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Author: scanlin Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76078  
Subject: Re: ETF or Mutual Fund Date: 9/11/2010 10:35 AM
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Another advantage of ETFs is that you can write covered calls against them to generate income. (not possible with mutual funds)

Example: On Sep 10, IWM (russell 2000 ETF) closed at 63.72. If you'd be happy letting it go for 65 on Oct 16 then you could sell an Oct 65 call for 1.46. You'd make 1.46 on the call option and 1.28 on the underlying stock. You can set the strike price (the 65) to just about any number you want (higher strikes will lower the premium you receive, but you'll have more upside potential). If the option you write expires out of the money then you can sell another one the following month.

MikeS
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