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  1. Yesterday
  2. Last week
  3. I added live cattle to the system this week. On the signals sheet it is "LC". The ticker to trade it is "LE". I'm not sure yet what fills will be like.
  4. Earlier
  5. Kim

    tastytrade review (Tom Sosnoff)

    They did it again! tastytrade brings the convicted criminal Karen the SuperTrader to their show again. She is using the fees she collected from her clients to travel the world while her victims still recovering from the millions of losses she caused. https://www.tastytrade.com/tt/shows/tasty-extras/episodes/quick-chat-with-karen-the-supertrader-01-16-2020 Instead of admitting they were wrong to bring her to the show to to promote her, they are doubling and tripling down on a losing trade.
  6. In one of the other boards, someone posted an image from Think Or Swim. It basically shows the real world prices for options trades (not the mid prices). Does anyone know if there is a way to view this info using Interactive Brokers?
  7. cwelsh

    Welcome to Anchor Trades

    Step 3 is the weekly rolls, and there are existing threads on it, most of which are in the subscription forums: https://steadyoptions.com/forums/forum/topic/2639-how-to-start-using-anchor-trades/ https://steadyoptions.com/forums/forum/topic/4241-how-do-i-create-an-anchor-portfolio/
  8. cwelsh

    Leveraged Anchor is Boosting Performance

    You missed the comment in the next paragraph that "assumed we paid for the hedge from selling short each week." So instead of the loss on the short puts, that's actually a gain of the $12,800. The purpose of the example was just to show the difference in levered performance ignoring the short put position.
  9. EdSeba

    Leveraged Anchor is Boosting Performance

    Sorry, I'm trying to figure this out out and most likely I'm missing something. Can you provide some clarity as to how is the constructed portfolio showing a balance of $100,963 when the spot at expiry is still 266.92? Mu calculations show the below. What am I missing? Payout PnL Long 8 June 21, 2019 265 Puts $0 -$12,800 Short 3 May 25, 2018 286.5 Puts -$5,874 -$4,872 Long 4 June 21 2019 150 Calls $46,768 -$256 Long 100 shares of SPY $26,692 $0 Left over cash $14,486 $0 TOTAL $82,072 -$17,928
  10. Michael C. Thomsett

    Are Covered Calls a ‘Sure Thing?’

