Setting Up an Example Portfolio for 2020 | Cameron May | 1-3-20 | Managing an Options Portfolio

January 6, 2020 0 By Kody Olson


should options be used to
enhance the potential for reward or to
reduce risk let’s explore it good morning
and welcome back everyone my name is
Cameron May it’s 9:30 Eastern Standard
Time on a Friday morning that means it’s
time to get back into our ongoing series
of discussions called managing an
options portfolio and as I’ve been
mentioning now for a few weeks and as
you’ve been seeing in other discussions
things are changing we have a new year and
we have revamped this Friday morning
discussion we’re just expanding it
previously we’ve looked only at the options side
of things and that’s still going to
be the emphasis however we’re going to
now frame that within the context of
manitou the management of a stocks
portfolio how my options be used to enhance
sort a hedge an existing option at our
stuff part me options used to enhance
and Hanson hedge an existing stocks portfolio so that’s how we’re
going to proceed today before we can do
that let me say hello to all of you
returning veterans already see a bunch of
people chiming in so hello there
Michelle Kathy Eric Robert Olga jaime cliff
Sandeep Paul Sarita John Robert Ricardo
rich basil and everyone else thanks
for joining us week after week if
you happen to be here for the very first
time though I want to welcome you as
well I think it’s going to be time well
spent and if you’re listening in the
youtube archive after the fact enjoy the presentation but be aware that
you’re invited to join us on Friday
mornings if you’d like to put it in your
personal calendar 9:30 Eastern Standard
times when we kick things off all
right so let’s quickly let’s review the
risks associated with investing then
we’re going to set an agenda and then
I’m going to give us an outline of
how we’re going to be pursuing the
management of a sample portfolio for 2020 sound
good and there’s Jay and Arturo hello to
you alright but first some important information following
presentation is for educational purposes only
options are not suitable for all
investors spread straddles and other multi
league option strategies can entail
substantial transaction costs short options
can be exorcised at any time any
investment decision you make in your
self-direct account is solely your
responsibility all investing involves risks
including risks of loss and there’s an
overview of your options Greeks all right
now let’s go to that agenda three items
that we want to cover as we do cliff
this your first time welcome I am sure we
have a number of first-timers I can see
we have a pretty good audience today I
hope that you continue to join me on
Friday mornings I really like teaching
this class and and have a lot of good
friends here already so if you want to
join the group that’s fantastic but our
agenda for today and this is what we’re
gonna do each week we’re gonna review
open positions and manage those as
seemed appropriate then we’re gonna see how did how
did the changes we make their change the portfolio’s overall exposure to
price movement on the major market
indices to time decay and to volatility
changes we’re gonna use thinkorswim to
gauge those things and then we’re
gonna add new positions to further tailor
our exposure to price time and
volatility now all of that is within the
context of what’s happening with a stock
portfolio and how might options be used to
enhance or protect or reduce the risk in
that options portfolio all right a
Augustine hello there and Charles good
morning Brijesh I didn’t say hello to
Alfred and Terrance hello to all of you
alright but let’s go to let’s go to the
website pardon me to the to the
thinkorswim platform and what you’ll notice
here is we’ve we’ve switched things up
quite a bit first of all you’ll see a
whole bunch of new positions here and
right over here is going to tell you
how I selected those positions so yeah
we’ve got some legwork to do in the
early stages of this morning let me
reposition this make sure that everything
is well displayed so everybody can see
it but yeah for those who have been
joining us week after week for the last
year you’ll notice wait a minute Cameron
you’ve got a bunch of stocks in this
portfolio yep I do and you’ll notice that
those stocks are allocated among growth value
and as I scroll down a little bit
further income investments and in
specific sectors so over here I’ll
explain how those were selected so today
even though this is an options
discussion and that is going to be the major
emphasis throughout 2020 stocks are gonna
creep in and we’re gonna spend a
little bit more time on stocks today maybe
more than typical because you have to
explain where in the world did these
come from what was the logic behind those
alright so we’re gonna discuss that but
we also have an options portfolio now
for convenience purposes what I’ve
done is I’ve started us off 2020 we’re
managing a $500,000 account for four
hundred fifty thousand of that has been allocated to stocks but we have
fifty thousand that’s that’s dedicated specifically to options and I’ve separated those within the paper
money account our stocks we’ve put in
the paper money IRA the options
we’ve put in the paper money margin account
right up at the top if you didn’t know
this you can navigate between those two
account types that way we just sort of
