I've seen others taking a stab at how they get to 1%/week. Here's how I go about it, at least to get into the ball park.
Assuming a $1M account (I set one of these up back in April, so this isn't completely theoretical) my original target was to be roughly 1/2 cash and 1/2 shares, and use those amounts to own shares and sell cash secured puts. In the actual case this is an IRA so that was my actual restriction. Setting that up today I'd be able to buy ~700 shares ($490k) and sell 7 or 8 csp (say $680 strike, thus reserving $544k for 8 of the 680 strike).
Let's pretend that I'm not a little bit short and I can sell all 15 of those positions. On $1M, 1% is $10k. To earn $10k on 15 positions is an average of $7 earnings ($700 * 15) on each of those. Ok - that's going to be sort of a stretch.
As I've been learning from others and from my own experience, that position setup has morphed. I was still targeting 50/50 though that has begun drifting more towards 40 (shares) / 60 (cash / puts). I have also changed from shares and csp, to lcc and bps. This shift has introduced leverage into the account that isn't dependent on margin (it's not available to me in the IRA, and I like to stay away from margin anyway).
On the shares side, I buy long duration calls that are DITM to various degrees, and sell short duration calls against those. I want ~40-50% of the account value in these leaps. So I might be buying the June 2023 500 strike calls today ($305 each). To select this particular option I'm looking for something really long duration (thought there are good reasons to use shorter duration), I want to minimize the time value I'm paying for (around $100 on these), and I'd like to get somewhere around 2 leaps for the cost of 100 shares maybe up to 3 for 1 or 5 for 2. I don't want a lot more leverage than this as I don't want to create too much volatility in the account.
At $305/share or $30.5k per contract I can buy around 15 of these for $450k (which means that I'll be able to sell 15 covered calls instead of 7). If I did want more leverage then I wouldn't get any closer than the 600 strike at $250 each. I think that we're unlikely to see $600 again and I like being another $100 away from that, but if I did come up to $600 each then I'll be able to buy ~20 at $25k each for $500k of the $1M.
Let's stick with 16 of the 500 strike for $480k.
On the put side I've been using $100 spread size put credit spreads (aka bull put spread, aka BPS). Each of these will need $10k as backing, so I can open 50 of these using the remaining $500k. This is one reason I'm starting to shift to $150 or $200 spread sizes - significantly better management available, and it cuts my # of positions back so that losses don't accumulate so fast (the gains are accumulating plenty fast). Using $200 backing, I'll need $20k per spread, so 25 spreads using the other half of the account.
BTW, at least at Fidelity, to make the BPS work in an IRA, I needed to get L2 options authorization, along with Spread Trading and Margin. In an IRA the spread trading was an incremental permission. The Margin setup in an IRA is only for trading using unsettled cash - not margin as we otherwise think of it. So when I trade a position I don't need to wait 3 days for the funds to settle and use them for something else.
Overall that sets me up to sell 16 calls and 25 puts or 41 total positions. To achieve $10k/week I need each position to earn $2.50 each week.
One thing that makes this easier to achieve is that when selling calls against the leaps I am far more ready and willing to take assignment on cc that go ITM. I think of the earnings from leap buy/sell as an incremental source of income, and that's what I'm in this to accomplish at this point. I would like to avoid assignment so I get all of the (leveraged) move up in the shares, but I'm also willing to miss out on some or a lot for the income now.
I also have a lot of flexibility in the ratios because of how much leverage there is in the put side. I might do something closer to $600k worth of leaps (20 of those now) and then sell 40 of the $100 spread size BPS for example. In fact I'll make adjustments to these ratios on a slower pace - quarterly? - as the shares go up and down and I develop a more intermediate term bias on where the shares are going. If I think the shares are going down then a few more BPS and a few less calls is probably a good idea. If I think the shares are going up, then a few more shares (leaps) and a few less BPS, is probably a good idea. This is tinkering around the edges - 20 leaps instead of 15 kind of scale.
That's how I get to 1%/week, even in an IRA or other account with no margin available. In practice I'm finding that I can beat that 1% pretty handily through a combination of more aggressive positions than $2.50 each week plus aggressive / early closes. The early close pattern is to close calls on a down day (while opening BPS), and closing the BPS on up days (while opening CC). The theme is to open into strength, and leads to mostly having either calls or puts open at a time, but not both. I actually having both open at the same time, but I'm mostly finding that a good entry for one is a good exit for the other.
My own larger target isn't a % - it's $10k/week, in 40 weeks of the year. I want to have 'permission' from myself to be completely out of the market for 3 weeks each quarter if I want to. Delivery / earnings comes to mind as a period I might want to be out. So far this is coming out better than I've described but 40% in a year sounds well beyond ok to me
