Return of an active investor with option selling

[NW-Bound]

I am an active investor who buys mostly individual stocks and sector ETFs. A big factor for doing this instead of buying MFs is that I want to enhance my equity return by selling covered calls. I don't have bonds, and keep a lot of cash, or rather very short-term Treasury. And I also like to enhance the yield on the cash by selling cash-secured puts.

The questions I constantly ask myself are: 1) what my total return is, and 2) what the option selling gets me. I always know my total return just by looking at the portfolio total value, but this does not tell me the effect of my option selling effort. I used to do tracking of investments via Quicken, and Quicken can separate the options from other equities, but my Quicken file got so bloated with so many securities and their price quotes that it crashed some time in 2024.

The following chart is generated by the brokerage where I kept 75% of my assets. The return in that brokerage coincidentally matches the S&P over the period of last 10 years, although there are large differences in each year. It should be noted that in these actively traded accounts, my stock AA is never higher than 80% or so, and it is usually around 70-75%. It has been in the 50-60% in the last 6 months.

But what is the return of the remaining 25% of my stash? This will come up next.

 

[NW-Bound]

What is the return of the remaining 25% of my stash? This 25% includes accounts at another brokerage where I don't trade much, our I-bonds, my wife's Stable Value fund at her 401k, my legacy MFs, our HSA, etc... These have returns less than that of the active accounts, and the stock AA of this 25% portion is also low.

It takes some work to get the return of this 25% of my stash, but I do have a more important number: the return of my entire investable assets.

I keep a diary logging the daily total value of my portfolio, and compute the return in each year by compensating for money inflow (my wife's SS), and money outflow, i.e. expenses. Everything is included in this total value, including our I bonds, and my wife's 401k Stable Value Fund. Of course when the latter are included, that brings down the total return because the cash yield is no match for the stock market the last few years. As expected, the cumulative return over 10 years of the entire portfolio is less than that of the above active accounts, and is 239.2% compared to the 290.7% return of the active accounts.

So, what is the answer to question 2) about the return of the option trading activity?

 

[RetiredHappy]

My question on your first post regarding your 75% stash is that if the Option/covered call returns mirror S&P500, it is alot of work to get the same returns as buying VOO over the same period.

 

[Route246]

I am using an options wheel strategy, mostly in my IRA so all options premiums paid are tax deferred. I started this when I retired last year, trading (covered calls, cash covered puts) SPY, MSFT, APPL, NVDA options.

My method can be explained if you enter this into your chatbots of choice: "explain options wheel strategy using .2 delta 3-10 days in a self-directed IRA trading SPY, APPL, NVDA, MSFT cash covered puts and covered calls while oscillating between equity and cash in a MM earning 3.5%"

You'll get a good description of the method I've settled on after quite a bit of trial and error to get started but this is my comfort level in terms of duration and delta. I did not start out with this method and dialed it in as I gained more experience. I'm a little impatient so I have the sort 3-10 days to mitigate my impatience. I am also disciplined so the .2 delta keeps me right on track being disciplined and not getting greedy.

My capital is 2.5M and in 235 days the options premiums collected is 326K which annualized amounts to about 500K or 20%. This is for only 235 days so market variance, etc. is not factored in. The actual number is slightly lower as this includes a small amount of taxable covered call premiums from my Megacorp holdings (roughly 25K of the 326K). When I started my target was 12% so my current run rate is well above that. There were some rips and tanks in there because of the global situation but the premiums compensated for those pretty well. Although my gross profit is about 20% I think factoring in the rips and tanks and taxable premiums I'm probably closer to 14%-15%.

 

[Route246]

My question on your first post regarding your 75% stash is that if the Option/covered call returns mirror S&P500, it is alot of work to get the same returns as buying VOO over the same period.

If I'm not mistaken the strategy is to write cash covered puts. This is often called "theta harvesting" which is basically collecting options premiums as the option decays. Buying VOO is just holding a long position in the 500. In my case I buy SPY if my cash covered puts get assigned and I sell SPY if my covered calls get assigned. The options premium I collect is for the daily time decay cost the options buyer is willing to pay me for the privilege of assignment if the option goes in the money on the expiration date.

