Is there any reason I shouldn't be holding VOO instead of cash and selling CSP's on margin? Assuming I'd rather buy the puts back at a loss than ever get assigned, I wouldn't ever have to liquidate too much if I'm trading large cap stocks, right?
Posted by rs2238
4 Comments
Its about your risk management. VOO had a drop of 20 percent this year. Imagine when your sold puts suddenly go deeply red and VOO crashes too. It wouldn’t wipe you out, but it would really hurt.
I do that. My account holds positions in a very, very, very stable company, VT and a cash ETF.
I sell puts using my margin as collateral, but I always follow these rules:
– Don’t overleverage
– Diversify across sectors
– Sell puts on boring stocks I’d like to own
Boring stocks bring in less premiums, but since my capital isn’t tied up while I have positions opened, I don’t mind much. I see it as a bonus on top of my buy & hold.
I use SCHD for this given its stability.
I mean, I assume you understand the risks if the underlying tanks and you get assigned a buttload of an underlying on margin. But aside from getting gigafucked in that scenario, nope. I do it myself all the time on XSP. The advantage there being that it’s cash settled, so when you get gigafucked you just pay a bill instead of holding a sinking stone on margin