I ran the numbers through Prime Options Calculator v 3.5 and they agree with the examples given above. If you go out to the Jan. 2012 options for more premium, you get greater downside, but with greater time for the underlying(s) to move. Higher strikes gives greater appreciation, but smaller premiums. So, like what's been said is, you basically have, like a short straddle, a strategy that works best in a flat market, but on underlying(s) that are by their nature.. volatile.
Haji was right. I trade TNA and TZA quite often.hedging with options wont work. They replicate 3 X performance by buying swaps every day. Due to high VIX ,TNA does not go up 3 times IWM when the market is in down trend and high Vix.( high cost of options daily is eroding value) If market rallies and vix falls ,TNA can rally say 20 points (but your upside is capped to 5 points) But TZA can fall 20 points (your downside covered call protects only 5 points loss. Same equation if TZA rises and TNA falls out of bed.