To those of us involved in the Steady Options community, options trading is almost second nature. But most investors, and even most traders, don’t trade options. There may be a variety of reasons why this is the case, but I believe it’s mostly related to the learning curve of understanding a completely new concept.
It can be intimidating at first.
Delta, theta, gamma, vega…options are clearly more complex than just buying a stock or ETF that you think will go up. But the rewards and diversification opportunities of learning options is worth it. After some time, many traders feel as comfortable with options as they do stock. What are some of the ways we could use options in a diversified portfolio?
- Risk management
- “Income” generation
- Speculation
These 3 examples outline simple ways to use puts. There are many similar ways to use call options as well, with the most basic and popular method being covered calls (which is similar to selling puts) and then even get into the complexity of spreads. Option spreads are created by combining multiple long and short option positions. So, with all of this in mind what’s a simple way to get started? As I said, I like the idea of selling puts, and that’s what we do in our Steady Momentum PutWrite service.
Each month, with overlapping positions meeting our target exit criteria on a regular basis, we sell slightly out of the money put contracts on equity market indexes such as the S&P 500, Russell 2000, and MSCI EAFE and collateralize the contracts with short and intermediate term bond ETF’s. This gives us exposure to thousands of stocks across the world, as well as exposure to the credit and term premiums in the bond market. By overlaying short puts on a bond ETF portfolio we create “portable beta”, which is a technique that creates leverage. I’ve written multiple articles about the overall strategy, which you can find here.
The Steady Momentum PutWrite strategy is the most conservative strategy available for subscription on the Steady Options website, and is relatively simple to follow. This makes it ideal for traders of all kinds, but especially those new to the options markets. In my article, I share examples of how put selling might have performed over the last several decades based on publicly available data from the Chicago Board Options Exchange (CBOE) to help set proper expectations and to provide subscribers with confidence.
I also professionally manage this strategy for clients of my firm, Lorintine Capital, which I co-own and operate with my business partner Chris Welsh. You can read more about managed accounts here. The investment minimum for Steady Momentum PutWrite managed accounts is currently $100,000, but as a self-directed subscriber where you manage your own account, you can start with less. If you’d like to learn more about the strategy, please subscribe HERE. For questions related to managed accounts, please feel free to contact our office at 214-800-5164.
Jesse Blom is a licensed investment advisor and Vice President ofLorintine Capital, LP. He provides investment advice to clients all over the United States and around the world. Jesse has been in financial services since 2008 and is aCERTIFIED FINANCIAL PLANNER™professional. Working with a CFP® professional represents the highest standard of financial planning advice. Jesse has a Bachelor of Science in Finance from Oral Roberts University. Jesse manages theSteady Momentumservice, and regularly incorporates options into client portfolios.
What Is SteadyOptions?
Full Trading Plan
Complete Portfolio Approach
Diversified Options Strategies
Exclusive Community Forum
Steady And Consistent Gains
High Quality Education
Risk Management, Portfolio Size
Performance based on real fills
Non-directional Options Strategies
10-15 trade Ideas Per Month
Targets 5-7% Monthly Net Return
Recent Articles
Articles
Pricing Models and Volatility Problems
Most traders are aware of the volatility-related problem with the best-known option pricing model, Black-Scholes. The assumption under this model is that volatility remains constant over the entire remaining life of the option.
By Michael C. Thomsett, August 16
- Added byMichael C. Thomsett
- August 16
Option Arbitrage Risks
Options traders dealing in arbitrage might not appreciate the forms of risk they face. The typical arbitrage position is found in synthetic long or short stock. In these positions, the combined options act exactly like the underlying. This creates the arbitrage.
By Michael C. Thomsett, August 7
- Added byMichael C. Thomsett
- August 7
Why Haven't You Started Investing Yet?
You are probably aware that investment opportunities are great for building wealth. Whether you opt for stocks and shares, precious metals, forex trading, or something else besides, you could afford yourself financial freedom. But if you haven't dipped your toes into the world of investing yet, we have to ask ourselves why.
By Kim, August 7
- Added byKim
- August 7
Historical Drawdowns for Global Equity Portfolios
Globally diversified equity portfolios typically hold thousands of stocks across dozens of countries. This degree of diversification minimizes the risk of a single company, country, or sector. Because of this diversification, investors should be cautious about confusing temporary declines with permanent loss of capital like with single stocks.
By Jesse, August 6
- Added byJesse
- August 6
Types of Volatility
Are most options traders aware of five different types of volatility? Probably not. Most only deal with two types, historical and implied. All five types (historical, implied, future, forecast and seasonal), deserve some explanation and study.
By Michael C. Thomsett, August 1
- Added byMichael C. Thomsett
- August 1
The Performance Gap Between Large Growth and Small Value Stocks
Academic research suggests there are differences in expected returns among stocks over the long-term. Small companies with low fundamental valuations (Small Cap Value) have higher expected returns than big companies with high valuations (Large Cap Growth).
By Jesse, July 21
- Added byJesse
- July 21
How New Traders Can Use Trade Psychology To Succeed
People have been trying to figure out just what makes humans tick for hundreds of years. In some respects, we’ve come a long way, in others, we’ve barely scratched the surface. Like it or not, many industries take advantage of this knowledge to influence our behaviour and buying patterns.
- Added byKim
- July 21
A Reliable Reversal Signal
Options traders struggle constantly with the quest for reliable
By Michael C. Thomsett, July 20
- Added byMichael C. Thomsett
- July 20
Premium at Risk
Should options traders consider “premium at risk” when entering strategies? Most traders focus on calculated maximum profit or loss and breakeven price levels. But inefficiencies in option behavior, especially when close to expiration, make these basic calculations limited in value, and at times misleading.
By Michael C. Thomsett, July 13
- Added byMichael C. Thomsett
- July 13
Diversified Leveraged Anchor Performance
In our continued efforts to improve the Anchor strategy, in April of this year we began tracking a Diversified Leveraged Anchor strategy, under the theory that, over time, a diversified portfolio performs better than an undiversified portfolio in numerous metrics. Not only does overall performance tend to increase, but volatility and drawdowns tend to decrease: