Alert

Check out the top 4 stocks to watch in October 2022
tastytrade logo
uploaded image

Nov 20, 2020

"How to Build a Portfolio using Complex Options Strategies" Takeaways

By:Tom Sosnoff

tradeTALK episode 10 wraps up with Tom Sosnoff, host of tastytrade Live. Tom discusses the importance of actively managing your capital using complex option strategies. We will discuss topics that enhance your calculated risk-taking abilities, quick decision making, and understanding of finance, all while reaping the benefits of capital efficiency, diversification, and above-average risk/return.

tradeTALK Key Takeaways
Episode 10
How to Build a Portfolio using Complex Options Strategies with Tom Sosnoff

 

In the first tradeTALK episode, I constructed a capital-efficient portfolio focusing on futures and futures options. In this episode, I constructed a similarly diversified portfolio using primarily equity options.

In this segment, I used eight different underlyings and approximately $16,000 in total capital. 

The total account size should be equal to roughly three times the capital used for the short options positions.

Notice that in all of the above underlyings, implied volatility rank should be above 20...this ensures that we are collecting a decent amount of premium relative to the risk we are taking.

When everything is all said and done, the expected return on capital for the total account comes out to 2% per month or 24% per year. 

Since the underlyings and strategies are well-diversified, I would expect the total volatility of this portfolio to be approximately 30% less than the S&P 500. 

Rewatch Episode 10 & prior episodes of the tradeTALK series on tastytrade.com


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com. 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.