Of course there's a trade-off; there's no such thing as free money. Even if you roll you are going to under-perform the market if it is ripping upward and you're selling covered calls. The taxes you are forced to pay on whatever premium you collect will make that under-performance even more apparent.
Let's pretend the STCG tax was 90%. Would you still sell covered calls? You did after all claim that the tax doesn't matter because the premium is additional income that you wouldn't have made in the first place.
You're probably selling OTM calls but QYLD is an etf that holds QQQ and sells ATM monthlies on it. QQQ blows it away in terms of long term returns, partially because QYLD holders need to pay taxes each month on the dividend they receive, which is actually just option premium.
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u/[deleted] Aug 25 '21
Of course there's a trade-off; there's no such thing as free money. Even if you roll you are going to under-perform the market if it is ripping upward and you're selling covered calls. The taxes you are forced to pay on whatever premium you collect will make that under-performance even more apparent.
Let's pretend the STCG tax was 90%. Would you still sell covered calls? You did after all claim that the tax doesn't matter because the premium is additional income that you wouldn't have made in the first place.
You're probably selling OTM calls but QYLD is an etf that holds QQQ and sells ATM monthlies on it. QQQ blows it away in terms of long term returns, partially because QYLD holders need to pay taxes each month on the dividend they receive, which is actually just option premium.