Leveraging Covered Calls: My Journey from HOOD to SCHD

 I've been exploring ways to optimize my investment strategy. Recently, I've been using a covered call strategy on Robinhood Markets Inc (HOOD) to generate income, which I've then reinvested into the Schwab U.S. Dividend Equity ETF (SCHD). Let me share my experience and insights from this process.

The HOOD Covered Call Strategy

I've been holding shares of HOOD and selling covered calls against my position. This strategy has allowed me to generate additional income through option premiums

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. As of January 10, 2025, HOOD's implied volatility (IV) was at 67.76, which is considered elevated at the 63.10th percentile

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. This high IV environment has been beneficial for writing covered calls, as it typically results in higher option premiums.

Reinvesting in SCHD

Using the income generated from my HOOD covered calls, I've made several purchases of SCHD:

1. January 15, 2025, 9:52 AM ET: $40.00 for 1.43421 shares at $27.89 per share
2. January 15, 2025, 1:49 PM ET: $23.00 for 0.82765 shares at $27.79 per share
3. January 16, 2025, 12:39 PM ET: $83.00 for 2.99003 shares at $27.76 per share
4. January 17, 2025, 9:39 AM ET: $80.00 for 2.86434 shares at $27.93 per share

In total, I've invested $226.00 of my covered call income into 8.11623 shares of SCHD.

The Benefits of This Approach

1. Income Generation: The covered call strategy on HOOD has provided a steady stream of income through option premiums
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2. Reinvestment: By channeling this income into SCHD, I'm building a position in a fund known for its consistent performance and low expense ratio.
3. Risk Management: While the covered call strategy caps my potential gains on HOOD, it also provides some downside protection
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   . Meanwhile, SCHD offers exposure to high-quality, dividend-paying stocks.

Challenges and Considerations

1. Execution: On Robinhood, setting up covered calls requires "legging" into the position by first buying the shares, then selling the call options
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   . This process requires careful timing and execution.
2. Opportunity Cost: While generating income, the covered call strategy on HOOD limits my potential gains if the stock price rises significantly
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3. Market Conditions: Both strategies are sensitive to market conditions. HOOD's high implied volatility has been beneficial for writing covered calls, but this could change
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   . Similarly, SCHD's performance can be affected by broader market trends.

Looking Ahead

As I continue this strategy, I'll be monitoring several factors:

1. HOOD's Implied Volatility: Changes in IV will affect the premiums I can collect from covered calls
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2. SCHD's Performance: I'll keep an eye on SCHD's dividend yield and overall performance metrics.
3. Market Trends: Both strategies will need to be adjusted based on overall market conditions.

Final Thoughts

This combined strategy of using covered calls on HOOD to fund investments in SCHD has allowed me to generate income while building a position in a solid dividend-focused ETF. 

As always, it's crucial to do your own research and consider your personal financial situation before implementing any investment strategy. Here's to continued learning and growth in our investment journeys!