Retail investors may become enticed to use leveraged exchange-traded funds (ETFs) when writing covered calls or selling cash-secured puts. The reason is that the option returns are generally so much greater than traditional ETFs. This article will use ProShares UltraPro QQQ (Nasdaq: TQQQ) and Invesco QQQ Trust (Nasdaq: QQQ) to investigate the advantages and disadvantages of employing leveraged ETFs.

What are ETFs?

Securities that track an index, commodity or a basket of assets like an index, but trade like a stock on an exchange. They provide the diversification of an index fund. One example is QQQ which offers exposure to and mirror the performance of the 100 largest non-financial stocks that are listed on the Nasdaq exchange.

 

What are leveraged ETFs?

This is a fund that seeks to magnify the returns of an underlying index or fund, typically 2x or 3x the daily performance. This is achieved via the use of financial derivatives like futures contracts and options. One example is TQQQ which seek 3x the exposure to the Nasdaq 100 stocks. This means that the price movement to the upside or downside is expected to be triple that of QQQ. We will confirm that through the use of a comparison chart and implied volatility (IV) stats from option chain.

 

Comparison chart of QQQ & TQQQ with the S&P 500

• TQQQ has much greater upswings and price declines than QQQ
• QQQ will out- and under-perform the S&P 500, but not the extent like TQQQ

 

TQQQ & QQQ option chains

• TQQQ: The $76.00 near-the-money call strike has a bid price of $4.45 and an implied volatility of 51% (top chart)
• QQQ: The $534.0 near-the-money call strike has a bid price of $11.46 and an implied volatility of 17% (lower chart)
• Note the implied volatility o TQQQ is triple that of QQQ. This is to be expected based on the stated goal of TQQQ
• Will the initial returns also be triple? Let’s find out

 

TQQQ and QQQ initial calculations with our BCI Trade Management Calculator

• After entering the data gleaned from the option chains, we calculate the initial 32-day returns for QQQ to be 2.09%, 23.86% annualized (brown cells)
• After entering the data gleaned from the option chains, we calculate the initial 32-day returns for TQQQ to be 5.86%, 66.87% annualized (pink cells)
• These initial returns align with our expectations of an approximate 3-to-1 ratio, because the returns will be directly related to the IV of the underlying securities for the same timeframe

 

Discussion (my take)

Utilizing leveraged ETFs may be appropriate for investors who are seeking greater returns and willing to incur higher risk. However, covered call writing and selling cash-secured puts are low-risk option selling strategies typically appropriate for investors with capital preservation in mind. In my humble opinion, most retail investors should avoid leveraged ETFs, especially when implementing low-risk option strategies, with the caveat that its use may be applicable for higher risk investors.

 

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Covered Call Writing Alternative Strategies

 

Covered call writing is a cash-generating strategy that lowers our cost basis thereby improving our opportunities for successful investments. One of the many benefits of incorporating this strategy into our investment portfolios is that the system can be crafted to meet our trading style, market assessment, portfolio net worth and personal risk tolerance. This book details three such covered call writing-like strategies that will highlight:

 

Covered call writing is a cash-generating strategy that lowers our cost basis thereby improving our opportunities for successful investments. One of the many benefits of incorporating this strategy into our investment portfolios is that the system can be crafted to meet our trading style, market assessment, portfolio net worth and personal risk tolerance. This book details three such covered call writing-like strategies that will highlight:

Portfolio Overwriting- using stocks in buy-and-hold portfolios
The Collar Strategy- using protective puts
The Poor Man’s Covered Call- using LEAPS options

Click here for more information.

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Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to publish several of these testimonials in our blog articles. We will never use a last name unless given permission:

1. Money Masters Symposium Sarasota Florida

December 1 – 3,2025

Setting Up Option Portfolios Using Stock Selection, Diversification, Cash Allocation and Calculations

Analysis of 6 covered call writing trades

Minimize risk and maximize returns. These are our 2 main goals when crafting our option portfolios. There are several factors we can utilize which will put ourselves in an outstanding position to achieve these objectives. Here is a summary of those factors which will be addressed during this presentation:

• Select elite-performing stocks and ETFs
• Diversity stock positions as well as their industries
• Allocate a similar amount of cash per-position
• Ensure that initial calculations align with strategy goals and personal risk-tolerance
• Once trades are entered, go into position management mode- be prepared for exit strategy opportunities

Registration link to follow.

2. BCI Educational Webinar #9

Thursday January 15, 2026

8 PM ET – 9:30 PM ET

Topic, description and registration information to follow.

3. Long Island Stock Investors Meetup Group: Part I

Thursday February 12, 2026

7:30 PM ET – 9:00 PM ET

Topic, description and registration information to follow.

4. Long Island Stock Investors Meetup Group: Part II

Thursday March12, 2026

7:30 PM ET – 9:00 PM ET

Topic, description and registration information to follow.