    Two primary flaws are found in covered calls, and these should be well understood by anyone decided to sell a call. First is the potential lost opportunity risk. If the underlying price rises far above the strike and the call is exercised, shares are called away – often well below current market value. A covered call writer needs to understand this risk and accept it in exchange for consistent income from the position. A second flow is that profits are always limited. The maximum profit is the premium received for selling the call or calls; however, a very real risk of net loss also exists. If the underlying price falls below net basis, a paper loss results. This means a writer has to either realize the loss or wait it out in the hope that price will rebound in the near future. For example, a trader buys 100 shares at $40 and sells a call with a 42.50 strike, expiring in two months. Net premium received is 3 ($300). The net basis is $37 per share (purchase price minus premium received). If the underlying price falls to $32 per share, the trader allows the call to expire worthless, but now has a paper loss of 5 ($500). Should the trader sell shares and cut losses, sell another covered call, or wait it out in the belief the price will turn around? The outcome should compare a limited maximum profit to unlimited possible losses. The risk is no greater than just owning shares, but it remains a risk just the same. A solution is to focus on underlying issues with exceptionally strong fundamentals (high dividend yield, 10 years of increasing dividends per share, annual high/low P/E between 25 and 10, growing revenue and net return, and a level or declining debt to total capitalization ratio). Strong fundamentals reduce volatility in stock prices over time, making covered calls safer than those for stocks with high volatility or erratic swings. But this is a deferred factor, not something seen to have an immediate impact: Fundamentals matter, but it takes time for the market to recognize and fully absorb the improvement in a sector’s fundamentals. When the market is not perfectly efficient, the firm’s market value can differ from its fundamental value. (Zhang, D. (2003). Intangible assets and stock trading strategies. Managerial Finance, 29 (10), 38-56) In other words, markets are inefficient. We hear this said a lot, but many people do not appreciate the meaning of the observation. Covered calls are not sure things and market inefficiency makes covered call writing higher-risk at times than options traders might believe. This is one reason n it makes sense to focus on very short-term expiration cycles. The longer a short option is left open, the greater the risk of unexpected and undesirable price movement. With expiration in one to two weeks at the most, time decay makes profitability more likely than the longer-term option selections. Based on the dollar amount received for selling options, many prefer to go out two or three months (or more). But in comparing short-term and longer-term options on an annualized basis, the shorter-term option yields better net returns. In other words, selling 8 two-week options is more profitable than selling two 8-week options. The dollar value of premium can be deceptive, and the only way to make valid comparisons is to restate returns on the annualized basis. A second advantage in the shorter-term option is rapid time decay, reducing risk exposure and allowing traders to roll trading capital over many times to avoid the unexpected. It also makes sense to avoid holding open covered calls in two conditions. First is quarterly dividend date. If a covered call is open in the days immediately prior to ex-dividend date and the call is in the money, traders can execute a dividend capture strategy, call away your shares, earn a quarterly dividend in one or two days, and then dispose of shares. This means you do not earn the dividend and you lose shares you want to keep. The second date to avoid is the day of quarterly earnings announcements. In case of an earnings surprise, the underlying can move in an unexpected way, often exaggerating the response to the surprise itself and leading to early exercise. In any strategy, even the assumed “sure thing” of a covered call, risk assessment and equally important risk awareness should be taken into account in judging a position. What is your exit strategy with the covered call? One conservative approach is to close a position when a certain percentage of profits are realized; but options traders know that setting goals is easier than following them. It often is too tempting to hold off closing in the hope of more profits tomorrow or next week. No one can know for sure when profits will suddenly turn into losses, so setting a conservative goal and then taking action when that goal is reached, is a wise method for avoiding losses. The lesson worth remembering in this is that there are no sure things in any form of trading. It’s true than covered calls are wonderfully consistent cash cows for traders, but anything can go wrong at any time, so traders need to (a) diversify risk exposure, (b) know the true risks to any strategy, and (c) limit exposure by time to expiration. Know when to take profits and set your rules. Then follow them consistently. Michael C. Thomsett is a widely published author with over 80 business and investing books, including the best-selling Getting Started in Options, coming out in its 10th edition later this year. He also wrote the recently released The Mathematics of Options. Thomsett is a frequent speaker at trade shows and blogs on his websiteat Thomsett Guide as well as on Seeking Alpha, LinkedIn, Twitter and Facebook. Related articles: Uncovering The Covered Call Covered Calls –Does Rolling Forward Mean Higher Risk? Leverage With A Poor Man’s Covered Call 2 Tweaks To Covered Calls And Naked Calls Dangers Of The Covered Call
  11. candreouTrade

    Welcome to Anchor Trades

    Can you add a description for step 3 here too please
  12. candreouTrade

    Welcome to Anchor Trades

    Can you add step 3 description here too please.
  13. Kim

    January 2019 Performance Analysis

    Billionaire Bill Ackman's hedge fund delivered 58% returns in 2019 after making a big investment in Warren Buffett's Berkshire Hathaway https://markets.businessinsider.com/news/stocks/bill-ackman-pershing-square-outperformed-returns-2019-berkshire-warren-buffett-2020-1-1028800197 I'm wondering how those "smart" investors who pulled money from the fund a year ago feel now? Maybe the same as some of our members who cancelled after our January 2019 drawdown, and missed the 63% recovery in the second half of 2019?
  14. Kim