keep things separate but let’s turn
our attention first to the stocks and I’m gonna go
fairly quickly Keith the first time or fantastic I want to tell the first-timers I may use some
terminology here that may be unfamiliar to
you don’t be intimidated by that you’ll
pick it up quickly alright and we have
great educational resources to fill in
the gaps wherever they may be for
you and wherever possible I’ll try to
link like if there’s a little video that I
think is helpful I’ll just try to link
it for you so you can go to the YouTube
archive for this presentation and access
those videos all right but let’s talk
about the sample account management
plan that we’re going to be implementing
and that we’re going to employ it
throughout 2020 first of all 90% stocks 10%
options that’s 18 stock positions and 10
options positions the way that that
works out we have a five hundred thousand
dollar portfolio 450,000 allocated to
stocks chop that up into a five percent allocation per position gives us
18 positions for that 90 percent
that makes sense hope it does the options
we’re gonna use 10 options positions all right we are going to be
using what’s called fundamental and
technical analysis in the administration
of this portfolio sometimes we’ll be
looking at the company behind the stock
other times we’re gonna be looking at the
chart we’re going to be wherever
possible using optional stocks we’re
going to have an allocation by sector and
by growth value and income and you
can already see that here we have
some growth as I discussed and some
specific sectors and so on those
allocations are made according to a 1040
crossover system somebody’s mind just
exploded Cameron what in the world is a
1040 crossover system I’ll explain it
I’m gonna try to do as much as I can
today but when we’re whenever you’re
starting off a new year there can be some
heavy lifting this might be an archive
you’ll want to go back and revisit from
time to time but a 1040 crossover system
is a pretty direct fairly
straightforward usage of charts to determine
when to make allocation changes okay we when we decide that we are
going to reallocate let’s say we want to
take something out of growth and move
it over to value or vice versa or add
more emphasis to income we’re going
to sell let’s say we’re reducing growth
how are we gonna reduce that by selling
the highest performers harvesting
the largest profits there all right
and then moving those our portfolios will
be and this is really where some people
are all of our veterans gonna go yeah I
get this Cameron the new people are gonna
go I don’t know what this is our
portfolio is beta weighted that means that
we’re gauging it against the S&P 500
so we can see if the S&P goes up how much
is our portfolio is expected to go up
or maybe even potentially down that’s
done automatically we are going to be maintaining a delta positive
which is a broker speak fancy way say a
fancy way of saying we’re gonna be bullish
as long as the GDP is positive and the
yield curve is normal so that’s gonna
be a general portfolio approach all
of these are examples of how an investor
might manage their portfolio you don’t
have to do it this way obviously this is
for educational purposes only and finally we’re going to
maintain our options positions fade a
positive meaning as time goes by we’re
going to be in options positions that theoretically benefit from the
passage of time positive time decay
exposure all right so those are the that’s
the general management plan overview
so how is this gonna be implemented I
want to look at this first this is
what’s already decided how these shares
have been allocated I’m using what’s
called a 1040 crossover system to
determine well how much do I want to go and
growth how much do I want to be in value
how much do I want to have in income and
what role do the options play in this portfolio are they are they
enhancing the portfolio’s potential for a
reward or are they hedging the
portfolio’s exposure to risk so let’s first
of all explain what a 10:40 crossover
system is I’m gonna go to the charts and
then we’ll come back and we’ll put
this into deeper context all right for now
we aren’t going to need the volume
so I’m gonna go up to the top here
let’s change our chart settings I’m gonna go
to equities and uncheck the box for
a show volume subgraph okay that’s just
gonna remove that volume there we go
so now I’m going to bring up the S&P
500 and we’re gonna have a look to see
what’s going on on a daily chart with
the S&P and we’re gonna be looking at
two trends we’re gonna be looking at a
shorter term trend and kind of an
intermediate to longer-term trend and it’s the relationship between those two
trends that’s going to determine
whether we’re more bullish or more protective
with our portfolio if we see that
short-term trends are strong and
intermediate to long-term trends are strong we
might be more bullish for example if we
see that short-term trends have have
weakened to the point that they might be
dragging the longer term down we may pull
back on the on the portfolio’s overall bullishness and move more into a protective mode and overall this
is going to be tied somewhat to
what we call the economic cycle if trends have been down and now
they’re starting to strengthen maybe the economic cycles moving into an expansionary phase and and that
might dictate that we move yeah more
