It’s been a long time since I felt really good about my portfolio. But recently, I made some changes that have finally given me the peace of mind that comes with knowing your investments are sound. If you’re feeling frustrated with your options portfolio, or if you’re just starting out, and don’t know where to begin, stay tuned for tips on how to make peace with your stock options portfolio!
In this video we discuss:
- Stock Options Delta to manage risks
- Volatility and Recession Trading Strategies
- Key Takeaways
Real quick guys, please comment below and let me know your thoughts on this post.
Also, be sure and grab the FREE Simplified Options Strategies Trading Guide. It covers the different options strategies setups, how and when to put them on, max profits, and trade management. It’s a great guide to have by your side when trading options.
So let’s get started!
What is Options Delta?
Technically, Delta measures the change in an option’s price given a one-unit move in the underlying asset’s price. It tells you how much the option will move compared to the underlying.
We covered Delta in detail in our last video “Use The Greeks To Gain An Options Trading Edge”. If you haven’t seen that one, I’ll link it down below and you can check it out. It provides a couple of good examples.
What I want to talk about in this video is how I am using Delta today. I believe that the markets are extremely efficient and everything is priced in. For this reason, I like to trade both sides and stay fairly delta neutral.
I do believe that the market has further to drop. I talked about this in detail in the video “How To Trade Options in a Recession“. I’ll link to it below so you can check it out if you missed it. I discussed how I was investing different amounts at different levels.
Because analysts still have earnings estimates too high, I believe the S&P can drop down to the 3200 to 3000 range. For this reason, I’m only about 70% invested and fairly delta neutral. I’ll move back in if and when the market drops. Here is the mix of long, short and neutral strategies I will employ.
Current mix with S&P above 3500 – 70% invested
Short – 25%
Neutral – 35%
Long – 10%
If and when the S&P hits 3200 – 80% invested
Short – 10%
Neutral – 40%
Long – 30%
If and when the S&P hits 3000 – 90% invested
Short – 0%
Neutral – 40%
Long – 50%
Volatility and Recession Trading
Since it appears the market has further to fall, I currently have many short and neutral positions. However, below is what I am trading along with the reasons why.
Strangles and Iron Condors for Neutral Trades
The market has taken a big hit and is down. As mentioned, I think it still has further to go. However, how much further? No one knows. I do know that it will not go to zero. I think the 3000 level is a pretty hard floor and from there we can get long. I doubt we can drop too much further than that.
Until then, Iron Condors and Strangles take advantage of both sides of the market. The main reason the market is down is inflation and more interest hikes coming. For these same reasons, I don’t believe the market will explode up anytime soon.
Selling premium using these neutral strategies allows us to take advantage of high volatility and collect high premiums.
I currently have neutral positions in AAPL, TSLA, DOCU, GOOGL, XOM and XOP.
LEAPS and Selling Puts for Long Strategies
When I buy LEAPS options I like to go deep in the money. This way when the stock price goes up I get the most leverage since the value of the option goes up the most as well. LEAPS options allow us to have the equivalent of long stock utilizing about half the buying power.
Right now I have LEAPS in SOFI, BAC, WFC, PLTR, DKNG, TEVA and F. In many cases I also have sold PUTs as well. I manage the PUTs at 21 DTE and roll to the following month.
Call Verticals to capitalize on Volatility and be Short
To make money when the market goes down, I prefer to sell Call Verticals. These verticals are typically 16-25 delta OTM Out Of The Money options. So they have some room to move up a little and still be profitable.
On days when the market moves down, I look to take profits and close them out when they are 50% winners. I typically roll to the following month at 15-21 DTE Days to Expiration.
Key Takeaways
By having a mix of long, short and neutral strategies, I can take advantage of any market conditions.
I believe the market still has room to fall and will adjust my portfolio as needed.
I’m using strangles and iron condors for neutral trades and selling call verticals to capitalize on volatility.
For long strategies, I’m using LEAPS and selling PUTs.
What do you think? Do you have a different approach? Let me know in the comments below.
Thanks for reading!
Also, be sure and grab the FREE Simplified Options Strategies Trading Guide. I’ll put a link down below. It covers the different options strategies setups, how and when to put them on, max profits, and trade management. It’s a great guide to have by your side when trading options.
Happy trading and I’ll see you in the next one!
Thanks for another great post.
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