New website feature: OTM Call ROI

I’m an options seller (obviously), and my goal is to sell the best puts every week. What does “best” mean? It means the puts that pay the highest premiums for the least risk (maximizing ROI) while also minimizing risk of assignment. 

Since I’m a long-term investor at heart, I don’t mind being assigned. I don’t mind holding shares of stock for weeks, months, or even years if necessary. It’s all part of the game. But ideally, the stocks I own should also be paying me nice weekly premiums via covered calls. 

What makes a covered call premium increase or decrease? Really it’s about optimism, or expected future gains. If the market thinks that a stock is going to go up in the next week, call premiums are generally going to be higher than if the market is pessimistic about a stock. 

If we sell puts on stocks, it would make sense to try to pick stocks where there is still a lot of optimism. That way, if we’re assigned, we can still sell covered calls and get paid good premiums. 

A reasonable gauge of a stock’s optimism is the call ROI at the 10% out of the money (OTM) strike. For example, if a stock is currently at $20, then I’d be looking at the call ROI at the $22 strike, since this is 10% above the stock’s last price. 

I realized that I can easily bring this into my Weekly Options List website, so that’s exactly what I’ve done. You can see it in the below screenshot as a new column that you can filter, just like all the other columns.

This week, I used the following filters to pick my stocks: min ROI = 1.5%, min OTM = 4%, and min Call ROI = 1%. This means that I’m selecting puts that are paying at least 1.5% in premium, are at least 4% below the last stock price, and have call premiums at the 10% OTM strike that are paying at least 1%.

In summary: this new filter should help in the event we’re assigned, which is ideal for people like me running the “Wheel” options strategy every week.  

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