Are you tired of paying ETF providers a fat management fee to sell covered calls for you? If you think you can do better yourself, especially using a zero-commission brokerage, there is always the do-it-yourself route. One advantage is flexibility. Instead of receiving distributions on a monthly or weekly schedule, you decide when and how often to realize income.
In fact, it is possible to generate premium income every trading day through zero-day-to-expiration (0DTE) covered calls. Before getting too excited, though, it is important to understand that 0DTE covered calls are not free money. While the rapid time decay can produce attractive premiums, you must monitor positions much more closely. If the trade moves against you, there is less time to adjust or roll the option to a later expiration. In practice, that means you often have fewer opportunities to repair a losing position.
As with any covered call strategy, the same rule applies: only sell calls on something you are comfortable owning if it falls sharply, or losing if it rallies above your strike price. If you want to stick with ETFs rather than index options, there are really only three major choices worth considering.
S&P 500 0DTE Covered Calls
The first and most popular choice is the SPDR S&P 500 ETF Trust (SPY). With approximately $765 billion in assets under management and a launch date of January 22, 1993, SPY remains the largest and oldest U.S.-listed ETF. It tracks the S&P 500 and offers one of the deepest and most liquid options markets available anywhere.
Most importantly for 0DTE traders, SPY has options expiring every trading day. One reason this matters is open interest. Open interest refers to the number of outstanding option contracts that remain open. Higher open interest generally means better liquidity, tighter bid-ask spreads, and a greater ability to enter and exit positions without significant price slippage.
The downside is that SPY is no longer particularly cheap. Its 0.0945% expense ratio is far higher than many competing S&P 500 ETFs. It is also structured as a unit investment trust (UIT), which prevents it from reinvesting dividends internally between payout dates and creates a small amount of cash drag over time.
Nasdaq-100 0DTE Covered Calls
The second option is the Invesco QQQ Trust (QQQ). QQQ manages roughly $493 billion in assets and has been around since March 1999. Unlike SPY, it tracks the Nasdaq-100, making it much more concentrated in technology and growth-oriented companies. Financial stocks are entirely absent from the index. The expense ratio currently sits at 0.18%.
Like SPY, QQQ offers daily-expiring options. Because the Nasdaq-100 tends to be more volatile than the S&P 500, option premiums are typically larger. More volatility creates greater uncertainty around future price movements, and option sellers demand higher compensation for taking that risk.
The trade-off is obvious: larger premiums come with greater assignment risk and larger potential swings in the underlying ETF. Capital requirements are also substantial. At roughly $740 per share, investors need approximately $74,000 to purchase the 100 shares necessary for one covered call contract.
Russell 2000 0DTE Covered Calls
The final candidate is the iShares Russell 2000 ETF (IWM). Many of the businesses contained in this ETF are earlier-stage, less profitable, and more volatile than the large-cap companies found in SPY or QQQ. According to iShares, IWM has a three-year standard deviation of 20.29%.
Like SPY and QQQ, IWM supports daily-expiring options. The higher volatility often results in larger premiums, making it attractive for covered call sellers. However, the same warning applies. If the ETF falls below your purchase price, you remain exposed to the downside. If it rallies through your strike, your shares can be called away.
One advantage is accessibility. At approximately $295 per share, investors need roughly $29,500 to establish a 100-share position, making IWM significantly easier than either SPY or QQQ to get started with. However, IWM is the most expensive of the trio with a 0.19% expense ratio.
The Bottom Line
Selling 0DTE covered calls can be an effective way to generate daily premium income, but it requires active management and a willingness to accept capped upside.
Among ETF choices, SPY offers the deepest liquidity, QQQ generally offers the richest premiums, and IWM provides the lowest capital requirement.
Just remember that premium income is only one part of the equation. Total return still matters, and every covered call sold represents a trade-off between current income and future upside.