 

[NW-Bound]

My question on your first post regarding your 75% stash is that if the Option/covered call returns mirror S&P500, it is alot of work to get the same returns as buying VOO over the same period.

The difference is that I am not 100% invested. I would like to think that in a severe market downturn, I still lose money, but much less than someone who is 100% VOO.

If I were greedy, I would deploy all my cash, then goose return with covered calls. I did think about it, but I am more conservative than people think of an option trader.

 

[NW-Bound]

My method can be explained if you enter this into your chatbots of choice: "explain options wheel strategy using .2 delta 3-10 days in a self-directed IRA trading SPY, APPL, NVDA, MSFT cash covered puts and covered calls while oscillating between equity and cash in a MM earning 3.5%"

I have been doing this for a few years after independently discovering it. Just a month ago, I stumbled across YouTubers doing option trading, and just learned the term "wheel strategy" from there.

 

[NW-Bound]

So, what is the answer to question 2) about the return of the option trading activity?

As described, I used Quicken to track my investing activities for many years, but in early 2024 the file had become so loaded with tens of thousands of securities and their price histories that the program hit a brickwall. When I stopped using Quicken, it already showed the cumulative premium from sold options already surpassed the $1M mark. I became active in option selling since 2018 or so. Prior to that, I only made a few $K/year as a lark.

In recent years, I have become even more active in option selling. Again, I log the total of my stash, but cannot separate out the contribution of option selling.

As Lord Kelvin said: "When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind..."

To that effect, recently I bit the bullet and sat down to download the transaction records from the broker that holds 75% of my investable assets for analysis. Unfortunately, they only keep detailed records going back 2 years, which means I only get data going back to mid-2024.

I will talk about these next.

 

[NW-Bound]

After importing the transaction records into a spreadsheet for sorting and doing some accounting, here are the statistics. Note that I only got partial data for 2024 (not shown), full data for 2025, and YTD data for 2026.

2025
Sold 8004 contracts for $991,070
Bought to cover 5421 contracts for $349,643
Net gain = $641,427

2026 YTD
Sold 2315 contracts for $817,964
Bought to cover 1407 contracts for $272,178
Net gain = $545,786 YTD

In 2026, I spent more time tracking high-priced semi stocks such as ASML, KLAC, LRCX, MU, AMAT, etc... Hence, the number of contracts bought/sold is less than in 2025, but their values are much higher.

Another slice-and-dice data analysis I am doing is to separate out the puts vs calls. In the last 12 months, I have reduced my stock AA to closer to 50%, and upped the cash-secured put selling vs the covered call selling. As stated earlier, I want to make more money both off my stock holdings as well as my cash.

To me, a balanced portfolio is 50/50 stock/cash, and 50/50 call/put selling.

By the way, I usually sell covered calls on only 1/5 to 1/3 of my stock holdings. And I only use the same fraction of my cash to write puts. Again, I am more conservative than most people think.

PS. I do write options on the 25% less active portion of the stash. However, the trades are perhaps 1/100 of the trades in the active 75% portion. I cannot do options on MFs, I bonds, Stable Value fund, etc... And the brokerage accounts in this 25% portion are not even $1M.

 

[CalBird]

Very impressive gain of option trading. I can’t believe you only mirrored sp500 return.

 

[sengsational]

That's awesome!

Given that, at least in the short term, the stock market is a zero sum game, who is the loser, and what the h-e double hockey stick are they thinking?

 

[Route246]

The difference is that I am not 100% invested. I would like to think that in a severe market downturn, I still lose money, but much less than someone who is 100% VOO.

If I were greedy, I would deploy all my cash, then goose return with covered calls. I did think about it, but I am more conservative than people think of an option trader.

