Hi Pierre, totally agree with your thinking. Most of my EU clients ended up doing the same thing for exactly those reasons. The liquidity difference is just massive. US open interest is about 3x what you get in Europe, so spreads on SPY or XOM are often a penny while the same stuff in Paris can be 10 cents wide. More market makers competing = better fills. Yet, I do keep an eye on European names for the occasional fat premium when something gets mispriced, but 90% of my trades end up being US stuff anyway. The math just works better most of the time.
For the FX thing, I'd definitely go with Interactive Brokers. Saxo is good too but their commissions are way higher.
As for EU option data, I know that IBKR scanner is pretty good - gives you live volume and open interest across Eurex and Euronext.
Thanks, aligned with this. Just FYI and maybe other europeans reading, my european brokers will NOT let me trade US ETFs (like the SPY, QQQ and so on), because they do not totally comply with european retail investor protection laws . They do not have KIIDs (Key Investor Information Document) and so on. So you need to be qualified as a Professional Investor and not Retail. (pay pro real time fees, need larger accounts,...). So I am limited to options on US stocks. take care.
1) On bucket 4 allocation - the 15% refers to your total position size in those higher-volatility stocks. So if let's say you have €100k to invest, you'd put no more than €15k total into Bucket 4 companies - whether you're buying shares to sell CCs, or holding cash for CPSs.
These stocks offer juicier premiums precisely because they're more volatile. And that cuts both ways - great for income, but riskier for overall portfolio stability. And the 15% cap keeps you from getting too greedy and overexposing yourself to that volatility.
2) On volatility&timing:
I think there might be a small misreading here. I'm actually recommending the opposite:
When volatility is moderate (VSTOXX 18-25) - I'd sell puts to potentially acquire shares at attractive prices.
When volatility is higher (VSTOXX 25-30) - I'd sell CCs to capture the elevated premiums.
It's actually a pretty common mistake: people are selling calls when volatility is low (getting paid peanuts) and then puts when volatility is high (buying at inflated prices)
So the logic is: higher volatility = higher option premiums.
So when vol is elevated, you want to be a premium seller, not buyer.
And when you already own shares during high-vol periods, CCs let you capitalize on both the inflated premiums and potential assignment at higher prices.
Can be a solid add-on, but important to use a multi-currency broker like IBKR; U.S. ADR options are thin and kill the yield. Also premiums hit your account in €, dividends arrive net of 15-30 % withholding, and §1256 treatment doesn’t apply—so I'd budget for ordinary ST/LT tax rates and decide whether I'd hedge the €/\$.
Overall I wouldn't put more than ~10-15 % of portfolio weight into EU -currency/withholding quirks can overwhelm the core U.S. strategy.
Interesting post, I am based in europe and of course looked at this. But I feel like I will be still doing USA Stocks and Options .
- less work as I can be inspired by your picks
- the volumes and spreads on USA Options are much better than volumes, even for highly traded equity like TTE.
- even if commissions are a bit higher here I feel that I recover part of that just on the better spreads.
I only need to get a broker that will let me have an account in USD to not have forex fees each time.
Any ideas on a platform with good volume and option interest data on european traded options ?
Good trading to all
Hi Pierre, totally agree with your thinking. Most of my EU clients ended up doing the same thing for exactly those reasons. The liquidity difference is just massive. US open interest is about 3x what you get in Europe, so spreads on SPY or XOM are often a penny while the same stuff in Paris can be 10 cents wide. More market makers competing = better fills. Yet, I do keep an eye on European names for the occasional fat premium when something gets mispriced, but 90% of my trades end up being US stuff anyway. The math just works better most of the time.
For the FX thing, I'd definitely go with Interactive Brokers. Saxo is good too but their commissions are way higher.
As for EU option data, I know that IBKR scanner is pretty good - gives you live volume and open interest across Eurex and Euronext.
Hope this helps!
Thanks, aligned with this. Just FYI and maybe other europeans reading, my european brokers will NOT let me trade US ETFs (like the SPY, QQQ and so on), because they do not totally comply with european retail investor protection laws . They do not have KIIDs (Key Investor Information Document) and so on. So you need to be qualified as a Professional Investor and not Retail. (pay pro real time fees, need larger accounts,...). So I am limited to options on US stocks. take care.
Hi Mike, couple of questions here:
1) When you talk about Bucket 4 and the recommended 15% allocation, are we talking about just CSPs or also CC for this bucket?
2) Can you explain why it's recommended to sell puts when volatility is low and sell calls when it's high?
Hi Omar, let me clarify both of these for you:
1) On bucket 4 allocation - the 15% refers to your total position size in those higher-volatility stocks. So if let's say you have €100k to invest, you'd put no more than €15k total into Bucket 4 companies - whether you're buying shares to sell CCs, or holding cash for CPSs.
These stocks offer juicier premiums precisely because they're more volatile. And that cuts both ways - great for income, but riskier for overall portfolio stability. And the 15% cap keeps you from getting too greedy and overexposing yourself to that volatility.
2) On volatility&timing:
I think there might be a small misreading here. I'm actually recommending the opposite:
When volatility is moderate (VSTOXX 18-25) - I'd sell puts to potentially acquire shares at attractive prices.
When volatility is higher (VSTOXX 25-30) - I'd sell CCs to capture the elevated premiums.
It's actually a pretty common mistake: people are selling calls when volatility is low (getting paid peanuts) and then puts when volatility is high (buying at inflated prices)
So the logic is: higher volatility = higher option premiums.
So when vol is elevated, you want to be a premium seller, not buyer.
And when you already own shares during high-vol periods, CCs let you capitalize on both the inflated premiums and potential assignment at higher prices.
Hope this clears things up!
Got it! thanks for the quick reply!
What are your thoughts for US based investors adding this to their portfolios?
Can be a solid add-on, but important to use a multi-currency broker like IBKR; U.S. ADR options are thin and kill the yield. Also premiums hit your account in €, dividends arrive net of 15-30 % withholding, and §1256 treatment doesn’t apply—so I'd budget for ordinary ST/LT tax rates and decide whether I'd hedge the €/\$.
Overall I wouldn't put more than ~10-15 % of portfolio weight into EU -currency/withholding quirks can overwhelm the core U.S. strategy.