoint, I should have closed any positions that were expiring worthless on the Friday before and sold new ones for this week that day. By waiting until Tuesday because of the Monday holiday, I lost a couple of days that could have made a small difference in the total amount of premium I collected. I’ll have to remember that for the next holiday.
Week 3, Sept 17 – 23
I decided to make a change this week and didn’t sell another RIVN put, rather I switched to Pinterest, (PINS). I started the week selling a put with the strike price at 24.50 and collected a premium of $0.49 which netted out to $48.34 after the fee. At this point I was getting a little impatient waiting for MARA and BYND to gain some ground back towards my put cost so I went ahead and sold some calls, which were well below the original cost per share. I sold the MARA with the strike price of $11 and collected a premium of $0.14, collecting a total of $13.34 BYND continued to decline and I sold another call at $11 this time and still only collected a premium of $0.05. I did sell calls on all 200 shares though, so 2 contracts and the net amount collected was $8.68.
By the end of the week the total premium collected was $70.36 which would be 1.15% of the balance at the beginning of the month, but things haven’t been going that great with the underlying stocks. I’ll just keep going for now to see how it all plays out. All options expired worthless this week so there were no purchases or sales of stocks.
Week 4, Sept 24 – 30
The last week of the month and I’m hoping for a turn around, but not yet. I went back to using RIVN for my put this week because the premium was better for the price than Pinterest was. During this time Rivian stock had declined too, so instead of selling a $24 put, I sold a $20.50 put and collected a premium of $0.48 or $47.34 after the commission. I also sold another couple of BYND calls. This time I had go down even lower with the strike price since Beyond Meat stock had declined so far. I sold a couple calls at $10.50 and only collected $0.04 or $6.68 total. It’s not much, but better than nothing. My thought was that it was so far out of the money I didn’t believe the stock could increase that much in a week, so It was most likely to expire worthless, and as before, it did.
I didn’t sell any calls on the Marathon Digital stock this week as it just didn’t seem worth it without bringing the strike price down so far it would increase the likelihood of getting called and having to sell the stock at a loss. Taking that into account, the total I collected in premiums this week was $54.02 which only equates to about 0.88% of the month’s starting value.
S&P 500 (VOO) Summary Activity and Results
Another month down and it’s time to see how we fared against the S&P 500. This month VOO ended $392.70 which is down from the August close when it closed at $413.83.
If nothing else, at least the S&P 500 isn’t growing as my Roth account is shrinking. I also have to note that in September there was a dividend paid of $1.493 per share so following the reinvestment rule I set a the beginning I purchased 0.059 shares so now I have a total of 15.738 shares I’m tracking against. At month end the S&P 500 ETF fund had a total of $6,180.22, a decline of 4.75% for the month, but still above the starting value of $6,000, so the total cumulative return since inception (June 1, 2023) is 3.00%.
Month End Results on Live Account
It’s now been 4 months and seems like I’ve been doing this a while, but really this whole challenge is just getting started. It’s a good thing too. This month even with the premiums that account ended down, but let’s look at the trades first. I placed 8 trades which ended up being 4 puts and 4 calls. I started the month with the same thought as last month, only sell calls on the stocks I had been assigned at prices close to or above the original cost per share. During the month though that started to change. I sold some at strikes less than the cost but still pretty far above the current price. It didn’t make a whole lot of difference in the total, but at least I felt like I was doing something. I didn’t get assigned any new stocks so I ended the month owning Beyond Meat and Marathon Digital. I’ll continue to hold those until I get called out of the stocks from selling covered calls.
The total premium collected of $206.40 wasn’t bad, but nothing to get excited about either. It was higher than last month and the yield on the month’s beginning value of $6,132.29 would be at 3.37%. That doesn’t sound bad for a monthly return, but when you factor in the values of the stocks that are still held in the account it’s not that great. Over all the account declined to $5,496.47 or a 10.42% decline in total. Pretty discouraging, right?
Final Comparison
The VOO S&P 500 ETF account ended at $6,180.22 which is down 4.75% for the month and a cumulative change of 3.00% since the beginning of the challenge on June 1, 2023. It doesn’t sound like that great of a return for a 4 month period, less than 1% per month, but it’s beating my results even with the recent decline.
On the other hand, my cash secured puts and covered call options strategy was doing good for the first 2 months and then really tanked during the next couple of months. Going from $7,459 at the end of July to $6,132 and then down to $5,496 was a huge drop of 26.31%. This leaves me with a negative return so far of -8.39% from the start through September.
Ending Thoughts
This is where the challenge is getting difficult and makes me want to do something different, but what would that prove. I’ll continue along with the same strategy and refine it as I go. I probably need to look at the stocks I’m using closer, and take some actions to reduce the risks. Right now it’s looking like there’s not much upside since stocks will tend to get called out if there is a quick price increase, but the downside is from the strike price to zero, and I’ve picked a few that have been really volatile. Time will tell.