    Lessons from Bill Ackman's comeback

    Billionaire Bill Ackman's hedge fund delivered 58% returns in 2019 after making a big investment in Warren Buffett's Berkshire Hathaway https://markets.businessinsider.com/news/stocks/bill-ackman-pershing-square-outperformed-returns-2019-berkshire-warren-buffett-2020-1-1028800197 I'm wondering how those "smart" investors who pulled money from the fund a year ago feel now? Maybe the same as some of our members who cancelled after our January 2019 drawdown, and missed the 63% recovery in the second half of 2019?
  15. Second, we were targeting negative correlation with the broader stock indexes to maximize the diversification benefits for people using this system as part of a broader portfolio. Third, we wanted to make trading the system predictable from a time standpoint. To accomplish these three objectives we built a mechanical trend following system using options on futures contracts that signals every Friday morning. The system is always in the market. To manage risk across all the contracts we use at the money option debit spreads targeting an overall delta based on the variation of the underlying future. We are currently trading 10 underlying commodity and financial futures. Like all trend systems we expected the overall returns to be positive, but the month to month performance to be lumpy with occasional large winning months. In the following table I show the monthly performance of the trend system since July compared to the SocGen Trend Followers Index and the S&P 500.The cumulative return on the Steady Futures portfolio for the 6 month period is 8.5% versus 1.6% for the SocGen Trend Followers Index. Additionally, our returns were non-correlated to the S&P 500 index returns. Trend following systems often perform poorly during stock bull markets. Considering this tendency we are very happy with the performance of the system over this period. Our win rates are in line with expectations. As a reminder, trend systems tend to have low win rates but larger wins than losses. Some successful trend systems have win rates as low as 40%. Changes to the System for 2020 It is important to think about what the sources of the performance difference between our system and the trend followers index are, and whether we are happy with those performance differences. While it is hard to quantify these drivers (we don't know exactly what or how others are trading) we can make some reasonable assumptions based on what we know about trend systems and what some managers say publicly. We've identified two underlying drivers for the performance difference. The first driver is differences in timing and signaling between our system and most trend followers. Most trend followers use various moving average or break out style systems. We generate our signals using statistical forecasting techniques. Additionally, we auto-optimize our model parameters based on trailing market conditions. During long trends we find that we achieve similar returns as other systems. We do find that during some trend reversals or during extreme weekly moves our system will often reverse faster than some of these other systems. Considering this is a feature of our process we are happy with performance differences that are driven by our forecasting process. The second driver of performance difference is lack of diversification across underlying contracts. Due to liquidity issues with some options we reduced our actively traded underlying contracts to 10 by the end of the year. Many large CTAs will trade well over 50 different underlying contracts. One of our goals for 2020 is to add at least 5 more underlying contracts to the system. We believe this additional diversification will improve our risk adjusted return over 2020.
  16. Performance Dissected Check out the Performance page to see the full results. Please note that those results are based on real fills, not hypothetical performance, and exclude commissions, so your actual results will be lower, depending on the broker and number of trades. Please read SteadyOptions 2019 Performance Analysis for full analysis of our 2019 performance. We have extensive discussions about brokers and commissions on the Forum (like this one) and help members to select the best broker. Please refer to How We Calculate Returns? for more details. Our strategies SteadyOptions uses a mix of non-directional strategies: earnings plays, Straddles, Iron Condors, Calendar Spreads, Butterflies etc. We constantly adding new strategies to our arsenal, based on different market conditions. SO model portfolio is not designed for speculative trades although we might do some in the speculative forum. SO is not a get-rich-quick-without-efforts kind of newsletter. I'm a big fan of the "slow and steady" approach. I aim for many singles instead of few homeruns. My first goal is capital preservation instead of doubling your account. Think about the risk first. If you take care of the risk, the profits will come. What's New? We continue expanding the scope of our trades. We are now trading hedged straddles, short term straddles, ratio spreads and more. We launched Steady Momentum and Steady Futures services. We have implemented more improvements to the straddle strategy that reduces risk and enhances returns. We started using the CMLviz Trade Machine to find and backtest some of our trades. This is an excellent tool that already produced few nice winners for us. What makes SO different? We use a total portfolio approach for performance reporting. This approach reflects the growth of the entire account, not just what was at risk. We balance the portfolio in terms of options Greeks. SteadyOptions provides a complete portfolio solution. We trade a variety of non-directional strategies balancing each other. You can allocate 60-70% of your options account to our strategies and still sleep well at night. Our performance is based on real fills. Each trade alert comes with screenshot of our broker fills. We put our money where our mouth is. Our performance reporting is completely transparent. All trades are listed on the performance page, with the exact entry/exit dates and P/L percentage. It is not a coincidence that SteadyOptions is ranked #1 out of 723 Newsletters on Investimonials, a financial product review site. Read all our reviews here. The reviewers especially mention our honesty and transparency, and also tremendous value of our trading community. We place a lot of emphasis on options education. There is a dedicated forum where every trade is discussed before the trade is placed. We discuss different strategies and potential trades. Unlike most other services that just send the trade alerts, our members understand the rationale behind the trades and not just blindly follow the alerts. SO actually helps members to become better traders. Other services In addition to SteadyOptions, we offer the following services: Anchor Trades - Stocks/ETFs hedged with options for conservative long term investors. Anchor Trades produced 38.4% gain in 2019, beating its benchmark by 7.0%. Steady Momentum - puts writing on equity indexes and ETF’s. Steady Momentum produced 19.1% gain in 2019, beating our benchmark by 5.5%. PureVolatility - Volatility products like VXX and UVXY. PureVolatility produced 28.3% gain in 2019. Steady Futures - a systematic trendfollowing strategy utilizing futures options. Steady Futures produced 8.6% gain in the second half of 2019 (launched in July 2019). We offer a 5 products bundle (SteadyOptions, Steady Momentum, Anchor Trades, PureVolatility and Steady Futures) for $745 per quarter or $2,495 per year. This represents up to 50% discount compared to individual services rates and you will be grandfathered at this rate as long as you keep your subscription active. Details on the subscription page. More bundles are available - click here for details. Subscribing to all services provides excellent diversification since those services have low correlation, and you also get the ONE software for free for 12 months with the yearly bundle. We also offer Managed Accounts for Anchor Trades and Steady Momentum. Summary 2019 was another excellent year for our members. All our services delivered excellent returns. SteadyOptions is now 8 years old. We’ve come a long way since we started. We are featured on Top 100 Options Blogs by commodityhq, Top 10 Option Trading Blogs by Options trading IQ, Top 40 Options Trading Blogs, Top 15 Trading Forums, Expertido Best Options Trading Blogs and more. I see the community as the best part of our service. I believe we have the best and most engaged options trading community in the world. We now have members from over 50 counties. Our members posted over 125,000 posts in the last 8 years. Those facts show you the tremendous added value of our trading community. I want to thank each of you who’ve joined us and supported us. We continue to strive to be the best community of options traders and continuously improve and enhance our services. Let me finish with my favorite quote from Michael Covel: "Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between." If you are not a member and interested to join, you can click here to join our winning team. When you join SteadyOptions, we will share with you all we know about options. We will never try to sell you any additional "proprietary systems", training, webinars etc. All our "secrets" are included in your monthly fee. Happy Trading from SO team!
  17. Alan

