The Hidden Risks of High Income Options Strategies | Shawn Gibson and Eric McArdle

In this episode of Excess Returns, we sit down with Shawn Gibson and Eric McArdle of Liquid Strategies to explore the rapidly growing world of option-based ETF strategies. With the rise of covered calls, buffered products, and hedged equity funds, it’s more important than ever for investors to separate smart solutions from risky marketing gimmicks. Shawn and Eric break down how their firm approaches overlays, income generation, and downside protection in a way that helps advisors and investors achieve better long-term outcomes.The evolution of options in ETFs and why adoption has acceleratedCommon flaws in covered call strategies and the risks investors missHow Liquid Strategies uses option overlays to add return, income, and downside protectionThe “Swiss Army knife” approach to using put spreads for multiple portfolio goalsThe importance of timeframe in option strategies and the debate around 0DTEWhy “high yield” products often just return investor capitalUsing options for true risk management and hedging vs. cosmetic protectionHow Liquid Strategies structures its ETF suite and interval fundsWhere hedged equity and bond overlays can serve as ballast in portfoliosStandard closing lessons for investors on staying invested and balancing risk00:01 – Introduction to Liquid Strategies and option-based ETFs02:34 – The rise of options in portfolios and industry evolution05:29 – Flaws in common options strategies08:19 – Covered calls: why they often disappoint12:00 – Balancing upside, downside, and income in overlays15:31 – What overlay strategies really mean20:19 – The “Swiss Army knife” of selling put spreads24:09 – Why timeframe matters and 0DTE options debate28:56 – How rates and volatility impact option overlays32:59 – The importance of systematic but flexible processes36:46 – High yield traps and returning investor capital43:04 – Using options for hedging and risk management46:47 – How advisors incorporate overlays into portfolios48:54 – ETFs vs. interval funds explained54:26 – Where overlays fit in today’s asset allocation57:55 – Closing lessons for investors

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