Hey,
This is a time of volatility....meaning the markets are going up and down with uncertain timing. With the right portfolio, you can make money no matter what. The key to do that is to bet on the one thing that is certain: time.
The greeks are our best friend when executing this strategy. If you haven't started using ThinkorSwim yet, go here.
By using option contracts (theta) and a balance of equities that are neutral (delta), we can profit on the time decay available. The key is to have a neutral delta (about 0) and a high theta.
Delta tells us how much the thing we own changes in value when the underlying stock increases by a dollar. A delta of 200 says that we will make 200 dollars if the stock rises a dollar. A delta of -12 says we will lose 12 dollars if the stock rises a dollar. So, a positive portfolio delta says we are bullish, or that we profit when the market goes up. A negative portfolio delta says we are bearish, or that we profit when the market goes down. A neutral delta is what we are shooting for in times of uncertainty. We don't make or lose money no matter what the market does.
If you are bullish (you own stocks), neutralize your delta by buying a SPY put option at its current value. If you are bearish (you have shorted stocks, are shorting calls, or long on puts) then buy some call options on the SPY. These moves will cancel out losses and cap gains. This preps you for theta profits.
Theta is how many dollars your portfolio pays you each day with time decay. Keep a high theta. As time passes, you will get paid no matter what!!
Increase your theta by adding open option contracts to your portfolio. Use the market and stock fundamentals and technicals to grasp a good idea of what will happen for a particular stock. Right now the VIX (volatility) is high, which means options are more expensive. It is a good time to sell put or call options rather than buy them.
Text me or tweet me if you want to talk about any of this.
cell: 5096555446
the twitter: @tannerorndorff
Tanner
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