    Techniques for Growing a Small Account

    Kim, I have been downloading old posts by you to help my son learn about options. Do you know if the ebook mentioned in your post is still available?
  18. Kim

    Anchor 2019 Performance Analysis

    Thank you @cwelshGreat job! I want you to read this sentence one more time: The strategy outperformed the S&P 500 in 2019 by 7.2% while being hedged. We all like to make money, but at the same time, not losing when the markets go down. This is why many people hedge. Well, there is a catch: hedging reduces your returns. Hedging costs money. Except for the Anchor strategy, it didn't: not only hedging did not cost us money, but the strategy actually OUTPERFORMED the S&P by 5%. Of course Anchor does not perform equally well under all market conditions - no strategy does. If S&P was up only 10%, the Anchor would likely slightly underperform (this where Steady Momentum would likely perform better). And the tradeoff was being slightly less hedged. But I believe most retail investors and fund managers would be extremely happy to get those numbers on a hedged strategy.
  19. Kim

    Momentum 2019 Performance Analysis

    Thank you @Jessegreat job! I think your statement "SMPW performed as expected." is a bit modest. If PUTW historically outperforms the markets with less volatility, and SMPM outperformed the PUTW by 5.5%, I would consider it an outstanding result.
  20. Steady Momentum had an excellent first year of publication, producing significant gains in both of the published strategies. The most popular strategy writes (sells) out of the money puts on equity indexes and ETF’s, and returned 19.1% for the year. The additional strategy that invests in ETF’s and is therefore tradeable in cash accounts, returned 18.4% for the year. Since SteadyOptions is an options centric community and the PutWrite strategy is most popular, I’ll focus most of the analysis on it. Members interested in learning more about the ETF strategy can read this post. I attempt to make Steady Momentum PutWrite (SMPW) a straightforward and simple strategy to follow without sacrificing anything in the way of expected returns. This allows members to replicate our model portfolio performance with minimal difficulties. The strategy is rules-based and transparent, so members can typically anticipate when a trade is approaching. An imperfect but fair benchmark for our strategy is the ETF PUTW (WisdomTree CBOE S&P 500 PutWrite Strategy Fund). PUTW tracks the CBOE S&P 500 PutWrite Index, which writes monthly at the money puts on the S&P 500 index. PUTW returned 13.55% in 2019, so we were fortunate to beat our benchmark by approximately 5.5%. This means on both an absolute and relative basis SMPW had an excellent year. Additionally, it should be noted that the strategy returns were produced with very little downside with gains in 11 out of 12 months and a maximum drawdown on a month end basis of less than 2% and a Sharpe Ratio of approximately 3. Members should not expect SMPW to perform at this level(Sharpe Ratio 3) forever. Reviewing the long-term historical data in my various posts is a better guide of what to expect (Sharpe Ratio 0.9).From my decade + experience in advising and guiding clients and subscribers, it’s my job to manage expectations in an intellectually honest manner. When performance is excellent, like we experienced in 2019, I’m forced to remind investors that drawdowns are coming at some point. Likewise, during deep and lengthy drawdowns it’s my job to remind everyone that spring always follows winter and the best returns are often after drawdowns. I can’t predict how long this current runup will last any better than I can predict when drawdowns will end. Please study the long-term performance data closely to know what to expect in both good times and bad, and then simply stay the course for the long-term. The underlying fundamental reasons why the strategy works are both timeless and universal, such as stocks outperforming bonds, bonds outperforming cash, and put options (the equivalent of financial insurance) having a positive (negative) expected return for the seller (buyer). It’s these relationships that explain much of SMPW 2019 results. Writing put options has exposure to the underlying asset performance, so the substantial gains in the S&P 500 (31%), Russell 2000 (25%), and MSCI EAFE (22%) indexes contain the most explanatory power as these are the indexes we write puts on. Since put writing carries a beta to the underlying assets of approximately 0.5, it’s no surprise that the strategy captured less than 100% of the underlying returns. The chart below from this post is particularly illustrative, showing how S&P 500 put writing has performed in historical market environments. Over time, put writing can match or exceed the returns of the underlying asset with less volatility. Additionally, SMPM has exposure to what academics call the “term premium” (the excess returns of treasury bonds vs. treasury bills) by holding cash collateral in fixed income ETF’s. High quality short and intermediate term bonds had a good year, with IEI returned 5.70% and NEAR returned 3.55%. The PUTW benchmark keeps all collateral in US treasury bills, which returned approximately 2%, so these spreads also explain several percentage points of the SMPW outperformance. SMPW also uses a modest amount of leverage (125% target notional), which was also contributory. Given the 2019 performance of both the underlying stock and bond asset classes, SMPW performed as expected. Congratulations to all members who participated in 2019 gains, and let’s have a great 2020 together! If there’s any additional questions, please feel free to post feedback on the discussion forum or simply reply to this post. 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. Jesse manages the Steady Momentum service, and regularly incorporates options into client portfolios. Related articles: Combining Momentum And Put Selling Combining Momentum And Put Selling (Updated) Steady Momentum ETF Portfolio Equity Index Put Writing For The Long Run Can You "Time" The Steady Momentum PutWrite Strategy? How Steady Momentum Captures Multiple Risk Premiums Put Selling: Strike Selection Considerations
  21. DubMcDub

