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

Wall Street was in a good mood today. U.S. indexes lit up the scoreboard with new record highs. The S&P 500 and Nasdaq surged about +1.1% to +1.4%, and the Dow followed suit, propelled by cooler-than-worrisome inflation that’s instantly elevated September Fed cut expectations. The drama on trade got a breather too—the U.S. and China hit the pause button on tariff escalation. The Fed Chair search also made headlines, with Treasury Secretary Scott Bessent reportedly expanding the shortlist to include Vice Chairs Michelle Bowman and Philip Jefferson, as well as Dallas Fed President Lorie Logan.

Meanwhile, markets are pretty sure (94% sure) that the Fed is trimming rates next month. Combine that with delayed tariff chaos, and you’ve got a heady mix of monetary relief and trade calm fueling today's rally. The gains in the equity markets were led by technology and consumer sectors, while safe-haven areas like utilities and healthcare saw lighter demand. Investors appear to be positioning for a more supportive policy environment heading into the fall. Nice.

“Good-To-Know’s”

The bid–ask spread is a real cost to any options trade, and it becomes even more important with multi-leg strategies like covered strangles and Jade Lizards. Every leg you add means paying the spread multiple times, so wide spreads can eat directly into your returns. We want the spread to be as narrow as possible before entering a position.

AAPL

The bid–ask spread on AAPL’s ATM Call (230 strike) is ~0.66% ([7.55-7.50]/7.55). This is a very narrow spread, and is what we like to see before entering a position. Now compare this to Perpetua Resources’ ATM Call.

PPTA

PPTA’s bid–ask spread for the ATM Call (17.5 Strike) is ~12.5% ([1.60-1.40]/1.60). This is a higher and less appealing spread compared to Apple. It can largely be attributed to Apple’s greater trade volumes and overall prominence over Perpetua Resources. The spread needs to be considered before entering a trade, as it can certainly change the outcome.

Quote(s) I Like

Thought Throttle

One of the core beliefs here at Theta Throttle is that substantial income can be made over time with consistency in selling options strategically. Usually, that means sticking to tried and true setups/structures, like cash-secured puts or covered calls.

Something nice and simple.

But every now and then, a position lines up just right, and it makes sense to collect premium on the other side of the options chain too. The key is doing it carefully, keeping your positions covered.

What Can We Do?

The most obvious (and riskiest) move is selling the other side naked. Let’s say you sold a cash-secured put on XYZ with a $40 strike while the stock trades at $50. Adding income on the other side could mean selling a call at $60. But because you don’t own the shares, that’s a naked call—huge risk for a relatively small reward.

If XYZ goes absolutely ballistic and hits $100 per share, you would lose ~$4000 ([$100-$60] × 100 shares). That’s only up to $100. What if XYZ goes to $250? $500? $1,000? This is the danger of naked calls. They open you up to unlimited loss. Not ideal.

Yes, this doesn’t consider the premiums, but when the loss is unlimited, it doesn’t really matter.

We’ve all heard the horror stories from traders who sold naked calls and paid the price. “Unlimited losses” isn’t just a scary phrase, it’s a reality—and one that can burn traders and investors who do not fully comprehend the associated dangers.

That’s why, 99 times out of 100, it’s better to use a covered option-selling strategy, especially when selling calls.

Two Safer Plays

The structure we’re aiming for is selling an option on each side of the stock, but with both legs covered. Two of my favorite ways to do that are (1) the Covered Strangle and (2) the Jade Lizard (and Reverse Jade Lizard).

The Covered Strangle

A covered strangle pairs a cash-secured put with a covered call, letting you collect premium on both sides while staying hedged. From our example, if you sell a $40 put on XYZ when the stock trades at $50, you might add income by selling a $60 call, but in this case, you would also purchase 100 shares of the underlying.

This covers the short call, and avoids the unlimited upside loss through ownership of the shares. So, if XYZ rallies past $60, you simply sell the shares at the strike. It boosts premium but requires more capital, making it best for range-bound markets where you’re fine buying low and selling high. It allows you the benefits of indifference.

Check out this previous article where we dive into Covered Strangles:

This works best if you expect the stock to stay neutral in the near term. The trade-off: while you get more premium, it doesn’t always increase your percentage return, since your invested capital also goes up. In other words, more dollars in, but not necessarily in the most efficient manner.

The Jade Lizard

A Jade Lizard starts with selling a put for income as usual, but on the other side, you sell a call and buy another call further out of the money, creating a bear call spread. That long call caps your risk while also keeping capital requirements lower. A Reverse Jade Lizard is the same, but it involves a bull put spread and a covered call.

Check out this previous article that thoroughly breaks down Jade Lizards (and Reverse Jade Lizards):

The trade-off here is that if the stock blows past both call strikes, you’ll lose on the spread. Unlike the covered strangle, you’re not “indifferent” to a big upside move—the spread will simply lose money.

Why I Stick to These Two

There are plenty of other ways to collect premium on both sides, but these two remain my go-to choices. They’re simple, flexible, and fit nicely into a steady, strategic approach to option selling.

Compare These 2 Covered Structures

Let’s take a look at some real numbers.

Trade Mechanics

Today, we’re putting three different premium-selling plays on the same stage: Microsoft (MSFT). The contenders? A straightforward cash-secured put, a covered strangle, and a Jade Lizard. Same stock, same expiration, but each one approaches the trade with its own style and temperament.

Let’s break it down…

Interpreting the Trades

The CSP is the clean, no-surprises option. One leg, defined risk, and a cost basis of $504.80 if assigned. It works for those simply looking to get into MSFT at a discount or earn a modest premium while they wait.

The Covered Strangle doubles the premium by adding an OTM call, but the trade-off is a significant capital commitment (100 shares purchased) and the potential to have shares called away above $550. It’s ideal for traders already holding MSFT or willing to own it at current levels and sell covered calls against it.

The Jade Lizard uses a bear call spread instead of a naked call, keeping risk capped on the upside and reducing capital requirements compared to the strangle. You’ll take in more income than the CSP, but less than the full strangle. It is usually the best % return of the three.

Which One Fits?

• The CSP is best if your main goal is stock acquisition at a discount with minimal complexity.

• Covered Strangles are best if you already own shares and want to juice returns in a neutral market, along with maintaining indifference.

• The Jade Lizard is best if you want capital efficiency and defined risk on the call side, while still collecting more premium than a straight CSP.

Important to Note…

All returns assume smooth expiration, no early assignment, and no slippage. Option strategies involve risk, including the potential loss of the entire investment. Know your position, risks, and capital requirements before entering a trade.

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

Why do low bid–ask spreads matter more for multi-leg strategies?

Bid–ask spreads are the cost to enter/exit an option trade (look back at “good-to-know”). They are the immediate “fee” that you pay to the market maker. In multi-leg strategies and structures, you pay the spread on each leg of the option, making it even more critical to utilize underlying with tight bid-ask spreads. Even if your thesis is sound when trading on illiquid stocks, the wider spreads are certain to erode away your profit potential.

Does a lower percentage return mean a worse trade?

The percentage return of a trade must be viewed in the context of risk and the amount of capital that is being deployed. So it depends. A lower return percentage could still be a better trade if the risk is minimal and fits the trader’s goal. Higher returns often come with more volatility exposure and capital efficiency tweaks. Talk to a financial professional if you are curious about your specific situation.

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