SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

Steady Momentum 2020 Year in Review


Steady Momentum Put Write (SMPW) is one of the available subscription services at Steady Options. We launched the strategy in early 2019, so we now have two years of performance to evaluate on both an absolute basis and relative to the strategy’s benchmark, PUTW (WisdomTree CBOE S&P 500 PutWrite Strategy Fund). 

SMPW is based on a $100,000 model portfolio that sells slightly out of the money put options on global equity indexes and ETF’s.  The strategy uses modest accounting leverage, targeting 125% notional exposure. The strategy also increases expected returns by holding collateral assets in short to intermediate term fixed income ETF’s.

 

The SMPW model portfolio returned 2.75% in 2020, outperforming the PUTW benchmark return of 1.65%. Since the official February 11, 2019 inception, our SMPW approach to put writing has outperformed PUTW by 7.12%. The SMPW annualized return since inception is currently 10.59%, vs 5.74% for PUTW. One of the unique characteristics of SMPW is the level of transparency we offer to members. The long-term theory and data for the strategy has been posted on the member board and in my various blog posts, and every trade alert provides the updated account value of the model portfolio. Additionally, at the end of every month an excel spreadsheet is provided to members showing the daily account value since inception. Our members feel confident in their ability to manage the strategy in their self-directed accounts and to replicate model portfolio results.

 

2020 will be remembered for the record setting speed of the February and March bear market as equity prices quickly adjusted to the potential economic impact of the global pandemic. From February 19th to March 23rd the S&P 500 dropped 33%, creating the first major stress test for our strategy. As expected, our model portfolio declined along with the market as put option values increased dramatically due to the price change and volatility increase.

 

Put writing provides a risk and return profile similar to insurance contracts. The put option buyer transfers the risk of surprise market losses to the option seller in exchange for a premium set by the supply and demand of market participants. Like an insurance company, put option sellers take on this risk with the expectation of long-term profits. If this were not true, no market participant would rationally sell puts. Occasional losses occur depending on strike selection which is similar to a deductible, providing the insurance like protection the put option buyer desires and is willing to pay for. For this reason, we believe put option writing is a sustainable alternative risk premium that can be earned in a passive manner without needing to skillfully time entries and exits. Historical market data shows a large and consistent tendency for option implied volatility to exceed realized volatility, which is in essence our source of expected profits along with the fixed income returns of our collateral ETF’s.

 

Our model portfolio recovered to new highs from April through year end as option prices adjusted upward to the pandemic risks similar to how insurance prices often increase after claims are paid out. We enter 2021 with VIX at $22.75, which is slightly above its long-term average. With the S&P 500 at all-time highs, market participants are still pricing in the potential for volatility until there is more certainty that the pandemic and all of its economic ramifications are behind us. 
 

In 2021 the tactical element of the SMPW strategy strike selection process will be removed.  The short delta of the strikes sold will no longer be determined by momentum signals, as this element of the strategy has been a net detractor to performance since inception. This decision is based on observations about how equity markets have evolved. Therefore the service will be renamed to "Steady PutWrite". We'll also be making an ETF change to our underlying fixed income collateral assets.

Our approach will otherwise remain consistent, selling and rolling put contracts in a disciplined manner with the goal of continuing to add value relative to our benchmark. Below is a chart displaying the path traveled for our model portfolio since inception that is useful as a visual aid to supplement the monthly returns listed on the strategy performance page.
 

 

image.png

 

Jesse Blom is a licensed investment advisor and Vice President of Lorintine 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 a CERTIFIED 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.

Related articles

 

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

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • Things To Think About Before Getting Involved In Investing

    There are various benefits associated with investing. It can be a great way to boost your income, providing you with financial security during a troubling time. Smart investing also comes with the possibility of long-term returns, meaning it can be better to invest your money than leave it in your regular bank account (even if you are earning interest). 

    By Kim,

    • 0 comments
    • 189 views
  • Micron Technology (MU) Earnings Report June 30, 2022

    Welcome to the ORATS earnings report where we scan for companies with upcoming earnings announcements, check out historical earnings information, and find a potential options trade. Read on or watch the video overview here: https://youtu.be/IDgR3FzONnI.

    By ORATS_Matt,

    • 0 comments
    • 224 views
  • Does “Managing Winners” Add Value to Short Strangles?

    Some option educators suggest short strangles have historically benefited from actively managed exit strategies. A widely popularized approach is to enter S&P 500 strangles at 45 DTE and exit at 50% of the credit received or a 21 DTE time stop, whichever occurs first.

    By Jesse,

    • 2 comments
    • 4,702 views
  • NKE Earnings Report June 27, 2022

    Welcome to the ORATS earnings report where we scan for companies with upcoming earnings announcements, check out historical earnings information, and find a potential options trade. Read on or watch the video overview here: https://youtu.be/2mtx2ja-VwQ.

    By ORATS_Matt,

    • 0 comments
    • 233 views
  • KBH Earnings Report June 22, 2022

    Welcome to the ORATS earnings report where we scan for companies with upcoming earnings announcements, check out historical earnings information, and find a potential options trade.

    Read on or watch here:

    By ORATS_Matt,

    • 0 comments
    • 298 views
  • Know How To Trade Before Making An Investment

    Everyone is searching for a way to improve their living quality. Plenty of scopes are coming to the forefront and people are grabbing the opportunities with the hope of receiving the best revenue against their investment. A share market is a place that can return the high revenue of your investment.

    By Kim,

    • 0 comments
    • 319 views
  • Implied Volatility and Standard Deviation

    1. Isn't holding a naked long call (as a result of locking in a profit or plain buying outright call) in general a bad idea? Reason I think so is because of the nature of IV: it mostly falls when the underlying is rising. So you have short theta and a big long vega moving against you.

    By Mark Wolfinger,

    • 0 comments
    • 299 views
  • Introducing a "Risk Free" Trade

    A few weeks ago, I got the following email from one of our former members: "I would like to share with you an article about "projected no risk trades" or "no risk trades". Of course I was skeptical. But when he shared the setup with me, I became intrigued. How does the following risk profile look to you?

    By Kim,

    • 6 comments
    • 1,392 views
  • What You Trade Matters

    Traders love to tell people that they can trade anything. That if you have the skills to be a trader, the specific item traded is unimportant. That may be true for some professional traders who are skilled technicians. However, it’s very different for gullible amateurs.

    By Mark Wolfinger,

    • 0 comments
    • 633 views
  • The Big Loss

    At his blog, Joey offers his perspective on the top reason that so many trader wannabes are not, and will not, become profitable traders. His post is titled: Learn to Lose Money to Make Money. Here are the Excerpts from the blog.

    By Mark Wolfinger,

    • 0 comments
    • 822 views

  Report Article

We want to hear from you!


2 years Performance Summary

Steady PutWrite CAGR since inception is 10.6% with Sharpe Ratio of 0.76. During the same period, the strategy benchmark PUTW (Wisdom Tree CBOE S&P 500 PutWrite Strategy Fund) GAGR was 7.4% with Sharpe ratio of 0.47. In other words, the Steady PutWrite strategy outperformed the benchmark by 3.2% annually with less volatility.

Share this comment


Link to comment
Share on other sites


Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

Options Trading Blogs Expertido