LABD Covered Call Strategy
LABD (Direxion Daily S&P Biotech Bear 3X ETF), in the Financial Services sector, (Asset Management - Leveraged industry), listed on AMEX.
The Direxion Daily S&P Biotech Bull and Bear 3X ETFs seek daily investment results, before fees and expenses, of 300%, or 300% of the inverse (or opposite), of the performance of the S&P Biotechnology Select Industry Index. There is no guarantee the funds will achieve their stated investment objectives.
LABD (Direxion Daily S&P Biotech Bear 3X ETF) trades in the Financial Services sector, specifically Asset Management - Leveraged, with a market capitalization of approximately $30.2M, a beta of -3.15 versus the broader market, a 52-week range of 12.465-99.5, average daily share volume of 5.0M, a public-listing history dating back to 2015. These structural characteristics shape how LABD etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of -3.15 indicates LABD has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. LABD pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a covered call on LABD?
A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income.
Current LABD snapshot
As of May 13, 2026, spot at $13.13, ATM IV 96.40%, IV rank 45.87%, expected move 27.64%. The covered call on LABD below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 28-day expiry.
Why this covered call structure on LABD specifically: LABD IV at 96.40% is mid-range versus its 1-year history, so the credit collected on a LABD covered call sits in line with its long-run distribution, with a market-implied 1-standard-deviation move of approximately 27.64% (roughly $3.63 on the underlying). The 28-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated LABD expiries trade a higher absolute premium for lower per-day decay. Position sizing on LABD should anchor to the underlying notional of $13.13 per share and to the trader's directional view on LABD etf.
LABD covered call setup
The LABD covered call below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With LABD near $13.13, the first option leg uses a $14.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed LABD chain at a 28-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 LABD shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $13.13 | long |
| Sell 1 | Call | $14.00 | $1.80 |
LABD covered call risk and reward
- Net Premium / Debit
- -$1,133.00
- Max Profit (per contract)
- $267.00
- Max Loss (per contract)
- -$1,132.00
- Breakeven(s)
- $11.33
- Risk / Reward Ratio
- 0.236
Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium.
LABD covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on LABD. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -99.9% | -$1,132.00 |
| $2.91 | -77.8% | -$841.80 |
| $5.81 | -55.7% | -$551.60 |
| $8.72 | -33.6% | -$261.40 |
| $11.62 | -11.5% | +$28.80 |
| $14.52 | +10.6% | +$267.00 |
| $17.42 | +32.7% | +$267.00 |
| $20.32 | +54.8% | +$267.00 |
| $23.23 | +76.9% | +$267.00 |
| $26.13 | +99.0% | +$267.00 |
When traders use covered call on LABD
Covered calls on LABD are an income strategy run on existing LABD etf positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
LABD thesis for this covered call
The market-implied 1-standard-deviation range for LABD extends from approximately $9.50 on the downside to $16.76 on the upside. A LABD covered call collects premium on an existing long LABD position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether LABD will breach that level within the expiration window. Current LABD IV rank near 45.87% is mid-range against its 1-year distribution, so the IV signal is neutral; the covered call thesis on LABD should anchor more to the directional view and the expected-move geometry. As a Financial Services name, LABD options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to LABD-specific events.
LABD covered call positions are structurally neutral to slightly bullish; the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. LABD positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move LABD alongside the broader basket even when LABD-specific fundamentals are unchanged. Short-premium structures like a covered call on LABD carry tail risk when realized volatility exceeds the implied move; review historical LABD earnings reactions and macro stress periods before sizing. Always rebuild the position from current LABD chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on LABD?
- A covered call on LABD is the covered call strategy applied to LABD (etf). The strategy is structurally neutral to slightly bullish: A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income. With LABD etf trading near $13.13, the strikes shown on this page are snapped to the nearest listed LABD chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are LABD covered call max profit and max loss calculated?
- Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium. For the LABD covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 96.40%), the computed maximum profit is $267.00 per contract and the computed maximum loss is -$1,132.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a LABD covered call?
- The breakeven for the LABD covered call priced on this page is roughly $11.33 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current LABD market-implied 1-standard-deviation expected move is approximately 27.64%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a covered call on LABD?
- Covered calls on LABD are an income strategy run on existing LABD etf positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
- How does current LABD implied volatility affect this covered call?
- LABD ATM IV is at 96.40% with IV rank near 45.87%, which is mid-range against its 1-year history. Strategy selection depends more on directional thesis and expected move than on a strong IV signal.