This entry was posted on Tuesday, July 19th, at
That got me thinking: This also fits in well with our approach of scaling up leverage to compensate for the impact of marginal capital gains taxes, which is a way of generating Roth-IRA-like returns in a taxable account without any contribution limits.
What actions did you take to learn about option trading? I work in the finance industry and have good knowledge of all the option math. Both from a theoretical perspective I hold a PhD in economics and the CFA charter and from practical experience at work with portfolios of futures and options.
Sure enough, after 4 months we had the August meltdown and I lost more than half the account. After learning that lesson I put a lot of new money into the account and kept much more margin cash per short Put position.
Incidentally, this is what we suspect could be in store for global equities in the next few years. When we eventually retire we like to run this strategy at a slightly lower leverage, though, because our marginal tax rate is lower. Over the years, we beat our target handily higher return, lower realized riskbut we budget very conservatively.
Even with the disastrous August event and a few other recent drawdowns that sent the puts into the money, we did better than expected. I have never traded any individual equity derivatives because of compliance issues at work: I would have to pre-clear each and every trade with our compliance department.
Another issue is the treatment of index futures and their options as Section contracts under the US tax code. We just report the cumulative net profit on IRS form and our full calendar year of trading of futures options takes 30 seconds during tax time.
What broker do you use? The commissions are quite low: We have no relationship with IB for referral fees, so this is our unbiased opinion. But they are the lowest-cost provider overall for our personal trading needs.
How do you describe your style?
Did this evolve over time? Some people trade options only sporadically, e. Once having taken possession, people then sell out of the money covered call options to collect income.
We take a very different route. We sell naked puts every week on Friday with an expiration date in exactly 7 days. Early on, we sold Puts with a longer term, up to a month, but we have now shifted to puts with 7 days or less to expiration.
In our trading, there is very little tactical timing involved. We do the same strategy every single week: If the price stays above, the options expire worthless and we made the maximum profit. If the index drops below the strike price, we sell each Futures contract within a few seconds of taking possession.
We have no intention of holding the equity exposure because we have plenty of it already in our other brokerage and retirement accounts. Then why should any of this option writing business work? Efficient markets are the reason why this works.
Whether you sell naked puts or covered calls, you voluntarily subject yourself to the most undesirable and unattractive payoff profile possible: The exact opposite of what everybody wants.
The efficient market compensates you for taking losses when they hurt the most. Why is there not more supply of downside insurance? Nobody has the stomach anymore.
Big institutional investors, like pension plans, are actually net buyers of downside protection. If you work for a pension fund or endowment you have a great aversion to downside risk because one big drawdown is all it takes for you to lose your job.
Career risk for money managers creates demand for put options. Hedge funds and private investors with a long-term focus and a stomach to sustain temporary short-term losses and an understanding spouse!
How much time do you spend on trading options? On Fridays I sell a new round of puts."Here i have collected a few sketchbook designs which i really like, i think i could take some inspiration from these.
Jay Carpenter and Oiccaic Haras j" "Another mixed media page in my school sketchbook. You guys have been fantastic, from my initial enquiries, through supporting me with payments to the information you provided beforehand.
But most importantly Penny was . % is nuts. Coincidentally I have 10% of my portfolio divided equally between Canopy, Aphria, and Aurora. I don't have Constellation money but good to see my allocation in this new sector is inline.
Very promising but also very speculative, 10% is my risk threshold in such a climate. Don’t take our word for it – here’s what our clients say: Do you sometimes have the feeling that you’re running into the same obstacles over and over again?
Many of my conflicts have the same feel to them, like “Hey, I think I’ve been here before. Congratulations, you're in your final year of the MYP:D Anyways, for Photography, you could probably create a blog or a website and have like an online portfolio with pictures you have taken.
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