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Best Practices

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Core Basics

Best Practices

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

tastytrade examines the ways we can build and enhance core positions, which should be a basic part of our portfolio.

We can build our core positions via equity, bonds, metals. commodities and emerging markets. For example, we can use laddered limits and place bids at varying stock prices, but this approach doesn't take advantage of volatility. To combat this, we often use laddered puts: selling ATM puts with consecutive expiration months and slightly falling strikes.

We can also enhance our core position using covered calls, which lowers the breakeven point of the position. Or we can use covered strangles by adding to the covered call a short, OTM put which utilizes the put skew. These enhancements are visualized using our study on SPY as an example.

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