    Tastyworks commissions

    Likewise, @CJ912.
  22. First, as one of our members wrote, how many traders would consider 40%+ returns as subpar? We are definitely in a good shape if 41.7% is considered "well below" average. But lets see what happened in 2019. Each year, our contributor @Yowsterbreaks down the numbers by trade type. Here is 2019 Year End Performance by Trade Type. As you can see, our returns have been heavily impacted by few big losers back in January and May. You can read a full analysis of January 2019 performance. We had some very large losing trades: Index trades (SPX, TLT, EEM, XLV): 4 big losing trades SPX (-100%, -100%, -72.9%) and TLT (-100%) killed the performance of these trades this year. VIX-based trades: 3 losing trades which play for VIX to fall from highs, or looking for movement in either direction all failed. Broken-wing Butterfly (BWB) Trades: One big -96% losing trade exceeded the gains from all winning trades. Of the top 10 losers only one was from the calendar or straddle trades (and it was at #10). Take away those 10 biggest losers and the model portfolio gain gets to ~90% (non compounded). When you dig into the numbers you see that the overall contribution from our “bread and butter” calendar and straddle trades is on par with prior years (multiply avg gain per trade by number of trades). Since May we made some adjustments, and in the second half of 2019 the model portfolio was up 63%, which translates to annualized compounded return of 165%, in line or better with our previous years. Our core strategies continue to work very well. In fact, if we traded only straddles, calendars and ratios, the yearly return would be well into the triple digits. Going forward, the goal is to avoid those bigger losses, and we are going to reduce the number of those higher risk trades and focus mostly on straddles, hedged straddles, calendars and ratios. On a related note, I got the following message from one of the former members: "So it is fair to say that there is definitely luck involved in trading any trading strategy. I happened to select to test your system at probably the worst 6 month period you have had in 8 years. Any other 6 month period … including 3 months earlier or three month later… would have provided drastically different results." This is true, but isn't it true for any investment? Someone who entered the stock market in March 2009 would have drastically different results from someone who started in 2007 and experience the 50% drawdown. This is also true for many best performing stocks. Apple, Amazon and Google produced incredible gains since their IPOs, but also experienced few large drawdowns, ranging from 65% to 94%. Of course those stocks have also experienced many smaller pullbacks of 20-25%. If you owned one of those stocks and sold them after each pullback, you would never achieved those long term results. In a similar way, if you started SteadyOptions subscription in December 2018 and cancelled after the January drawdown, you would missed the following 63% recovery. If you cancelled after our previous drawdown in 2016, you would missed the following gains of over 400%. Drawdowns are an inevitable part of achieving high returns. If you haven’t yet experienced a significant decline, then you probably haven’t owned something that has appreciated 10x, 20x or more. Or you simply haven’t been investing for that long. All big winners have drawdowns. Accepting this fact can go a long way toward controlling your emotions during periods of adversity and becoming a better investor. To put things in perspective, SteadyOptions produced Compounded Annual Growth Rate of 120.3% since inception. You cannot produce such high gains without taking some risk. We are trying to avoid the drawdowns as much as possible, but the truth is that 20% drawdowns are normal and expected for a strategy that produces such high returns. Finally, take a look at SteadyOptions historical performance: Only 3 out of 9 years we produced "subpar" double digit returns. If the historical pattern continues, the next 2 years should be very rewarding.. Stay the course!
