Yeah those tax rates are... ugh. Congrats on the income to get there though! :) I'm essentially FIRE'd on 1.2M in a LCOL, single with no spouse or kids and living on 20k/year. Short of re-starting an engineering consulting biz I doubt I'll have much income the next year or two. I realize the amount of income required to minimize taxes. Basically I'm at the opposite end of your income/tax situation. Last year I had to realize 65k which kind of sucked, but this year I'll be dead on 37k with zero tax liability.
Your question really is good though, as I went looking but couldn't find any sort of QQQ completion index, such as exists for the SP500 (e.g. VEXAX at Vanguard). I imagine the demand for such a product would likely be smaller than for the S&P completion index, but since QQQ is more or less market cap weighted among the stocks it owns it shouldn't be too hard to construct one for it. I got pretty close portfolio backtesting a mix of QQQ, VFH, VIS, and VAW. Maybe I should try and start an ETF for such a completion index, I hear you only need to swing a few tens of millions in AUM for it to take hold :)
Also if you pursue the options strategy, I thought you might be interested in the performance of the SP500 Buy Write ETF and the SP500 Put Write ETF. The first buys the SP500 index and writes monthly call options against it; the second sells cash secured monthly puts on the index. They both are essentially long the market (so definite downside risk) with capped upside (b/c of the options) supplemented by the premiums they collect (relatively steady income stream). A graph of the two wonderfully shows the idea of put/call parity in action (see attached, PBP and PUTW total return graphed against SP500 total return) since they track beautifully, as well as the relatively constant rate of return and reduction in volatility this strategy can net you.
It's not the NASDAQ but it should help give you an idea of how your idea would work in practice. It does limit the downside exposure somewhat because of the premiums collected, while capping the upside; the near constant walk upward is from premium collection and being long the portion of the portfolio that didn't get exercised away. Just realize that the positive deviation of the index return represents sales of long term appreciated securities that you'd get a tax hit on.
With QQQ being more volatile, you'd probably net a lot more premium but also be exposed to more tax liability as your calls got exercised. I don't have historical options data to model it though. It's certainly an interesting strategy to mitigate risk, and if it weren't for the taxes involved I'd be more in favor of it. The only thing I would modify about your idea would be to sell the call contracts 30-45 days out to maximize your return from theta decay and minimize your call risk. Selling longer dated contracts will net you more net credit up front, but a better idea would be to maximize theta decay of the options contract and that seems to happen somewhere in the 30-45 day range since theta decay accelerates the closer you get to expiration.
Anyway, sorry for the long rambling post, but thank you for asking an interesting question. I hope the additional info I've written today is useful, and please feel free to point out anything you think I might have gotten wrong.
PS: If you really want to minimize downside risk, you might look into collar strategies. They won't net you much if any premium, more likely they would cost just a little bit, but would be a relatively cheap way to finance downside protection on your QQQ portion of your portfolio until you are able to unload it in early retirement. Just be wary if IRS constructive sales rules and be sure to keep your strike prices far enough apart not to run afoul of them. If you did this I'd absolutely use the longest dated LEAPS available and roll them out at the earliest possible opportunity.
Cheers!