I'm not so conservative and I've been 100% cash and 100% equities. I'm still selling short options and the premiums are just pointed the opposite direction. Indifference to cash earning 3.5% or equities coupled to tax deferral makes this wheel strategy very optimal for someone like me. It is also a minor part of our/my net worth but it is generating a nice return (so far, I'm not so cocky to believe it lasts forever).

I guess you can call me greedy because all of my assets (equity or cash) is always subject to 3-10 day covered calls or puts. Very safe from any loss due to being covered but not protected from "what if" losses if the stock rips or tanks, which I am willing to live with.

 

[Route246]

I have been doing this for a few years after independently discovering it. Just a month ago, I stumbled across YouTubers doing option trading, and just learned the term "wheel strategy" from there.

After importing the transaction records into a spreadsheet for sorting and doing some accounting, here are the statistics. Note that I only got partial data for 2024 (not shown), full data for 2025, and YTD data for 2026.

2025
Sold 8004 contracts for $991,070
Bought to cover 5421 contracts for $349,643
Net gain = $641,427

2026 YTD
Sold 2315 contracts for $817,964
Bought to cover 1407 contracts for $272,178
Net gain = $545,786 YTD

In 2026, I spent more time tracking high-priced semi stocks such as ASML, KLAC, LRCX, MU, AMAT, etc... Hence, the number of contracts bought/sold is less than in 2025, but their values are much higher.

Another slice-and-dice data analysis I am doing is to separate out the puts vs calls. In the last 12 months, I have reduced my stock AA to closer to 50%, and upped the cash-secured put selling vs the covered call selling. As stated earlier, I want to make more money both off my stock holdings as well as my cash.

To me, a balanced portfolio is 50/50 stock/cash, and 50/50 call/put selling.

By the way, I usually sell covered calls on only 1/5 to 1/3 of my stock holdings. And I only use the same fraction of my cash to write puts. Again, I am more conservative than most people think.

PS. I do write options on the 25% less active portion of the stash. However, the trades are perhaps 1/100 of the trades in the active 75% portion. I cannot do options on MFs, I bonds, Stable Value fund, etc... And the brokerage accounts in this 25% portion are not even $1M.

I did not see your duration or your delta. Have you tracked that? I am firmly in the 3-10 days around .2 delta and always choose Friday expirations due to liquidity and reduced spreads. I see that you are aggressively covering over half of your contracts. I don't cover, I just let them assign and take the hit but I'm in IRA so taxes don't matter. I do cover if my short term gain is a high percentage of theta. I've covered on the same day a few times when my total gain exceeded 85% as there is no use waiting duration for the remaining 15%.

If this were a taxable account I think my behavior would be totally different as I would be aggressively avoiding assignment whenever possible.

This started out as a whim because an ex-colleague told me just before I retired that I would be able to trade options in our Megacorp stock. He gave me some links and YouTube videos and it just took off from there. I never dreamed that I would be able to net mid-6-figures the first year of doing this. I understand the risk and this is not for everyone.

 

[Route246]

That's awesome!

Given that, at least in the short term, the stock market is a zero sum game, who is the loser, and what the h-e double hockey stick are they thinking?

IMO there is no loser. The person executing a wheel strategy is essentially an insurance company taking on the theta (time decay) risk and charging a market price for taking that risk. Since people have different levels of risk tolerance, tax liability and asset type (cash or equity) the system works well in real time.

Also, IMO this is not for casual participants. At a minimum you need a basic understanding of how markets work, how different brokerages offer options trading services and you need to keep detailed records in order to assess your performance.

 

[NW-Bound]

Very impressive gain of option trading. I can’t believe you only mirrored sp500 return.

The fact that the return of the 75% accounts happens to match the S&P after 9.5 years is merely coincidental. I was surprised when I saw it.

My original intention was to see how I could do against the typical 60/40 portfolio, or the popular balanced fund such as FBALX, or VWENX. They have the same stock AA as I do.

Another thing is that I own a selected subset of the S&P500. No Magnificient 7 for me, other than a bit of Google recently, and whatever NVDA is in the ETFs SMH and XSD. I even shorted Tesla (causing a 5-figure loss ), and never had FB, AMZN, etc... It's tough to keep up with the S&P while not owning these stocks.

