average joe investor: selling iwm put options daily: backtesting the russell 2000 strategy

Get the Spreadsheet for FREE! In this video we are backtesting selling daily put options on the Russell 2000 Index (IWM). We have talked previously about selling put options on IWM on a weekly basis and a monthly basis, but the question remains: does it make sense to do it every day? ---------------------------------------------------------------------------------------- JOIN THE PATREON COMMUNITY! ----------------------------------------------------------------------------------------- You can also Work with Joe 1 ON 1! Want to increase your option selling knowledge and get started! ----------------------------------------------------------------------------------------- Partner With Me - [email protected] ----------------------------------------------------------------------------------------- This communication/content is for informational purposes only and is not intended as personalized investment advice, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This communication should not be relied upon for purposes of transacting in securities or other investment vehicles. ------------------------------------------------------------------------------------------ Selling daily put options on the IWM Russell 2000 index can be an effective way to generate premium income, but it carries considerable risk and requires careful consideration of market volatility, position sizing, and readiness to own IWM shares if assigned. Pros and Cons Premium Income: High implied volatility in IWM means option sellers collect rich premiums, which can lead to consistent income if the ETF remains above the strike price. Potential Discounted Entry: If assigned, the net purchase price of IWM will be lower than market price, factoring in the premium collected. Defined Risk (Cash-Secured Puts): Selling puts with cash backing is safer than naked puts and allows controlled exposure to small-caps. However: There is downside risk comparable to owning the underlying ETF, especially during sharp market drops, which can result in substantial losses. Daily selling increases assignment risk and exposes the capital to frequent short-term market moves, which may be amplified in volatile conditions. The opportunity cost of setting aside cash for assignments, and the necessity for robust position sizing and risk management, must be factored in. Best Practices Sell puts only if comfortable owning IWM long term at a net discounted price after premium. Manage risk with strict allocation, avoiding over-leverage or naked puts. Focus on cash-secured puts for conservative risk management. Monitor implied volatilityselling put premium is most attractive when IV is high, but this also signals greater risk. Alternatives & Strategy Refinement Defined risk strategies like put spreads can offer high returns with capped downside, such as credit spreads. Some funds, like IWMY, systematically sell daily puts and reported significant yields, but also accept higher volatility and drawdowns. Consider laddering strike prices, or using monthly options for lower churn. Conclusion Selling daily put options on IWM can work for premium generation, provided careful risk management and willingness to accept assignment or losses in bearish markets. This strategy benefits from high volatility and is best suited for disciplined, well-capitalized traders comfortable with IWM exposure.