  23. The new tracking account was opened on January 2, 2019 when SPY was right at $249.00 with a balance of $100,000. In the tracking account, trading commissions were ignored. The initial portfolio looked like: Six contracts of the 175 calls gave us control over $105,000 of SPY, and we held $36,000 of BIL. This gave us about 140% leverage on the account, a moderate amount, but enough that we should not lag when the market increased. I have a couple of comments on our initial portfolio. First, our initial hedge was only 1.6% out of the money. During the year we changed that to 5%, allowing for a loss in the event of a small market decline but trading it off for a higher upside. Second, during the year we also “split” the hedge of the short puts and the long portfolio. The short put hedge stayed at the money, as one of the bigger risks to the portfolio is a large spread between the short put that is sold during the week and the actual put hedging it. For instance, in the above portfolio there is more than $6.00 of downside risk between the short put and its hedge. (It is more than six dollars due to the delta of the hedge compared to the delta of the short position – in other words, the short position is more sensitive to down movements than the long hedge). To offset this risk, we kept the portion of the hedge against the short puts higher. Almost immediately after opening the position and continuing throughout the year, the market took off upwards, moving over 2.5% up in the first week alone. In fact, the market moved up so quickly, we ended up having to roll the long hedge after the first month, rolling to the January 20 258 Puts when SPY hit 270. It was at this roll that we adopted the five percent out of the money hedge. The market kept moving up, resulting in us having to roll the long hedge again on April 2, 2019 when SPY hit 285. At this point we “split” the hedge and our portfolio looked like: With SPY trading at 285, the six contracts at five percent out of the money, hedging the actual long portion of the portfolio were purchased at a strike of 270. The four contracts hedging the short puts that are sold to generate income were purchased at a strike of 285 – the then current value of SPY. The market did not stop its rise, leading to another roll of the hedge on November 1, 2019. That makes three rolls up of the long hedge during one calendar year – a record number for Anchor and one that we would expect to act as a drag on the account. However, due to the leverage employed, any drag was minimal. December 30, 2019 came around, necessitating a roll of the long call position. Due to portfolio gains, the strategy also had to purchase some additional long puts to continue to hedge the entire position. After this roll, with SPY at $320.74, the portfolio looked like: Over the full year, SPY went from $249.00 to $320.74, a gain of 28.8% (31.2% including dividends). Over that same period, Leveraged Anchor increased from $100,000 to $136,094.88 – a gain of 36.1%. The final number for 2019 is 38.4% gain. In other words, the strategy outperformed the S&P 500 by 7.2%. Individual accounts will be less, as there are trading costs and commissions, but even if an individual trader’s commissions ran two percent (an extremely high number), performance is still superb. In reviewing the strategy, several points emerge: Adding forty percent of leverage resulted in outperforming the market by twenty five percent. This means the three rolls of the hedge during the year bled the account by about fifteen percent, which is to be expected. Another way of looking at this is, had we not been hedged, the performance would be higher, but if a trader did that, the trader would be significantly increasing risk; Given the outperformance, it may be worth rolling the hedge more frequently to reduce risks from downturns; Given the outperformance, it may be worth rolling the hedge of the short puts more frequently to reduce the risk from small short term pull backs and whipsawing; and For large accounts, diversifying into other instruments on other market indexes (small caps and international) should be explored. Thoughts and opinions on rolling the hedge more frequently, or on any other concerns or ideas for the strategy are always appreciated, as we are always looking to improve the strategy further. Thanks everyone for a great year, and let’s hope next year performs just as well. Christopher Welsh is a licensed investment advisor and president of LorintineCapital, LP. He provides investment advice to clients all over the United States and around the world. Christopher has been in financial services since 2008 and is a CERTIFIED FINANCIAL PLANNER™. Working with a CFP® professional represents the highest standard of financial planning advice. Christopher has a J.D. from the SMU Dedman School of Law, a Bachelor of Science in Computer Science, and a Bachelor of Science in Economics. Christopher is a regular contributor to the Steady Options Anchor Trades and Lorintine CapitalBlog. Related articles: Anchor Trades Portfolio Launched Defining The Anchor Strategy Market Thoughts And Anchor Update Leveraged Anchor Is Boosting Performance Anchor Trades Strategy Performance Revisiting Anchor (Thanks To ORATS Wheel) Revisiting Anchor Part 2 Leveraged Anchor Update Leveraged Anchor Implementation Leveraged Anchor: A Three Month Review Anchor Maximum Drawdown Analysis Why Doesn't Anchor Roll The Long Calls?
  24. Kim

