Investors using the buy-write or covered call strategy can generate consistent income even when underlying securities decline in value. For instance, purchasing 100 shares of the Direxion Daily Small Cap Bull 3X ETF (TNA) at $52.25 and selling a March 6th 52.5-strike call option at 2.3 points allows for a cost basis of $4,995 after crediting the $230 option premium. This approach offers a 239% cash-on-cash return potential if options are rolled weekly, highlighting its effectiveness in various market conditions.
This strategy allows profits regardless of market movement—projected returns are 4.6% if TNA remains stable, 5.1% with a slight price increase, and 1.5% even if it decreases by 3%. Given the volatility of current markets, selling option premiums provides a lucrative income opportunity.