more aggressively into specific
sectors of the marketplace but let’s just
look at this indicator first so these
two trend lines can be added right up here
under the Edit Studies icon and
they’re known as simple moving averages so I’m
gonna type in the word simple up here
at the top of our indicator menu choose
simple moving average and then add two
of those to our chart all right if you’re
not familiar with simple moving
averages what you’ll want to do is go to
the archive for this session long as
it now every once in a while session
doesn’t make it to the archives we have technical glitches or whatever
but I don’t anticipate for that for
this one still possible but on the
archive go 11 minutes in and I’ll link up in
the upper right corner and for those
watching on YouTube they’ll see it right now
a description of what simple
moving averages are if you want if you
need to know a little bit more about
this sort of charting thing alright but
let’s let’s adjust these I’m gonna
click on the little gear icon and I’m
gonna change our first moving average
to a 10 and I’m going to change its
color to red and click OK the other one I’m
gonna change to a 40 which is a longer
term so it’s intended to represent a
longer term trend I’m gonna leave its color
green and click OK and then I’m going
to click apply so what we now have are 2
lines representing two different
trends trend timeframes and what a trader
might use these forests to determine well
do the markets in the short-term and
the intermediate to long term look
bullish or bearish is there weakness
somewhere and we’re gonna do this not on a
daily chart which may give us a pretty
quick rapid succession of trend
changes let’s go to a weekly chart let’s go to
like a three-year weekly chart all
right so if you’re not familiar with the
1040 crossover system this is how it
works we have this shorter term trend
line represented by the and a longer-term trend line
represented by the green and when whenever
you see this sort of an event when the
red the short-term trend line crosses up
and through the green that’s a
signal that that at least in the short-term
things may be strengthening and for
some traders they see that as a time
to maybe make them make their a position
or even a portfolio more bullish so what
do we call that guys when we get a 10
crossing up above a 40 that shorter term
trend line appears to be strengthening
we call that a golden cross yeah that’s
somebody with a flair for the dramatic
who’s given it that name but they were
trying to paint a picture and that is
more more bullish technical outlook all
right so at least you know whether
maneuver sell the indicator that’s not my
choice of name but it’s called a golden
cross so that’s what I’ll refer to it as
being and that defines our first phase
in our in our management portfolios our
sample management approach when we see
a golden cross the emphasis for new stock positions will be value because
in order for us to have a golden cross
what pretty much had to happen with
stock prices before its appearance
prices have probably come down recently
sometimes to a more dramatic extent than
others sometimes this will be at the
bottom of a great big move down others
have borne modest move down but yeah maybe
that’s when we move more to value so
what is value here’s a quick explanation
for a potential definition of value
stocks may be smaller to mid capitalization
stocks with betas that’s that’s how
volatile the stocks are a beta of 1 is
just an average volatility stock less
than 1 is lower than average above 1 is
higher than average so we’re look at
mostly average volatility with low
prices compared to performance metrics
low earnings a low price to earnings
low price to sale low price to book all of those
below average with a with a load of
middle price overall for the stock and
then finally we’re gonna wait for
value stocks we’re gonna wait more
toward real estate financials and technology
why is that well that relates to the
economic cycle and if you go through our education the economic cycle is explained there’s actually a not
a chapter but more like a page on
the economic cycle but basically the different sectors can can
perform well or perform poorly theoretically
under different economic conditions
when stock prices have come down and maybe
the Fed has has reduced interest rates
to try to stimulate the economy when the
when the economy has been struggling that
sort of a scenario may theoretically
benefit sectors that can that are
particularly sensitive to things like
interest rates like real estate like financials
and finally technology is where big
investor or big institutions can invest
heavily when the economy seems like it’s starting to swing up they might
buy new desktops for everybody that sort
of thing anyway so there is our
value approach and we’re going to do
that we’re going to emphasize value
stocks for new positions when we get
that Golden Cross all right also
during this phase we’re going to have the
strongest positive portfolio Delta I’m
gonna have to explain that what does that
mean well that just means we’re gonna make
our our portfolio the most bullish at
that time so how do we measure this well
we go to our monitor tab and notice right
here above our positions there’s a
little box that says beta weighted I’m
gonna check that box and I’m going to type
