PORTFOLIO SUITABILITY FOR OPTIONS TRADING
How do I know if options trading is suitable for my portfolio?
Options can serve as a very valuable component to one's overall portfolio strategy. Options trading can help drive portfolio results via leveraging a minimal amount of capital, defining risk and maximizing return on investment. The Trade Notification service provides plenty of optionality to pick and choose what trades you'd like make based on the notifications that are sent out to members. Additionally, these trades are scalable for accounts of all sizes as you can adjust the number of contracts as appropriate, whether it's 1 contract or 10 contracts.
Options trading is not intended to be a short-term portfolio boost:
Options are a long game and sticking to the 10 Options Trading Rules is essential when engaging in options trading regardless of account size. "Trying it out" isn't a viable strategy, options are a long-term commitment. The number of trade occurrences needs to be maximized in order for the probabilities to reach their expected outcomes. Options performance over various market conditions can demonstrate the value of options in mitigating risk and circumventing downward movements. See the Performance tab for examples of the percent premium capture per trade, ROI per trade and the options-based portfolio compared to the S&P 500 over time.
What results can you expect over the long-term from following the trade notifications?
Generally, you can expect to generate consistent income, winning ~85% of all trades placed and smooth portfolio appreciation. My goal is to outperform the S&P 500 on an annual basis with a much lower risk profile. Refer to the Performance tab for past portfolio metrics.
Familiarize yourself with different types of options:
Familiarize yourself with the basics of covered calls and cash covered puts as a starting point. From this foundation, risk-defined trades such as credit spreads, diagonal spreads and iron condors are essential to defining risk, leveraging a minimal amount of capital and maximizing ROI.