Tag: how to trade options

Achieving an options win rate of 98% requires following a core set of 10 basic rules supplemented by some general guidance. Following these rules while deploying an array of option types (i.e., put spreads, call spreads, iron condors, and diagonal call/put spreads) across a diverse large-cap ticker list is the foundation of this success. Staggering expiration dates, managing winning trades, keeping trade allocation in balance with overall portfolio size, and trading in tickers that are liquid in the options market are other critical components to this success. Sticking to high probability outcomes via leveraging delta as a proxy, layering in some basic technical analysis, and maintaining appropriate portfolio structure is essential while ideally maintaining a 50% cash in addition to a hybrid long equity/options approach.

Options Trading Framework - 10 Essential Rules

A set of trading fundamentals must be followed to run an options-based portfolio over the long-term successfully. Specifically, position-sizing, sector diversity, maximizing the number of trade occurrences, and risk-defined strategies are some notable areas that traders need to heed for long-term successful options trading.

The following option trading fundamentals must be exercised in every trade. Violating any of these fundamental rules will jeopardize this strategy and possibly negate this approach's effectiveness on the whole. Below are 10 option trading rules that provide a basic framework of options trading to maintain discipline and systematic trading mechanics (Figure 1). Continue reading "How To Achieve A 98% Options Win Rate" →

An agile options-based approach is essential to navigating these choppy markets that we have witnessed thus far in 2021. Generating consistent monthly income while defining risk, leveraging a minimal amount of capital, and maximizing return on capital is the core of options trading. Options enable smooth and consistent portfolio appreciation without guessing which way the market will move. Options allow one to generate consistent monthly income in a high probability manner in all market scenarios. Over the past 10-plus months (May 2020 – March 2021), 225 trades were placed and closed. A win rate of 98% was achieved with an average ROI per winning trade of 7.5% and an overall option premium capture of 84% while outperforming the S&P 500. The performance of an options-based portfolio demonstrates the durability and resiliency of options trading to drive portfolio results with substantially less risk. This approach circumvented the September 2020, October 2020, and January 2021 sell-offs while outperforming the S&P 500, posting returns of 50.6% and 47.5%, respectively (Figures 1, 2, and 3).

Figure 1 – Overall options-based performance compared to the S&P 500 from May 2020 – February 2021 Continue reading "Options: Outperformance Despite Choppy Markets" →

Generating consistent monthly income while defining risk, leveraging a minimal amount of capital, and maximizing return on capital is the core of options trading. Options enable smooth and consistent portfolio appreciation and consistent monthly income without guessing which way the market will move. Over the past 9-plus months (May 2020 – February 2021), 203 trades were placed and closed. A win rate of 98% was achieved with an average ROI per winning trade of 7.8% and an overall option premium capture of 83% while outperforming the S&P 500. The performance of an options-based portfolio demonstrates the durability and resiliency of options trading to drive portfolio results with 50% of the portfolio held in cash, thus substantially less risk. The options-based approach circumvented the September, October, and January sell-offs while outperforming the S&P 500, posting returns of 47.6% and 43.7%, respectively (Figures 2-6). Following a well-defined set of options rules are essential for long-term successful options trading. Continuously reflecting and refining these rules is also essential to ensure continuous improvement via lessons learned with supplemental rules (Figure 1).

Options Trading Framework - 10 Essential Rules

A set of trading fundamentals must be followed to run an options-based portfolio successfully. Specifically, position-sizing, sector diversity, maximizing the number of trade occurrences, and risk-defined strategies are some notable areas that traders need to heed for long-term successful trading.

To run an options-based portfolio effectively and successfully over the long-term, the following option trading fundamentals must be exercised in every trade. Violating any of these fundamental rules will jeopardize this strategy and possibly negate the effectiveness of this approach on the whole. Below are 10 option trading rules that provide a basic framework of options trading to maintain discipline and systematic trading mechanics.

Figure 1 – 10 rules for long-term successful options trading as demonstrated throughout these performance metrics
Continue reading "10 Essential Options Trading Rules" →

Another positive month for the options-based portfolio despite another negative month for the markets. A positive $3,372 in income was generated for January 2021. Generating consistent monthly income while defining risk, leveraging a minimal amount of capital, and maximizing return on capital is the core of options trading. Options enable smooth and consistent portfolio appreciation without guessing which way the market will move and allow one to generate consistent monthly income in a high probability manner in both bear and bull market scenarios. Over the past 9-plus months (May 2020 – January 2021), 203 trades were placed and closed. A win rate of 98% was achieved with an average ROI per winning trade of 7.8% and an overall option premium capture of 83% while outperforming the S&P 500. The performance of an options-based portfolio demonstrates the durability and resiliency of options trading to drive portfolio results with substantially less risk. The options-based approach circumvented the September, October, and January sell-offs while outperforming the S&P 500, posting returns of 47.6% and 43.7%, respectively (Figures 1, 2, and 3).

Figure 1 – Overall options-based performance compared to the S&P 500 from May 2020 – January 31st, 2021
Continue reading "Options: Positive Returns Despite Negative Market Returns" →