AI continues to make me a better investor. As a follow up to a recent post about a new app for covered calls, I decided to ask AI to start validating my investment approach to many equities I am investing in. I wrote this post on AI determining what I had already thought, that covered calls were the best options strategy for IWM.
The other ETF I am heavily invested at the moment is TLT. I have been doing covered calls on TLT but I had not yet asked AI if that indeed was the best options strategy on it. I downloaded data from 2000 thru 2026 and asked AI to give me the best options strategy.
AI RESPONSE
Based on analysis of your TLT daily data (5,910 trading days), TLT behaves like a low-return, moderate-volatility, mean-reverting asset with occasional large drawdowns. This profile strongly favors certain income strategies over others.
Here is the objective breakdown and recommendation:
Key characteristics of TLT (from your dataset)
- Annual return: ~1.3%
- Annual volatility: ~14.4%
- Maximum drawdown: −51.7%
- Typical monthly move range: ±3–6%
- Behavior:
- Mostly sideways
- Frequent reversals
- Occasional sharp selloffs
This is an ideal environment for option premium harvesting strategies, especially those that benefit from sideways markets.
Strategy comparison (income consistency vs risk)
1. Covered Calls — BEST OVERALL
Income: High
Consistency: Very high
Risk: Moderate (same downside as holding TLT)
Typical monthly income from your data:
- ~$1.58 per share per month
- ~2.0% monthly income
- ~24% annualized income potential
Why it works best for TLT:
- TLT rarely trends strongly upward for long periods
- Frequent sideways action allows repeated premium collection
- Volatility is high enough to generate meaningful premiums
Major advantage:
- Most reliable and repeatable income stream
Major disadvantage:
- Downside risk during crashes (like 2022 bond crash)
Best for:
- Income-focused investors comfortable holding TLT long-term
2. Cash-Secured Puts — TIED for highest income, slightly less consistent
Income:
- ~$1.81 per share per month (slightly higher than covered calls)
Advantages:
- Often higher premium than covered calls
- You acquire TLT at lower prices if assigned
Disadvantages:
- Large downside risk during crashes
- Assignment during prolonged downtrends reduces income consistency
Best for:
- Investors wanting to accumulate TLT gradually
Consistency ranking: #2
3. Put Credit Spreads — BEST risk-adjusted consistency
Income:
- ~$0.90 per share per month
Advantages:
- Limited downside risk
- Very stable and predictable income
- Much safer during crashes
Worst loss:
- Limited to ~5% vs >10% for covered calls
Best for:
- Investors prioritizing consistency and capital protection
Consistency ranking: #1 on risk-adjusted basis
4. Collars — SAFEST but lowest income
Income:
- ~$0.22 per share per month
Advantages:
- Strong downside protection
- Highly stable
Disadvantages:
- Lowest income
- Protective put reduces profits significantly
Best for:
- Conservative investors protecting large TLT positions
Consistency ranking: High but low income
Final ranking: BEST strategy for consistent income
Based on income stability, risk, and TLT behavior:
| Rank | Strategy | Income | Consistency | Risk | Overall |
|---|---|---|---|---|---|
| #1 | Covered Calls | High | Very High | Moderate | BEST overall |
| #2 | Put Credit Spreads | Medium | Extremely High | Low | BEST risk-adjusted |
| #3 | Cash-Secured Puts | Highest | High | Moderate-High | Good |
| #4 | Collars | Low | Very High | Very Low | Safest |
BEST overall recommendation: Covered Calls on TLT
Optimal implementation:
- Hold TLT shares
- Sell calls:
- 30–45 days to expiration
- 2–5% out-of-the-money
- Repeat continuously
Expected income:
- ~18–26% annualized income
- Most consistent strategy for TLT specifically
BEST strategy if you want maximum consistency and lower risk
Use Put Credit Spreads:
- Sell put spread 3–7% below current price
- 30–45 DTE
- Repeat monthly
Expected income:
- ~10–16% annualized
- Much lower drawdowns
BEST hybrid strategy (professional approach)
Use combination:
- 70% Covered Calls
- 30% Put Credit Spreads
This maximizes:
- Income
- Consistency
- Risk control
My Thoughts
Absolutely amazing. AI is like having a team of financial analysts, traders, research assistants doing deep analysis and providing insightful actionable investment advice in MINUTES! AI went further and recommended strike prices, expiry and other information which I won’t share here because if everyone copies the strategy, it will ultimately end up distorting the market. Sorry but you really should get your own AI and figure some things out for yourself 😉
Incidentally, I have been executing cash secured puts and covered calls as part of my strategy on TLT. AI just confirmed that what I was doing was the right thing! I may try put credit spreads for a more “professional” feel…lol!
By the way did anyone catch the 24% income potential here? If not, you need to wake up but please don’t take anything here you see as financial advice. DISCLAIMER! Obviously, trading options can result in huge losses if you don’t know what you’re doing.
I do have an upcoming post on my entire ETF portfolio that I’ve spent some time now with AI developing for me. It is highly customized for my income flows, tax situation, goals and other variables so I don’t recommend anyone copy it but it does help illustrate the power of AI.
Share The Wealth
Do you understand yet that AI will revolutionize the world and probably not in a good way for those left behind?