And the year-to-year return varies from the S&P quite a bit. The end point is the same, but a look at the yearly performance will be shocking. Anything but a mirror.

Another reason for me to do after-the-fact analysis to understand, in order to see if I can learn anything.

More later....

 

[NW-Bound]

I did not see your duration or your delta. Have you tracked that? I am firmly in the 3-10 days around .2 delta and always choose Friday expirations due to liquidity and reduced spreads. I see that you are aggressively covering over half of your contracts. I don't cover, I just let them assign and take the hit but I'm in IRA so taxes don't matter. I do cover if my short term gain is a high percentage of theta. I've covered on the same day a few times when my total gain exceeded 85% as there is no use waiting duration for the remaining 15%.

If this were a taxable account I think my behavior would be totally different as I would be aggressively avoiding assignment whenever possible.

This started out as a whim because an ex-colleague told me just before I retired that I would be able to trade options in our Megacorp stock. He gave me some links and YouTube videos and it just took off from there. I never dreamed that I would be able to net mid-6-figures the first year of doing this. I understand the risk and this is not for everyone.

I do weekly options. Delta varies from 0.2 to 0.3, depending on market/sector conditions, and on whether I want the options to get assigned. Most of my stocks only have Friday expiry. A few only have traditional monthly options.

I buy to cover when I want to sell another option for the following week, without waiting for the option to expire worthless.

All of the option trading is in IRA and Roth accounts, particularly Roth as it is even more tax advantageous. As the result, return of Roth > return of IRA > return of taxable.

More on this later...

 

[Route246]

I do weekly options. Delta varies from 0.2 to 0.3, depending on market/sector conditions, and on whether I want the options to get assigned. Most of my stocks only have Friday expiry. A few only have traditional monthly options.

I buy to cover when I want to sell another option for the following week, without waiting for the option to expire worthless.

All of the option trading is in IRA and Roth accounts, particularly Roth as it is even more tax advantageous. As the result, return of Roth > return of IRA > return of taxable.

More on this later...

I think we have converged on a similar method (wheel strategy). Your avoidance of Mag7 is probably the only difference. I chose SPY for stability and Mag7 for volatility.

 

[NW-Bound]

As mentioned, I only started doing high volume option selling in 2020 at the start of Covid. Then, in 2022, when it occurred to me that these short-term cap gains would be nicer if they happened inside Roth accounts rather than in tax-deferred accounts, I said "to h3ll with taxes", and did Roth conversion each year to the top of the 22% bracket, and then into the 24% bracket. The idea is to have more money in Roth. I will be in the 24% bracket in a few short years when RMD hits anyway.

Then, I traded more heavily in Roth. Still never 100% in stock there, and always have around 30% cash to be safe. However, when I wanted to trade some hot stocks and their options, I did it in Roth first. And to be safe and not overweigh any individual stock or sector, I refrain from doing too much of the same in the IRAs. And the ideas worked out, and my Roth overgrew the IRAs. But compared to these, my taxable accounts look dead.

And even in the Roth, I still have some ho-hum stocks besides the cash. XLU, XLP, XLB, XLF, and more individual stocks I am not going to bore you with.

Still, here's the return on a Roth account that was opened in Dec 2022. One might ask, why not trade the same in other accounts? Well, did I say that I am conservative?

By the way, the sum of this Roth account and two other older Roth accounts breaks the $2M mark today. I still have a lot of IRA to convert, unless the market crashes hard then we will be talking about other things.


And note the terrible performance from Jul 2024 to Jul 2025. A story to be told there. And the breakout since mid 2025... This account is at 50% cash now.

 

[CalBird]

Overall your option trading gained quite a bit edge over sp500. Maybe you can convince Mr ERN that wheel strategy does work.