in the symbol SPX now I also need to see Delta all right and hello there
our best oh good to see you I’m gonna
swap out this column here that says days
that I’m gonna put in a column that says
Delta so to customize our columns we come
over here to our gear icon click on
that I’m going to type in the word Delta
and I’m going to add that to our list of
columns let’s click on that move that up
next two days and then the days we’re
just gonna remove so what you’ll
notice now let me click on OK you’ll notice
here for my consumer discretionary
growth stocks we have this column and
it’s that’s titled Delta so what is
this telling us well when we check
this box that says beta waiting against
the S&P 500 this is telling us bottom
line it tells us position by position
and bottom line how our stocks might
perform if the S&P were to go up one point
that’s kind of an important question how
would my portfolio theoretically respond
if the S&P were to go up now whether we
think it goes it’s likely to go up or
down this always assumed that the S&P
is about it goes up okay so for
each of our portfolio positions we can see
they respond a little bit differently
but this overall tells me how
bullish I am with the stocks that I’ve chosen
so then when we get to options and we
think you know what we could it would be
nice to be more bullish well we can
gauge how bullish we already are and then
maybe use options to enhance that or
if we decide that we need to be more
bearish we can gauge how bearish we are
and use the options to reduce that I
shouldn’t say well we want it we don’t
gauge how bearish we are we gauge how
bullish we are and then use options to
reduce that bullishness all right but we
have to understand just how bullish we
are with our stocks in order to make a
measured approach that way so that we
call our Delta so we’re going to maintain
a very positive Delta when we have that
fresh golden cross because that at that moment from
a technical vantage point is when
we might have the greatest potential for
upside alright and finally in pursuit
of that objective we’re going to
allocate about 45% to value stocks 30% to grow
stocks 15% to income and leave the 10th
the remaining 10% for our options
trading so each of our account management
decisions are going to be tied back to
where do where do the trends appear to be
now I have to I can’t emphasize this
enough this is not the only way to
administer to a portfolio of stocks and
options right but other traders might
not use charts at all for their
decisions but what I want to just be able to
teach in this discussion throughout 2020
is how does a trader actually or how
does an investor make those adjustments
how do we gauge bullishness and how do
we how do we customize it how do we
tailor it using our options all right so there is phase one golden
cross let’s go back to our charts what about
when we get something like this and I
might even scroll back in time a little bit
more let’s go to a longer-term chart
let’s switch to maybe a 20-year chart
we’re gonna keep this on a weekly view
click OK and now we can see what the
S&P has done over the course of last 20
years and I want to zoom in on a time
frame where we got at what we call a
death cross that’s where this shorter
term moving average crosses down over
the longer term so right there may
be a technical signal of significant
market softening or weakening and at
that point a trader Oh actually I’m getting
a little bit ahead of myself my
apologies I might as well finish the
explanation of a death cross but we’re not
quite there yet I did get a little bit
ahead of myself all right but that’s
called a death cross all right I think
you can see for obvious reasons why they
chose that name doesn’t always imply
that that’s what’s going to happen
but I’m going to scroll forward a little
bit and move on to phase 2 I kind of to Phase three in my enthusiasm
so phase two is when we have what I’d
call an aging golden cross well so
here’s an example back in January of 2012
we got a golden cross maybe we took took
the opportunity to look for value
stocks and actually in January 2012 stocks
had been down and then kind of sideways
there in in recovery phase recovery mode
so maybe there were more opportunities
for value but after a while that window of opportunity starts to close
maybe poof stock is dominating the
markets what might that be what might be
growth cliff says is there a target
growth percentage for the initial value portfolio position there is CIE
you’ll notice it’s forty five percent
value thirty percent growth fifteen
percent income if we’ve had a recent
Golden Cross well what if it’s been a
while well then our portfolio
objectives change markets are still bullish
and actually they’ve been
persistently bullish so what is an aging
Golden Cross well I went back and looked
since nineteen forty nine on the S&P
500 the average period from the
appearance of a Golden Cross to the appearance
of a death cross was about seventeen
months so he might just split the
difference and call an aging golden cross
about eight months does that make
sense all right so if we’re getting if
we’re still bullish but it’s a little bit
been a little bit longer we shift our
focus to growth at least for this example portfolio we’re gonna shift from
small to mid cap to mid to large cap
our betas are going to be a little bit
higher as we go for growth stocks we’re
gonna we’re gonna emphasize more
