Notable consensus: Agreement that selling SPX puts is favorable due to cash settlement, tax efficiency, and the skew where downside protection is more expensive.
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[+5] u/nrubhsa: For me, better to invest the portfolio in equities entirely, or nearly, for the upside equity risk premium. Then, sell short term SPX puts / put spreads far OTM with the buying power provided by the portfolio to capture addition variance risk premium.
SPX settles in cash, so no pin risk. It’s tax favorable with split LTCG and STCG and no influence to the basis like the cover calls.
If you want to capture upside VRP, sell some calls or call spreads into the mix, or ICs. But the put side is more favorable for premium—the market is willing to pay more for downside protection than lottery tickets.
To answer your question about risks, this has a lot to do with deltas / strike selection. You don’t mention this so it’s difficult to assess in full. The appropriate risk has a lot to do with you overall financial situation: income, minimum expenses, savings and investments, goals, and willingness to take risk.
The market consistently pays a "variance risk premium," with more premium (skew) on the put side for downside protection than on the call side. An investor can hold a core equity portfolio for long-term growth and use the provided buying power to systematically sell short-term, far OTM SPX puts or put spreads. SPX's cash settlement eliminates assignment/pin risk. This is a long-term, additive income and risk-premium harvesting strategy overlaid on a buy-and-hold portfolio, not a directional bet. Overall risk is highly dependent on strike selection (Delta) and the investor's personal financial situation. A major market downturn could trigger losses on the sold puts.
This Reddit post, published April 19, 2026,
features r/options community
discussing SPY.
1 trade idea extracted by AI with direction and confidence scoring.