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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

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

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