By - SnooBooks8807
I'm in 90% and keep out 10% to withdraw an income from and to sustain any margin increases.
Have you always been 90%? Also does that affect you psychologically with that much risk on? Or no?
Yeah pretty much. I don't view it as too much risk. I believe myself to have a winning edge in the markets. I average 6.8% returns a month. There's nothing else I'd rather have my money in right now.
There's so many different ways to mitigate risk in the markets.
Care to share your winning edge? Are you an option seller?
I trade short strangles when the market is neutral, naked puts when it's a bull market, and naked calls in a bear market.
I avoid assignment of stock and would prefer to hedge it when possible.
If I take assignment, I'll work to repair the deficit immediately in an effort to get out of the position as fast as reasonably possible.
I have a portfolio margin account with over $500k.
I look to get at least 10% gross per month on each trade I take. Doesn't always work that way through, thus the 6.8% monthly return. That percentage is only possible because I have a portfolio margin account. I'd otherwise be getting 1-2% monthly returns.
You should check out /r/pmtraders for others trading on PM
Interactive Brokers. I applied when I deposited 250k and they approved me. I know a guy that tried getting it with 150k and they kept rejecting him. I know another guy that got approved even before putting any money in his account.
No, never have had one. That's correct IBKR doesn't do margin calls. They'll start closing out your positions without regard to which one should be closed out first.
It's why I leave 10% out and in cash. In the event margin requirements roll up on me.
It's not difficult to avoid margin calls. It's just being smart about your trading and taking the appropriate risks.
You can set liquidation priority on your positions, so you do have some control
Has to be IB with that cost. Everyone else is 2x IB
Not sure what you mean here.
Referring to having portfolio margin on under 1mil account. It's usually Interactive Brokers but you might get it Tasty as well but pay 2-3x much for the margin interest.
Now having easy access to high leverage. In the portfolio, you can get up to 6/1 rather than normal 2/1 has downsides as well. The obvious one is that you can blow up your account in a spectacular fashion but also IB has no real concept of marking calls.
If you hit their risk limit they would just start closing stuff in alphabetical order without any prior warning, You can check where your risk limits are but you have to manage them or they will and the latter will not be pretty.
Now good point with 6/1 is that you can do a lot of defined risk stuff like married PUT with dividend stock and make a very decent return on defined risk with high leverage.
I have found it pretty easy to manage leveraged risk. Most I think use it to take on bigger positions. I generally use it to go wkde with multiple positions.
I’m a seller as well but not as experienced as you. Let me ask you this, when you’re selling premium and your positions get tested, can you just roll forever? If so, (and time and opportunity cost aside) isn’t this a bullet proof strategy? Just simply roll out another month until the position expires worthless?
Sure in theory, you could roll forever and let theta decay do it's thing.
The reality is different. Price might be dropping faster then you can roll out making the risk of assignment even greater. You're holding up cash collateral effectively lowering your overall ROI.
I commonly roll options. Anytime I do though, I'm no longer looking to profit, and only looking for an opportunity to get out at breakeven.
So If you sell a put for $5, and 2 weeks later it’s worth $7, you will look to just get your money back by selling the closest exp possible that will give you back what you lost? Instead of rolling out 2 months later for another credit?
I would have to see why it's $7 first.
Right now I lot of the put legs on my strangles look underwater, price isn't near them. The cost of the puts had gone up.
However, theta decay will chew through the the next couple of weeks. Half my portfolio is expiring on the 17th.
If price is breaching, then I'll hedge it by shorting the stock.
If it's moved to far along like a huge dip or something, I would likely roll it out and down to where I don't lose any money on the roll.
But if it's not too far out, I might take assignment and repair the damage from there.
It all depends on what's happening to price at the time. I pay more attention to the charts than I do the options chain.
Great info. So you don’t sell puts because you WANT to be assigned per se, it’s simply a high probability, cash-generating strategy…
Your numbers are dubious.
Well the nice thing is that my returns are not predicated on what you believe is possible or not. By all means, assume it's dubious, full of shit, or whatever else you want to do to discredit it.
Does nothing to affect the edge I have in the market, but it certainly tells me you're not capable of those same returns.
Best of luck to you.
You’re claiming 6.8% per month. That’s 81.6% per year, so yeah, you are either full of shit, or you had a very good year. Either way, you don’t know enough to know that that’s unsustainable, no matter how good your PM is. I have PM as well and to get 10% ROC, in this market, on a short strangle is pretty narrow.
You also don’t know enough to know to that you have no “edge” in the market. That’s laughable, as are your make believe numbers. Run along little boy, this is a grown-ups game.
Yes, I'm having a great year. Last year was good too. And the year before that was good too.
You're under the impression that I think 6.8% monthly is sustainable for all of time? Come now.... all markets change, but opportunity is always abundant. There's always a way to compound great returns.
I suppose you won't believe that I was getting double digit returns monthly in eCommerce either.
