Tag: Options Strategy

Generating consistent monthly income in a high probability manner in both bear and bull markets is the luxury of options trading. The core of options trading is defining risk, leveraging a minimal amount of capital, and maximizing returns. They enable smooth and consistent portfolio appreciation without guessing which way the market will move. An options-based portfolio performance demonstrates the durability and resiliency of options trading as a means to drive portfolio results.

An agile options-based portfolio is essential to navigate pockets of volatility and mitigate market downdrafts. The recent September correction, October nosedive, and election volatility into November are prime examples of why risk management is paramount. Despite the recent market volatility, positive returns in all three market scenarios were generated. Over the past 6-plus months, 171 trades were placed and closed. A win rate of 98% was achieved with an average ROI per trade of 7.6% and an overall option premium capture of 89% while matching returns of the broader market and outperforming during market downswings (Figures 1 and 2).

Figure 1 – Overall option metrics from May 2020 – December 4th, 2020
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Despite the major averages being in correction territory in September followed by a volatile October, ending with a massive sell-off and heightened election volatility during the first week of November, realized gains were generated. Following the 10 rules in options trading throughout the recent market volatility has generated positive returns in all three market scenarios.

Defining risk, leveraging a minimal amount of capital, and maximizing returns is the core of options trading. All of this, combined with a statistical edge, provides smooth and consistent portfolio appreciation without guessing which way the market will move. The results over the course of September, October, and the first week of November demonstrate the durability and resiliency of options trading as a means to drive portfolio results.

An agile options based portfolio is essential to navigate these pockets of volatility. The recent September correction, October nosedive, and election volatility are prime examples of why following the 10 rules of options trading is key to an effective long term options strategy. Overall, in May, June, July, August, September, October, October, and thus far in November, 149 trades were placed and closed. An options win rate of 97% was achieved with an average ROI per trade of 7.5% and an overall option premium capture of 88% while outperforming the broader market despite the September correction (Figures 1 and 2).

Figure 1 – Overall option metrics from May 2020 – November 6th, 2020
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The confluence of the impending U.S. Presidential election, rising COVID-19 cases domestically and abroad, and market dependency on stimulus measures give rise to a potentially volatile environment in November. Positioning your portfolio to be as agile as possible is essential when navigating these potentially volatile events. Cash on-hand, exposure to broad-based ETFs, and options is an ideal mix to achieve the portfolio agility required to mitigate uncertainty and volatility expansion.

Options trading at its core defines risk, leveraging a minimal amount of capital, and maximizing investment return. Proper portfolio construction is essential when engaging in options trading to drive portfolio results. This cash liquidity position provides portfolio agility to adjust when faced with extreme market conditions such as the September market correction rapidly.

An agile options based portfolio is essential to navigating these pockets of volatility. The recent September correction is a prime example of why maintaining liquidity is one of the many keys to an effective long term options strategy. In May, June, July, August, September, and October, 141 trades were placed and closed. An options win rate of 97% was achieved with an average ROI per trade of 7.5% and an overall option premium capture of 88% while outperforming the broader market despite the September correction (Figures 1 and 2).

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Options trading, at its core, is defining risk, leveraging a minimal amount of capital, and maximizing return on investment. Options trading in combination with long equity via broad-based index ETFs and cash-on-hand provides portfolio agility in the face of market corrections and in times of volatility expansion. COVID-19 was the linchpin for the major indices to drop over ~30% in March. Logging the worst sell-off since the Great Depression and inducing extreme market volatility that hasn’t been since the Financial Crisis.

Although options trading provides a margin of downside protection and a statistical edge, no portfolio is immune from the wreckage when hit with a black swan event. Thus proper portfolio construction is essential when engaging in options trading to drive portfolio results. One of the main pillars of building an options-based portfolio is maintaining ample liquidity by holding ~50% of one’s portfolio in cash. This liquidity position provides portfolio agility to adjust when faced with extreme market conditions such as COVID-19 and the September market correction rapidly.

An agile options based portfolio is essential to navigating these pockets of volatility. The COVID-19 induced sell-off and recent September correction are prime examples of why maintaining liquidity is one of the many keys to an effective long term options strategy. In May, June, July, August, and September, 121 trades were placed and closed. Options win rate of 98% was achieved with an average ROI per trade of 7.3% and an overall option premium capture of 90% while outperforming the broader market over the September downturn (Figure 1).

Figure 1 – Smooth and consistent portfolio appreciation while matching the broader market gains and outperforming during the market sell-off in September. An overlay of an options/cash/long equity hybrid portfolio and the S&P 500 post-COVID-19. Even under the most bullish conditions, the hybrid portfolio outperformed the index with ~50% in cash
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