That'd be The Wheel strategy, the original genesis of this thread
It sure does sound pleasant, but its not risk free income that also provides upside exposure (because who wouldn't buy all of that they could get their hands on!?!). If it were risk free then there is somebody with better funding and tools in the market that will have purchased all of it first.
The (or at least A) risk in The Wheel is that you lose money on the strike to strike slippage as you flip back and forth between puts and calls. As a for instance if you'd sold a 950 call for this week expiration and we finish with the shares at 1010, then you'd take assignment in The Wheel, collecting $95k plus the premium. Then you could sell the 1000 put for high aggression and get like $20 worth of premium. If the shares are below 1000 next week then you take assignment on that 1000 strike put. Let's say the shares are at 980 next week - you've sold at shares at 950 and repurchased at 1000. The premiums might have been good but in this example the first $50 of that premium is just paying for the strike to strike slippage.
When I ran the wheel awhile back to get some experience with it, I found that taking assignment on puts (buy shares) was just fine for me, emotionally. The angst though when I was assigned on the call (shares into cash), and selling puts to get back into shares, was not good. I made money on that round trip, and pretty decent money - something like the premiums and an extra $5 in the strike to strike change. That's a great outcome but the emotional side for the cash to shares (assignment on puts) was not something I wanted to be doing routinely.
The problem was that while I was in cash (out of shares), I was constantly thinking about the shares taking off on me. I'd get the put premium and that'd be nice, but if I collect a $20 put premium and the shares go up $110 in a day, then I'm not exactly thrilled with that outcome. It's a #firstworldproblem for real, but its still not fun; it can be hard to remind oneself that they just earned $20/share when they've watched the other shares go up $110
The Wheel continues to be a backup position for me, though with me selling spreads these days, it doesn't really fit very well. It's a lot more sensible with cash secured puts and covered calls.
With the big swings in the share price plus things being 'frothy' here at $1000 give or take, an idea that's occurred to me for getting back into the market (I really want to be in - I just don't want all of that spread leverage) is to return using good old fashioned cash secured puts and covered calls (which would be leap cc for me).
On the cash secured put front, I won't be earning anywhere close to the weekly income, but I'll be setup to earn some weekly income, and I'll have really big levers ready to go to manage the position. Something I did earlier this year was to do a 4:1 conversion of cash secured puts into $200 wide put spreads. That got me a >$100 improvement in my short put strike, and left me a bunch in the tank for a 2:1 or even another 4:1 increase in the spreads, and another big improvement in the strike. And if that sort of aggressive management isn't needed, then I'll earn at least that little bit of income in the meanwhile.
It's at least an idea I'm kicking around. Since I'm getting a lower and lower share price by waiting I think that I'll continue waiting for the shares to fall below $1000.
Even if there's only $5k to be made that's still a pretty good result in most universes, and leaving myself with a LOT of headroom for management should that become necessary is appealing. I feel like I've got a solid floor underneath me, so selling puts isn't so bad. Even if that floor is more like 730 and I'm looking at selling 930 strike puts
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