TMV Covered Call: Strike Selection, Premium & Risk
How to sell covered calls on Direxion Daily 20+ Year Treasury Bear 3X — optimal strikes, expected premium, and the risks that actually matter for a small-cap etf name.
Is TMV a good covered call candidate?
TMV (Direxion Daily 20+ Year Treasury Bear 3X) is one of the most heavily traded ETFs for options strategies. Tight spreads and good open interest across strikes make it ideal for premium sellers. Because TMV is a basket rather than a single name, single-stock earnings risk is diffused, which is a meaningful edge for consistent income.
Strike selection for a TMV covered call
For TMV covered calls, target strikes 12-18% out of the money at deltas around 0.10-0.20. Use 14-28 DTE so you can react to sharp IV crushes and moves. On a very high-volatility name like TMV, going closer to the money chases premium at the cost of a much higher assignment probability — the risk of being called away becomes meaningful below 12-18% OTM.
Expected premium and income on TMV
Typical monthly premium collected on TMV runs around 3.5-6.0% of capital, which annualizes to roughly 42-72% if you sell new contracts every cycle. Capital required to run a single contract wheel on TMV is under $5,000 — the share price and the 100-share lot size set the minimum, not the strategy.
Risk management for TMV covered call trades
The core risk on a covered call is opportunity cost: if the stock rips through your strike, your upside is capped. You still profit, just less than someone who held the shares outright. On a very high-volatility name like TMV, expect 5-10%+ single-day moves during stress. Size positions so one adverse gap doesn't blow up the account. ETFs diffuse single-stock risk but still carry basket-level exposure — a sector ETF will move on macro shocks even if individual holdings are fine.
TMV Covered Call FAQ
What is the best strike price for a TMV covered call?
On TMV, target 12-18% out of the money at 0.10-0.20 delta. On a very high-volatility stock like this, closer-to-the-money strikes chase premium but spike assignment probability to uncomfortable levels.
How much premium can I collect selling calls on TMV?
Typical monthly premium on TMV is 3.5-6.0% of position value, annualizing to 42-72% when you roll every cycle. Earnings months can pay 2-3x the normal rate because of elevated IV.
What expiration should I use for TMV covered call trades?
Use 14-28 DTE so you can react to sharp IV crushes and moves as a default for TMV. Shorter expirations let you react to IV resets and price gaps.
Is TMV suitable for beginners selling options?
Not ideal for beginners. Smaller-cap names can have wider spreads and sharper moves. Start with large caps or major ETFs first. Always check the bid/ask spread before entering — anything wider than 5% of the mid price is a warning sign.
Related TMV strategies
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