I suppose you won't believe that I live along the Caribbean coast of Puerto Rico in the resort community of Palmas Del Mar with a few hundred other entrepreneurs here taking advantage of zero capital gains with Act 60.
I suppose you don't believe that I have an ocean view on every floor of my four story home.
You think I'm full of shit. Great, that's something you have to deal with, not me.
As for me, I'm already in the works of establishing a private fund that we'll be launching on RIA platforms for qualified investors based solely on my methodologies and existing track record. My compliance team, is headed by a guy that was a lawyer working for/with the SEC. My operations is a guy that had developed and sold several ecommerce businesses in the 7 figures.
This little boy is going to be getting a heck of a lot of performance bonuses on this grown-ups game.
Your ceiling is my floor.
Best of luck to you.
Sounds good. File it under fiction.
Edit: let me know where I can buy your seminar for 5 easy payments of 59.95
"cash is a position" = You increase and decrease your allotment of cash as the market conditions change. Right now I have \~10% cash right now, but that number has grown and shrunk over time depending of what I wanted to focus on. I.e. in October I had 90% in cash.
Your allocation should grow as the crash gets deeper. Some do it based on the VIX level, some based on % drop on one of the indexes…deploy a portion of your reserves for every 5% drop for example. Either way, imo is smart not to be all in when the times are good...i say at least 25% cash is a must.
Very interesting comment. This spurred an idea of having cash % equal to Vix’s price. So in march 2020 youd be 66% cash. Most of the time youd be 10-20% cash. This wouldnt give you any edge, but would smooth out returns simply
the opposite...the higher VIX goes the less cash you have. Same with the % allocation based on the index drop. At 30% drop on SPY you should be fully invested.
Insightful. Thanks i agree. crank up allocation as spy tanks
Agreed with this, as the VIX increases the more positions you should have (lesser cash) as an option seller. It gives you a better edge as premiums are higher.
I only transfer out money to pay bills, so yeah almost all of it goes back into increasing my position
How do you allocate your capitol? What strategy ?
Depends really, I like credit or debit spreads the most. The pmcc is probably my favorite and I have only one or two stocks that I use. Volatility has to be a certain % over a long period of time, like tesla for example, and I'll sell calls or puts at a 5 delta or 4 delta gap. Usually makes me around 10k a month.
I'll take out 2 grand for bills and the rest I'll keep in the brokerage. I'll average down if there is a big dip, sell a CSP on the rebound, and then sell calls again when it levels out.
I'm always holding at least 25% cash
Ya given that I have $13 in my savings account, I would say I am balls deep in the market if my balls were hanging from my forehead...
My best trade ever was possible because I had cash available in Mar 2020. Picked up shares of LADR at $2.70 with a 20% dividend (was 50% when I bought, but they cut it to "merely" 20%). Sold it last month for over 300% gain.
95% tied up in positions at any given time. If I can’t figure out what to do with the money, I put it in QYLD for 12% dividends and let them do the options for me
it depends for me,
i have a few committed positions (long term) that make up roughly 25% of my portfolio
but i switch between deploying 0% to 90% of the remaining funds
additionally, sometimes i sell short against my long-term positions to free up additional buying power
edit: to elaborate on the deploying strategy, generally high probability spreads with a internal check to meet ROC % thresholds & payback time 'if' loss scenario occurs
so sometimes IV / price trade-off doesn't seem worth it, so i generally hold cash till a decent opportunity comes along
I’m 95% in the market
If you like margin calls, go all in. Everything works until it doesn’t.
“Works until it doesn’t” is my least favorite phrase of all time. It makes no sense whatsoever.
Howz aboots “It is what it is” -like yea no shit
Give it time…it will make sense someday.
10% cash and 90% portfolio margin for me
This is the way.
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66% cash, 33% stock, 10% long puts, 10% short puts
69% in options.
50% in cash almost all the time . . .
For risk purposes? If so, are you satisfied with that ratio? The more I trade/invest, the more dissatisfied I am with being only 50% in.
I take what the market will give me and don't try to force it higher.
The downside of higher allocations is that opens up being forced to take losses and not being able to take advantage of market moves.
I'm an admittedly conservative trader who hates, I mean I hate! to lose money! When I have to take losses then I have to make those up through profitable trades just to get back to breakeven! I just prefer to not take any losses if they can be avoided and the best way to avoid them is to keep ample dry powder available.
If your risk tolerance is higher and you are OK taking more losses in order to trade a higher percentage of your account, then do it!
I would agree with everything you said except for one thing. By “losses” you mean unrealized losses. Which are different. But I know what you mean
No, I mean actual realized losses . . .
If you are trading 90% of your account and there is a downturn it can result in being forced to close positions for realized losses. This may also prevent being able to roll out of trouble and being forced to take losses.
If this hasn't happened to you yet I think once it does you will see why keeping a good amount of dry powder is critical.