I. What is your Portfolio size?
The size of your portfolio more than likely decides what type of stocks you are buying and how much capital you are willing to allocate per trade. I have a 6 figure portfolio so, most of my options strategies are broken down like this.
Wheel strategy (70%)
LEAPs (20%)
Credit-Spreads/ Buying short term calls and puts 5%.
5% cash on the sideline waiting to be deployed in case a market drop occurs.
Now, that is what I do, you can do whatever you would like, but doing this has offered me great returns, last year I had a return of 62%, this year I am currently hovering around 12-14% depending on the day.
So, whatever works for you do that.
Also, these percentages that I am talking about are in allocation with the $VIX ( 0.0% ) levels. The lower that ticker is the less I have allocated especially under 15 levels. The metrics above still stay the same, but instead of 100% invested it’s about 75% of my portfolio; and the same guidelines still apply to my strategies.
I hope that makes sense to you, if not you can always book a 1:1 call with me through google calendar and we can go over your individual portfolio and make a plan that beats the market and allows you to sleep at night.
Book a call with this link, totally free.
II. Power-to-Weight Ratio
Compare a standard portfolio to a heavy, old-school engine. It works, but it's sluggish. Compare your system to a 5.0L Coyote with a Twin-Turbo setup.
The reason I had such a fantastic year is because of LEAPs.
A LEAP; are options that have an expiration date greater than 1 year — hence the name Long-Term Equity Anticipation Securities.
And the way I do these are on companies that are trading below there intrinsic value, and I have researched to have a 30-40% upside in the year.
I buy a 70 delta, which is the terminology of the greeks. ( If you don’t understand this read one of my articles where I cover all of these ) and the reason I do this is because they’re already in the money substantially, and I am controlling 100 shares for about 1/3 of the price if I were to buy them today.
So, you could essentially buy 3 contracts worth of LEAPs controlling 300 shares of the stock and you are only paying what 100 shares are currently worth, pretty cool right?
Yes, very cool if you are correct, and very not cool if you are wrong.
So, do your own due deligence, and if you need help book a call with me and I would be glad to help.
III. The Mechanism: How LEAPS + CSPs Work Together
Step 1: Buy a Deep ITM (In-The-Money) LEAP on a high-conviction stock (e.g., Apple, Amazon, or an Index). This gives you the upside of 100 shares for a fraction of the price. I like to shoot for a Delta of 70 or higher, if you have the capital to do so.
Step 2: Take the $70,000 you "saved". This is the money that is left over instead of just straight up buying 100 shares. LEAPs allow you to buy at about the 1/3 of the current price for 100 shares of the stock you are wanting to own. Use it for Cash Secured Puts (CSPs) to harvest premium while you wait for lower entries.
The Result: You have the same growth potential as the "Buy and Hold" guy, but you're earning 4-5% on your idle cash and harvesting another 1-2% monthly in premium.
IV. The "VIX Filter" (Your Proprietary Edge)
Photo of the vix allocation levels.
VIX: As the VIX lowers, we get cautious with how much of the capital we have allocated in the market.
As the VIX gets higher fear is driving the market, everyone is losing their shit because it’s over, but that is exactly when we take advantage.
If you do this I promise you, that you will make money, it is only a matter of time before you are doing this every week-month (depending on your style of trading), and every year you out perform the market.
V. The Hand-Raiser (CTA)
Most people are terrified of leverage because they don't have a system to manage it. I treat leverage like a precision tool. I’ve built a spreadsheet that calculates exactly how many 'units' of leverage your portfolio can handle without redlining.
If you want to see the Capital Efficiency Calculator I use to manage my full-time portfolio, reply 'ENGINE' and I’ll send you the breakdown."
And I also post videos:
As always.
Jesus is the way.
And.
Trade smart.