3 ETFs Every Options Trader Must Know ETFs, or exchange traded funds, are securities that track a specific asset. These assets can include an index, sector, commodity, and more. ETFs are traded like regular stocks. They are traded on an exchange, and the price of an ETF goes up and down throughout the day as it is bought and sold. When compared to mutual funds, ETFs are considered more cost effective and liquid. While options traders can sell options on ETFs, more premium is usually available by selling options on individual stocks.If you are considering trading options on ETFs, you should know the most popular ETFs currently on the market:
SPY: The SPDR S&P 500, or SPY, is the longest running ETF. It tracks the S&P 500 Index, including large- and midcap stocks that have been selected by the S&P Committee. It typically ranks among the highest trading volume and is very popular in the US. QQQ: The Invesco QQQ, or QQQ, focuses on technology stocks by indexing the Nasdaq 100. 100 Nasdaq companies are included in the ETF, and it ranks as the second most traded ETF in the US. GLD: The SPDR Gold Trust, or GLD, provides access to the gold market and has been trading since 2004. GLD is the largest ETF physically backed by gold.
Trading options on ETFs can be profitable, but there is a better way to earn a profit selling options. David Jaffee of BestStockStrategy.com prefers to sell options on individual stocks in order to earn a larger premium. Learn the best options trading strategy when you enroll in David Jaffee’s online options trading course.