Top Dogs: Managing a Large Account

Building a Core Portfolio

Top Dogs: Managing a Large Account

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

This is the second, in a 6 part series focusing on managing a large account. Today we focus on building a core portfolio and how to use options to lower cost basis and reduce overall risk.

Slide 2 of 7 introduced possible etfs along with their 100 share notional and margin values -- this included: SPY (S&P 500 etf), IWM (Russell 2000 etf), QQQ (Nasdaq 100 etf), FXE (Euro etf), EEM (Emerging Markets etf), TLT (Bond etf) and GLD (Gold etf).

Slide 3 of 7 showed the percentage change of these etfs over the past several months. As contrarians, we often get short indices that have increased and get long those that have decreased. Tom looked at the graph and discussed possible contrarian premium selling plays for 2017.

The main takeaway with these slides is through the use of long and short positions along with options, we can greatly reduce our risk through reducing cost basis.

A final table included the beta-weighted deltas for the positions. Overall, we were slightly short the market. The cool thing with options, is the market can go against us, but we can still make money due to the decay of the options used.

Watch this segment of Top Dogs: Managing A Large Account with Tom Sosnoff and Tony Battista to learn step by step on how to build a core portfolio and how any why to incorporate options in its construction.

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