Why the Wheel Strategy Doesn't Work - Options Series Part 12 - Early Retirement Now

The Wheel Strategy is often sold as a surefire downside risk management tool when selling cash-secured put options. Here are several flaws in this approach.

earlyretirementnow.com

 

[Route246]

You are much more diversified than I am. My average sell is 10 contracts so for SPY that is a big chunk to have in play but SPY is relatively stable except for a few months ago when it ripped in April and I ended up in cash but it came back down to 725 on June 10 so it has been "stable" since the April run up. I'm OK with missing that because the cash is sitting and earning at 3.5%.

I have found this is like having a part time job once I retired. I probably average about 10 hours per week, much of that is recording trades in my tracking sheet. Since my trades are formulaic and unencumbered from emotion, sentiment and guesswork it is almost like programmed trading.

My observation so far since October is that wheel trading is a really good way to enhance yields, controlling income and living with the risk or rips and tanks. Since I'm indifferent to owning equities or MM at 3.5% I seem like a perfect candidate for this. I'm still a beginner but the ride has been enjoyable so far, not only due to the cash being generated but in the learning process of how the Greeks work and how to use them to your advantage once you gain trust in what they represent.

 

[pb4uski]

I'm a little confused on what you are trying to measure. You must have some tracking of your gains on options, right? Then I guess that you would need to combine that with the income or gain from the underlying to get the return on the trade as a whole and compare it to some benchmark?

Have you discussed this with your broker? I know ar Schwab my broker has access to certain reports that are not available to me online. I occasionally ask him to run a report for me and it shows up on my secured messages inbox.

 

[Route246]

Overall your option trading gained quite a bit edge over sp500. Maybe you can convince Mr ERN that wheel strategy does work.

Why the Wheel Strategy Doesn't Work - Options Series Part 12 - Early Retirement Now

The Wheel Strategy is often sold as a surefire downside risk management tool when selling cash-secured put options. Here are several flaws in this approach.

earlyretirementnow.com

Interesting, I read it and I can't get over the fact that he is always looking back, particularly with losses and how to eventually recover from losses. For me, that would be the ultimate fool's errand and I try not to be a fool. I try to never have buyer's or seller's remorse, I commit to my trades once I click the button and I never look back whether it was a win or a loss. It is done and there is nothing I can do about it. I feel my trades are made with the best intentions and best information at any instance in time. Once that instance in time passes I focus on the next decision, and so on. If I spent any time regretting a loss or trying to figure out how to get it back I would go crazy and I feel my judgement would be severely compromised. This is not to say that I don't go back and critique my strategy with a post-mortem that can explain exactly what happened and if there was anything that I should have done differently. He sounds too much like shoulda/coulda/woulda traders I know.

Heck, come up with a strategy and tactics to execute that strategy and then have at it, for better or worse.

 

[Fishmasterdan]

NW. Are counting the interest your earning on the cash reserved for the csp?

 

[NW-Bound]

That's awesome!

Given that, at least in the short term, the stock market is a zero sum game, who is the loser, and what the h-e double hockey stick are they thinking?

Option market is a zero-sum game. One can look up various articles on the Web.

The stock market is not, short or long term.

 

[NW-Bound]

I'm a little confused on what you are trying to measure. You must have some tracking of your gains on options, right? Then I guess that you would need to combine that with the income or gain from the underlying to get the return on the trade as a whole and compare it to some benchmark?

Have you discussed this with your broker? I know ar Schwab my broker has access to certain reports that are not available to me online. I occasionally ask him to run a report for me and it shows up on my secured messages inbox.

If you are directing this at me, I will answer this.

I know the total portfolio return. It's simply the delta between the current value and whatever past values you choose, whether Jan 1 this year or 10 years ago. Of course one has to compensate for deposits and withdrawals from the portfolio.

Now, how much of the return comes from stock appreciation, and how much from dividends, how do you know? Brokerage statements usually break out the dividends for you.

My brokerages do not break out gain/loss from option trading vs stock gains. Hence, I have to download the trade records, sort out the two categories of securities, and add up the option gains myself.

I hope this is clear.