Jon Pemble

Options trader sharing real portfolio work and lessons. Not financial advice.

[Jon Pemble @switch_theory]

I find it incredibly ironic looking at the covered call income community. Lately everyone has been obsessed with NEOS products like $SPYI and $QQQI because of their "tax alpha." And to be fair, the math on their tax structure is clever. Because they use $SPX / $NDX index options, they can classify up to 90%+ of their massive monthly payouts as Return of Capital (ROC).

That means zero immediate tax drag. The money hits your account tax free, lowers your cost basis, and defers the tax bill until you sell.

But here is the absolute kicker: people are taking these tax deferred distributions and immediately reinvesting them to "build the snowball" during their working years.

Think about what is actually happening under the hood.

By buying a covered call ETF, you are actively selling away your upside. When the Nasdaq or S&P 500 rips, your fund caps its growth because of the options overlay. So you're intentionally stunting your portfolio’s capital appreciation, receiving a tax deferred cash payout to compensate for it, and then instantly buying back into the same asset that caps your growth.

You are doing a mountain of accounting gymnastics just to create a synthetic, underperforming growth fund.

Why play this game for 40 years?

It makes infinitely more sense to just buy the pure, uncapped underlying assets (like $SPY or $QQQ). You get the exact same benefit (zero tax drag during accumulation), but you actually get the full upside of the market.

When you finally cross the retirement finish line and need the cash flow, that's when you deploy the strategy. Take your massive, uncapped nest egg, flip the switch, and buy into SPYI or QQQI. That is when you actually want the income faucet and the ROC tax deferral to pay your bills.

Pumping these funds during your wealth building years just to click "reinvest" isn't financial wizardry. It’s sacrificing massive capital growth for a psychological safety blanket, wrapped in a tax loophole you don't even need yet.

Accumulate with pure total return. Use the income ETFs when you actually need the income. Everything else is just doing extra steps to lose money.

[Jon Pemble @switch_theory]

Ooh man, we’re going through the wayback machine with this one. Can’t believe that comment came out of my mouth 11 years ago… pre AI and everything 🤣

[Jon Pemble @switch_theory]

@GrantCardone Ooooo looks like I have a little check coming 🥂

[Jon Pemble @switch_theory]

@jschultzf3 Don’t fight the feeling

[Jon Pemble @switch_theory]

@Jason Hard to disagree with this one. I took a small hit on some $FIG options ~ few months post IPO, but I've been eyeing it again. Buying the equity here is a clean move.

[Jon Pemble @switch_theory]

Spot on. It’s definitely not impossible, but “the market can remain irrational longer than you can stay solvent.” Even the brightest investors get thrown massive curveballs. Managing individual positions takes a level of discipline and stress tolerance that a lot of people just don't want to sign up for.

[Jon Pemble @switch_theory]

Filled at $7 credit

I went with the “defense getting home or forcing a turnover” version of this trade but pairing it with “could score a TD,” wouldn’t have been a terrible pair either.

[Jon Pemble @switch_theory]

Game on the line and you know the coach is gonna call a zero blitz…

The blitz either gets home, or the defense gives up a TD, right?

[Jon Pemble @switch_theory]

@ISITrading2717 Congrats man!

[Jon Pemble @switch_theory]

One thing MySpace had going for it that I wish X would capitalize on…. Music in people’s profiles. I think we need some way of sharing the song of the day or something 🤷‍♂️

Anyway here’s what’s on repeat rn

[Jon Pemble @switch_theory]

@EmmetPeppers “Buy more after the sell”

[Jon Pemble @switch_theory]

@Selling4Premium

[Jon Pemble @switch_theory]

People overestimate theta’s power but underestimate its consistency

[Jon Pemble @switch_theory]

@jschultzf3 Right back at ya 👊

[Jon Pemble @switch_theory]

@ISITrading2717 Yea it’s hard to beat those triple tax advantages, I don’t get a match, but my employer contributes 1k total paid out bi-weekly @ $38.46. And if you start talking about conditional formatting or data validation, I might have to mark this thread NSFW 😂

[Jon Pemble @switch_theory]

Quick note on the name change

I’ve bounced around a bit over the years: optionacejon, Jon Trades, Switch Theory, etc. Appreciate everyone who’s rolled with the changes.

Decided to simplify and go with my real name (Jon Pemble) as the display name while keeping @switch_theory. Same trading ideas and market talk, just keeping it a little more straightforward going forward.

By the way, if anyone’s curious about the whole “Switch Theory” name… it was an old inside joke with a buddy. Let me know if you want the quick story.

Thanks for sticking around. More to come.

[Jon Pemble @switch_theory]

@ashleyschendel Imagine trying to buy groceries and your card gets declined because Grok flagged your tweet as a “Class A Shitpost” and put your funds on a 30 day suspension

[Jon Pemble @switch_theory]

@ScottRobo308 That’s awesome. I made the switch a little over a year ago. FSD is like having your own personal chauffeur drive you around. Butter silk smooth!

[Jon Pemble @switch_theory]

@ISITrading2717 Who's your early favorite for a superbowl win this year?