Market Movements

^{*Weekly Return is calculated as market open of the previous Wednesday, to market close this Tuesday (yesterday); Current Level is Tuesday’s (yesterday’s) close.}

Weekly Rollout

U.S. markets opened the week with a mixed tone. The Nasdaq rose on continued tech strength, while the S&P 500 dipped slightly as investors digested earnings and a hotter-than-expected CPI report. June’s inflation came in at 0.3%, mainly because of tariffs on imported goods, raising concerns about price pressures re-emerging just as the Fed eyes potential rate cuts. Who else is tired of tariff talk?

In commodities, copper demand is back in focus as proposed tariffs prompt U.S. producers to ramp up domestic mining. While projects gain momentum, analysts note that supply constraints won’t ease anytime soon. Meanwhile, JPMorgan’s 2025 outlook highlights long-term opportunities in private credit, housing, and AI infrastructure, suggesting investors may benefit from moving beyond short-term volatility.

“Good-To-Know’s”

This erosion works in favor of the seller, who collects the premium up front and can either buy the option back later at a lower price—or let it expire worthless.

Time decay accelerates as expiration nears. Early in a contract’s life, decay is slow, but as the contract’s final days approach, it ramps up quickly. This is one of the core principles that must be understood to fully realize the advantage that option-sellers have. Theta can be your biggest ally if you let it.

Quote(s) I Like

Thought Throttle

If you’re like me, when you began selling options, you quickly realized how limited you are by your level of assets. It’s hard to utilize instruments, like options, that represent 100 shares of the underlying stock when you have very little funds.

If you were adamant on selling a Cash-Secured Put on Tesla, you would need collateral of roughly $31,078 per options contract. Not a small sum of money.

This is one of the most common tropes in option selling. You have the drive and the idea, but you don’t have the budget.

So what can we do while our accounts are small, other than just waiting?

Use Lower-Priced Underlyings

The easiest workaround is to focus on cheaper underlyings. These are stocks that are inexpensive enough to sell options on. I wouldn’t say that there is a specific dollar amount that categorizes “cheap.” A common rule of thumb is $50, but this varies and shouldn't be treated as a hard rule—it depends on your account size and strategy.

These underlyings allow you to participate in the same strategies—cash-secured puts, covered calls, the Wheel, etc.—without needing an overwhelmingly high account balance.

You still need to be selective.

Not every cheap stock is a good candidate, but there are companies out there that offer solid fundamentals, liquidity, and a decent premium without requiring too intense of a capital commitment.

Start small. Master the mechanics. Understand the impact of IV, delta, bid/ask spreads, and assignment. Most traders want to jump to “the big names,” but skill compounds faster than capital—especially early on.

The goal isn't to chase dollar signs—it's to learn like crazy and develop a process you can scale.

Use Defined Risk Credit Spreads

Simply finding cheaper stocks is my favorite personally, because it still allows you to set up favorable option strategies like covered selling positions—establishing a trade that leaves you satisfied with assignment or the contract expiring worthless.

But if, for whatever reason, you cannot utilize cheaper stocks, you don’t have to sit out. There are ways for you to adjust the structure.

Two-leg strategies like vertical credit spreads allow you to define your max risk upfront, making them ideal for smaller accounts and tighter capital constraints.

Take a put credit spread, for example. Instead of selling a naked put, you sell one put and buy another further out-of-the-money (Example in Trade Mechanics). This caps your downside while still allowing you to collect premium. Same logic as a CSP—just tighter risk, tighter reward, and tighter capital commitment.

For more information, check out our previous article on vertical credit spreads.

Note: these strategies and structures are less forgiving than the basic covered strategies (cash-secured puts, covered calls), but they do require substantially less capital and can still be set up so that you don’t necessarily have to be right—you just can’t be wrong.

A Variation of Spreads: The Poor Man’s Covered Call

Almost a go-between from the basic coverage strategies to vertical spreads, are poor man’s covered calls (PMCCs). This strategy tweaks the standard covered call by utilizing synthetic ownership.

You can buy a deep in-the-money LEAP (Long-Term Equity Anticipation Security) instead of owning shares outright. Then, sell short-term calls against that position— very similar to a covered call. You replicate the payoff of long stock, but at a lower capital cost.

It’s not perfect. You have to manage theta decay and be more thoughtful about strike selection. But the structure works. And it lets you practice the full rhythm of the Wheel: entry, income, exit, repeat.

You may not be “owning” the stock in the traditional sense—but you’re still participating in the income and process that ownership would allow.

This variation is especially useful for stocks you like but can’t yet afford. It also reinforces the idea that creativity and structure matter more than raw account size.

For more information, check out this previous article on Poor Man’s Covered Calls.

In Conclusion…

The mistake most people make is assuming they’ll become more structured, more focused, or more consistent once they have more money.

That’s backwards.

If you can’t follow your plan with a small account, you’re not going to follow it with a bigger one. More capital doesn’t fix impatience or impulse. It arguably magnifies it.

These three ideas—cheaper stocks, defined-risk trades, and PMCCs—aren’t just workarounds. They’re tools for learning execution, managing risk, and building your process before size becomes a factor.

Learn to trade well with $1,000, and you’ll be dangerous with $10,000, or $100,000.

Trade Mechanics

Lower Priced Underlyings

Assuming we’re interested in generating income or picking up a long-term position in a well-known company at a discount, Ford would be considered as a cost-effective candidate for a cash-secured put.

