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Potentially 12%-15% Consistent Income: Monthly Options Series (September 2025)

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  Published in Stocks and Investing on Friday, August 29th 2025 at 8:53 GMT by Seeking Alpha
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Potentially 12% Consistent Income Monthly Options Series – September 2025

In a recent piece on Seeking Alpha, authors examined a “monthly options strategy” that could deliver an attractive 12 % annualized yield by September 2025. The strategy hinges on a systematic play that trades the same expiration cycle (the first‑trading‑day‑of‑month options) on a highly liquid underlying – typically an exchange‑traded fund (ETF) or a blue‑chip equity – while carefully balancing implied volatility, delta exposure and time decay. Below, we break down the key ideas, the mechanics, the data that backs the claim, and the risks that could bite the investor.

1. The Core Idea: Consistent Income From Time Decay

At its heart, the strategy exploits the fact that most option premiums are heavily weighted toward the theta (time decay) component rather than vega (volatility) or gamma (rate of change of delta). By selling a monthly option (a short‑dated contract) and re‑selling it each month, the trader collects a “premium stream.” If the underlying remains within a modest price band, the option will likely expire worthless, and the premium is pure profit. By rolling the position into the next month’s contract, the trader compounds that income.

The article notes that monthly options are particularly attractive because:

The trade‑off is that the monthly option’s gamma is lower, which is good for income stability but leaves the position more exposed to large moves in the underlying.

2. The Underlying: A Liquid, Volatile‑Capable Asset

The article provides a sample of two candidate underlyings:

1. SPY – the S&P 500 ETF, noted for its deep liquidity and broad market exposure.
2. QQQ – the Nasdaq‑100 ETF, with higher beta and therefore higher implied volatility.

Both ETFs have an option chain that is updated daily, with a standard set of strikes that makes the “at‑the‑money” (ATM) option easily identifiable. The authors recommend focusing on the ATM strike to maximize premium capture while keeping the Delta near 0.50 – this ensures a balanced “neutral” position.

Link: The author’s commentary links directly to the official options chain on the BATS exchange for SPY, which shows the current bid‑ask spread, implied volatility, and open interest for the month’s ATM option.

3. How the 12 % Yield Is Calculated

The target annualized return of 12 % comes from a simple compounding calculation:

1. Monthly Premium – For SPY ATM call on a given month, the premium is roughly $4.00 (per share).
2. Annualized Yield – $4 × 12 months ÷ $200 (spot price) = 24 % per annum.
3. Risk‑Adjusted Return – Because the strategy typically stops out at a 10‑15 % loss per month (using a stop‑loss or a “protective” lower‑strike sell), the net expected yield reduces to about 12 %.

The article also uses back‑testing data (the past 5 years) to show that the monthly ATM options for SPY have historically had a 70‑80 % probability of finishing out‑of‑the‑money. This high “win” rate, combined with the steep theta, yields a “consistent income” stream.

Link: An embedded graph from Benzinga shows the 5‑year rolling return of the monthly SPY option strategy, illustrating the cumulative return curve that peaks near 12 % before tapering due to occasional large losses.

4. Step‑by‑Step Mechanics

A. Opening the Position

• Sell an ATM call on the first business day of the month.
• Set a protective “stop‑loss” at 12 % below the strike (e.g., if the strike is $210, stop‑loss is $184.80).
• Record the premium collected.

B. Monitoring the Trade

• Track the underlying’s price relative to the strike.
• If the underlying climbs above the strike by more than 10 % before expiry, consider rolling the position to a higher strike or selling a different option.

C. Closing & Rolling

• If the option expires worthless, you keep the entire premium.
• If the option is in‑the‑money, you close the position at the market price (or roll to a later month).
• Repeat the process on the next month’s first business day.

D. Exiting the Series

• Close all positions by the end of August 2025, then evaluate cumulative returns.

5. Risk Management & Caveats

The article devotes a whole section to risk mitigation:

The article warns that the 12 % figure is an upper‑bound; real‑world results depend heavily on transaction costs (commissions, bid‑ask slippage) and the trader’s discipline in executing the exit rules. The author also points out that, while the back‑tested performance looks promising, past performance is not a guarantee of future results.

Link: The author includes a link to a Risk‑Management Guide on Investopedia that explains margin requirements and how to calculate potential drawdowns.

6. Historical Performance Snapshot

Using a proprietary back‑testing engine, the article shows a graph that charts the cumulative return of the monthly ATM strategy on SPY from January 2018 to December 2023. The key takeaways:

• Cumulative Return: 10 % by December 2023, aligning with the 12 % annualized goal.
• Maximum Drawdown: 6 % during the 2020 market turmoil.
• Win‑Rate: 75 % of monthly trades closed out at profit.

The article attributes the drawdown primarily to a 2020‑early‑2021 “volatility spike” when COVID‑19 caused the market to swing wildly. In those months, the stop‑loss was hit in several trades, but the high probability of subsequent out‑of‑the‑money expirations helped recoup losses in the following months.

Link: The embedded chart is sourced from Quantopian, which allows users to replicate the back‑test and adjust parameters such as the stop‑loss threshold.

7. Practical Implementation Tips

• Brokerage Choice: The author recommends platforms with low spreads and direct market access to avoid slippage – e.g., Interactive Brokers or Tastyworks.
• Automation: Using simple Python scripts to monitor the option chain and trigger trades automatically can reduce the cognitive load.
• Record Keeping: Maintain a spreadsheet that logs each trade’s entry, exit, premium, and realized P/L to spot patterns early.

Link: A downloadable template spreadsheet is linked in the article, sourced from Seeking Alpha’s own “Option Trade Log” post.

8. Bottom Line

The article presents a compelling case that a disciplined, monthly ATM option selling strategy can deliver a near‑consistent 12 % annualized yield by September 2025. The core advantage lies in capturing theta on a large‑volume underlying while keeping delta exposure neutral. Back‑testing and historical data support the win‑rate estimate, but the article is careful to emphasize the importance of robust risk controls and mindful trade execution.

For traders who are comfortable with the mechanics of options and are willing to manage a routine roll schedule, the strategy offers a predictable income stream that can complement a long‑term equity portfolio. As always, the potential for a few large, unexpected moves means that the strategy should be run with proper diversification and stop‑loss rules in place.

Further Reading (Links Included in the Original Article)

1. Options Chain for SPY – BATS – (direct link to the ATM strike).
2. Volatility Hedge Strategies – Investopedia – (article on hedging volatility).
3. Monthly Option Back‑Test Results – Quantopian – (interactive graph).
4. Risk Management in Options – Investopedia – (margin and drawdown guide).
5. Option Trade Log Template – Seeking Alpha – (downloadable spreadsheet).

Note: All links are provided for reference; the reader is encouraged to review the source material for additional context and to validate the assumptions discussed in this summary.