    2019 Year End Performance by Trade Type

    Okay, you mean assignment.. We don't sell naked puts, but assignment is still a risk in some cases because we trade calendar spreads where short options are involved. So if the stock moves too much, short options might become deep ITM and be assigned. This is very rare, but it could happen. In any case, this is not an issue because the stock will be fully hedged by the long leg of the calendar. We will send an email to all registered members when we have available spots.
  25. nitsuj

    2019 Year End Performance by Trade Type

    Hi Kim, Thanks for the quick answer, I hadn't see the FAQ but it. The last question was related to selling naked put options and how you handle any stock that is allocated to you, but I have now seen in the faq that you don't do that. One last question, do I need to follow any particular thread to be notified about spaces opening on for the Steady Options Service?
  26. Kim

    2019 Year End Performance by Trade Type

    As mentioned on the subscription page, please make sure to read the Frequently Asked Questions and the service description before subscribing. Both places mention that you need a margin account. And yes, 20k becomes 28k in 2019. Could you clarify your last question please?
  27. nitsuj

    2019 Year End Performance by Trade Type

    Hi, Just looking at this and the steady options subscription page, and can't see if the recommendation is to use a cash or margin account. So to be specific if I have a $20000 account and followed all of the trades this year, would it now be at $28000 with the 40% return? Also and this is only slightly related, how do you deal with any allocations that occur? Thanks
  28. Michael C. Thomsett