As of July 15, 2025, Ford trades at $11.58. You could sell the $11 put expiring August 15, 2025, for $0.30 per share, or $30 total.

• Stock Price: $11.58

• Strike Price: $11.00

• Exp. Date: Aug. 15th, 2025

• Premium Collected: $0.30 per share ($30)

By selling this put, you’re agreeing to buy 100 shares of Ford at $11 if assigned—effectively paying $10.70 per share when factoring in the premium. This would yield us a return of 2.8% in roughly a month if unassigned, giving us an annualized return of ~38.5%.

For smaller accounts, this trade only requires $1,070 in capital, offering a lower-cost way to practice discipline and generate income—all without needing absurd collateral.

Note: As always, be mindful of assignment risk, and remember that if assigned, you’ll be a shareholder subject to all the ups and downs that come with owning stock. Make sure you fully understand what you are getting into before you trade.

Vertical Spreads

Apple’s high share price can make cash-secured puts expensive for smaller accounts. As of July 15, 2025, AAPL trades at $211.30. Selling the August 15th $200 put would earn a $2.90 premium, but requires ~$20,000 in collateral.

An alternative, assuming we believe that AAPL will remain above $200 through expiration? A defined-risk put credit spread:

• Sell-to-Open: Aug 15, 2025 $200 Put for $2.90

• Buy-to-Open: Aug 15, 2025 $190 Put for $1.20

• Net credit: $1.70 per share ($170 total)

• Max risk: $830 (difference in strikes - premium collected)

Compared to selling a traditional cash-secured put—which would require $20,000 in collateral for the $200 strike—this defined-risk put credit spread significantly lowers the capital required while still allowing participation in premium collection. It’s a more capital-efficient way to express a bullish-to-neutral view on AAPL, especially for smaller accounts that can’t absorb the full cost of a CSP on a high-priced stock.

Note: While spreads offer lower capital requirements and a higher potential return on risk, they come with key trade-offs. With a CSP, assignment gives you the opportunity to own shares at a discount.

A spread, on the other hand, is a purely directional bet with a hard cap on both gains and losses. If AAPL closes below $200 at expiration, the entire $830 is at risk. The much higher return associated with the spread should set off alarms in your head that there is a much higher associated risk as well.

These trades also require more active monitoring and may be impacted by bid-ask spreads, early assignment, margin rules, and pin risk. Understand the mechanics before deploying spreads, especially in smaller accounts.

Poor Man’s Covered Call

At $226.95 per share (as of July 15, 2025), a traditional covered call on AMZN would require $22,695 to purchase 100 shares. That’s a steep entry for many traders.

An alternative? The Poor Man’s Covered Call, a long-dated, deep-in-the-money call paired with a short-term short call:

• Buy-to-Open: June 18, 2026 $185 Call for $57.50

• Sell-to-Open: August 15, 2025 $240 Call for $4.10

• Total capital required: ~$5,750

• Net credit received: $410

If AMZN stays below $240 through expiration, the short call expires worthless, and you keep the full premium. This represents a 7.13% return on capital in just one month.

Compared to a traditional covered call requiring $22K+, this setup allows for similar upside exposure with about 75% less capital being required, making it a powerful tool for smaller accounts looking to replicate covered call income.

Note: While the Poor Man’s Covered Call (PMCC) reduces capital requirements compared to a traditional covered call, it introduces added complexity. The long call is a decaying asset, impacted by time decay (theta) and implied volatility (vega), and doesn't carry the same rights as owning shares.

You’ll need to actively manage the position—monitoring for early assignment, rolling short calls, and ensuring the LEAP retains enough value. Though it’s capital-efficient, the PMCC demands more attention and carries its own set of risks.

This is for educational purposes only—not a trade recommendation. Remember to always do your own due diligence and consult a financial advisor before making investment decisions.

Throttle Q&A

What are Some Basic Rules and Guidelines for Stock Selection?

When selecting stocks for selling options, begin by focusing on companies with strong fundamentals and healthy trading volume. Look for U.S.-listed stocks with a mid- to large-cap valuation, daily volume over 250,000 shares, and a price per share that fits your account size (typically $20–$100 is a good starting point). From there, focus on consistent earnings growth, manageable debt levels, and solid returns on capital.

But valuation and financial health aren't the only factors—also look at institutional ownership, insider activity, and whether the company is actively reinvesting for growth. Once you’ve narrowed down your list, technical analysis can help with timing your entry. We broke all this down in more depth in our full article here. It’s worth the read if you want a structured, repeatable screening process.

What Are The Different Account Types For Tax Purposes?

In reference to last week’s edition, there are three main tax buckets: taxable, tax-deferred, and tax-free.

Taxable accounts (like regular brokerage accounts) are flexible but require you to pay taxes on gains, dividends, and interest every year.

Tax-deferred accounts (like Traditional IRAs or 401(k)s) let your investments grow without annual taxes, but you’ll pay income tax when you withdraw the funds in retirement.

Tax-free accounts, such as Roth IRAs, are funded with after-tax dollars and grow completely tax-free. Withdrawals in retirement are also tax-free, if the conditions are met.

All three can play a valuable role in a well-rounded strategy. A qualified financial advisor can help you decide how to best use each based on your goals and income.

For more details on how the tax advantages can affect your outcomes, review last week’s edition.

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