September was difficult for both stocks and bonds: the S&P 500 fell 0.5%, while the yield on the 10-year Treasury climbed to levels not seen in 19 years. The 30-year yield also rose above 5.6%, the highest since 2002. Against that backdrop, some investors are looking at options strategies to lift portfolio cash flow, CNBC reports.
Ashton Lawrence, a certified financial planner and director at Mariner Wealth Advisors, said clients remain uneasy about the market outlook. In his view, options can be used to generate additional cash flow from an existing portfolio, build positions more deliberately and add some guardrails around risk. He also stressed that these strategies are not a substitute for core income-producing assets such as bonds and dividend-paying stocks.
Covered calls
Joe Mazzola, head trading strategist at Charles Schwab, said covered calls are often the first income strategy individual investors try. In a covered call, the investor already owns the stock and sells a call option against it, collecting a premium if the shares stay below the strike price through expiration. The trade-off is that if the stock reaches that level, the investor may have to give up the shares and miss further upside.
Mazzola said the approach may be especially relevant for stocks that have appreciated sharply over the past two years, including in AI-adjacent sectors, but have recently stopped pushing higher. Selling out-of-the-money calls, he said, can help augment returns for investors willing to cap some upside potential.
Cash-secured puts
Another approach is the cash-secured put, which may suit investors waiting for a lower entry point in an ETF or stock they want to own. In that strategy, the investor sells a put option and collects the premium, while keeping enough cash on hand to buy the shares if they fall to the strike price. Lawrence said many people still hold substantial sums in cash and money market vehicles, and this can offer a way to get paid while waiting.
Analysts caution that both strategies involve risk. With a cash-secured put, the main danger is a sharp drop that sends the stock well below the strike price, while a covered call can leave the investor on the sidelines during a strong rally. Lawrence said investors trying these trades on their own should fully understand what they are doing and why.