    A Reliable Method for Picking the Underlying

    Once you decide on a favorite strategy or group of strategies, which underlying do you pick? Very little is said about this among traders, and it appears that many have a few favorite stocks they use for options trading. This can be based on many factors, including past experience and levels of success. Many options traders focus on positions like covered calls and limit their trades to positions held in their portfolios. This ultra-conservative approach makes sense but easily overlooks the flexibility of other strategies with similar risk profiles, such as uncovered puts. The risks are the same, but the uncovered put is far more flexible because owning equity positions is not part of the strategy. However, if you are one of those traders focused only on the strategy, how do you pick the underlying? One method is preferable over all others: Dividend yield and history. This is true even if you do not own stock. Clearly, a higher dividend yield is preferable over an underlying with a low-yielding dividend or that pays no dividend at all. But beyond this, it may also make sense to pick high-yielding dividend stocks and to also focus on dividend achievers, those companies increasing their dividend per share every year for at least the last 10 years. Why is this? Although there are exceptions, dividend achievers tend to exhibit out-performance by the share price compared to the rest of the market. These also tend to show lower volatility and to provide strength in both fundamental and technical indicators. Dividend achievers provide greater benefits than dividend per share. That measure may itself be deceptive if the growth is minimal compared to increases in net earnings. Based on the payout ratio, a dividend achiever might not keep pace with profitability. For this reason, options traders will make the best selection of underlying issues when they look at all three dividend indicators: Dividend yield should be better than the average stock. This is a matter of opinion, but look for stocks yielding 3.5% or higher, representing a strong return and a major part of overall returns among three sources (dividends, option premium and stock appreciation). The dividend often is the strongest of these three. Payout ratio, the percentage of profits paid out in dividends. This is a difficult indicator because when profits are volatile, the ratio itself might jump up or down each year, so that it is not always reliable. But avoid issues exhibiting a general slide in the payout ratio over many years, a sign that management is giving shareholders only a minimal dividend when they could be sharing profits more generously. Dividend achiever status, an increase in dividends per share every year for at least 10 years. This matters only when viewed in context of the other two dividend tests. The increase itself can mean much less when viewed by itself and not also considering where it all fits together. There is also a fourth test worth applying. The debt-to-capitalization ratio is crucial to judging dividends and picking underlyings to trade options. Capitalization represents the sources of capital, namely long-term debt and shareholders’ equity. As the ratio grows over the years, more and more of future profits will have to be used for debt service, meaning less profits will be left to pay dividends. A strong, well managed company will report consistent or declining debt-to-cap ratios. When the ratio rises, it is a danger signal, demonstrating that management is not controlling working capital effectively. Many people do not see the relationship between long-term debt and dividends. But imagine this scenario: Profits are flat or even falling, but the dividend per share is increased. How is this even possible? It could mean that the company is allowing long-term debt to increase. That extra money borrowed is used to pay a higher dividend. Whenever profits are flat, but dividends rise, look at the debt-to-cap ratio. If it is going up each year, the positive-looking dividend history is a false signal. Eventually the company will have to pay for its over-reliance on debt. If you’re not sure about this, look back at the history of Eastman Kodak, General Motors or Sears. They all fell into the trap of letting long-term debt run away and move above 100 percent of total equity (meaning equity value was less than zero). For options trading, it might still be possible to make a profit in the short term, but over time it tends to go downhill along with the stock price. Options trading relies on both technical indicators and fundamental trends, despite a popular belief that you can learn all you need from implied volatility and pricing models. Nothing could be so deceiving as this belief, and on the popularity of signals that reveal only part of the larger picture. Options trading is not so far rem oved from stock analysis and corporate strength (or weakness) that you can ignore it completely. The broader your sources of information, the better your track record will be in trading options. There are few if any indicators that can be used on their own and without looking at related signals and trends. Picking the underlying is not just a matter of richer than average options as the means for selection. Turning to the three dividend signals plus trends in long-term debt and total capitalization, give out a complete picture of what is taking place, and this leads to more informed decisions. Too many traders shun fundamental analysis when picking underlying issues for options trading. But this is invariably a mistake. More information leads to better decisions. Michael C. Thomsett is a widely published author with over 80 business and investing books, including the best-selling Getting Started in Options, coming out in its 10th edition later this year. He also wrote the recently released The Mathematics of Options. Thomsett is a frequent speaker at trade shows and blogs on his websiteat Thomsett Guide as well as on Seeking Alpha, LinkedIn, Twitter and Facebook.
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