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Strategy Overview
This article explores an investment strategy using a covered call and a naked put. Variations may involve a simple covered call or a covered call with a put credit spread.

Variations to the Strategy Include:

• Covered call with a put credit spread (illustrated in the “Additional Detail” section)
• Covered call only (same as covered call with naked put except without the naked put)
• Long stock only

Profit Diagrams for the Various Strategies

Strategy Cycle

The various option strategies covered leverages monthly and weekly options sold in 4–5-week cycles.  Weekly options enables a continuous (more diversified) expiration cycle.

Market Overview

Before executing strategy trades, consider the market environment. By back-testing 31 years of S&P 500 data, a model classifies the market as green, yellow, or red. Historically, the market is green 86% of the time, indicating favorable performance and acceptable volatility, allowing 75% of strategy capital deployment. Yellow weeks show increased volatility but still favorable performance, leading to 50% capital deployment. Red periods indicate unfavorable performance and extreme volatility, suggesting minimal or selective capital deployment. Yellow and red each account for about 8% of the weeks.

Watch List

Entry: Monday, April 21. Expiration: Friday, May 16. Only stocks with monthly options were considered for this cycle.

Additional Detail On Watch List Favorites

Past Performance

Performance on closed trades through April 18, 2025, since inception in February 2024

More Information

For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com

Darren Carlat

SpreadEdge Capital, LLC

(214) 636-3133

Darren@SpreadEdgeCapital.com

Disclaimer

This information is for informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results, and all investments carry inherent risk. Consult with a financial advisor before making any investment decisions.