traditional growth fundamental metrics like
return on equity and profit margin
we’re going to look for both of those to be
above average we’re gonna look for
higher priced stocks since a lot of
stocks are probably going to be a little
bit higher priced under those conditions
and we’re going to shift our sector
waiting for new positions we’ll already
owned real estate financials technology as
we bring on new positions and shift from
value to growth we’ll look for consumer discretionary and industrials
which are sectors that theoretically seem
to perform a little stronger as
we’re in the a little bit deeper in the expansionary phase of economic
cycle all right our over our overall stock
is going to stock portfolio our
overall portfolio bias is going to
remain bullish and remember as I said
earlier we’re gonna remain bullish at
all times unless the GDP goes negative or
the yield curve inverts Ryan I can’t
provide a copy of this however you can
feel free to join each week and do
whatever it you need to do to remember how this
is outlined yeah all right but
we’re gonna maintain a stronger positive
portfolio Delta but with our options Delta
now no longer enhancing the portfolio bullishness by ten to twenty
five percent but instead enhancing it somewhere between zero and ten
percent now for some of you gonna
probably think Oh Cameron this is too much
bullishness that’s okay this is just an
example but at least I can show you how to
gauge that and then you can customize
it as you see fit for your own preferences our
target allocation 45% growth so strong
emphasis on growth 30% value 15% income and rima and
retaining 10% for stocks so now we’re starting
to get the rhythm of it right what
about when we see that death cross death
cross sounds dramatic doesn’t that
sound like boy Cameron that means we got to
bail out of bullishness and go
straight to bearishness get really
protective and maybe get into our of our 1970s
60 zero nuclear fallout shelters right
not necessarily I know that that’s
it’s a pretty strong title but let’s
roll back here look at that example of a
death cross and here’s what we might
plan to do with our portfolio our
emphasis for new positions will now shift to
income we’re gonna remain in that mid
to large cap so maybe a little bit less
volatile is what we’re looking for we’re
gonna measure that volatility with our
beta beta is going to shift from
fairly aggressive going back more
toward the conservative route but we’re
going to emphasize income so looking for
stocks with an above average yield and
below average debt and finally we’re
gonna wait our new positions more
toward materials energy and consumer
staples which tend to be those that
might be they’re a little bit more
defense a little bit more income
oriented sectors that’s not always
universally true under every market
condition we’re gonna maintain a mod a modest
positive still positive portfolio Delta
so have we shifted have we sold out all
of our stocks no we’re just dialing
down their volatility we’re starting to use
our options to hedge that portfolio
risk we’re gonna use options Delta at
the hedge stocks Delta by 0 to 10
percent so just easing back that overall
risk so using options interestingly in
this circumstance should actually
reduce the overall risk of the portfolio
and I know that for a lot of new options
traders those that are just learning
they might think well options aren’t they
always aggressive aren’t they always
adding to risk not necessarily depends on
the allocation finally our target
allocation 45 percent income 30 percent
growth and 15 percent value and then
finally what about an aging death cross so we
got a death cross it’s but it’s been a
while so you might think okay so eight
months after the death cross not
necessarily that the span between the
appearance of a death cross and the appearance
of a Golden Cross tends to be much
shorter than vice-versa okay going back
to 1949 I looked at each of the the
appearances on the S&P 500 death cross to
Golden Cross that period tended to be
about eight or nine months so if we
split that difference about four months is
when we we get an aging death cross but
that just means that the bearish
market conditions have persisted for
several months and at this point we
might get truly defensive go go more for
large cap stocks ease off on the stocks
volatility looking for still lower beta
stocks for new positions above average
yield above average debt is still going to
be an emphasis weighted more toward communications healthcare and
utilities we’re going to look for a very
modest positive portfolio that’s still positive still
bullish that might I know that can’t that can
sound counterintuitive but yes we’re
just trying to hedge the risk not
eliminate it in our portfolio but options
will be used to hedge stocks Delta by 10
to 25% target allocation 45 percent
income 30 percent value 15 percent growth
and then 10 percent options all right so
yeah we’ve spent 30 minutes in a in a
class titled managing an options
portfolio we’ve talked a lot about stocks
haven’t we well yeah this is the most
we’re gonna talk about stocks through
the rest of 20 10 to 20 time we’re gonna
be giving the emphasis to options
but I just had to lay the groundwork
and I think it can also be helpful to
see how how the options might be used as
that as that supplement to a stock
portfolio now cliff says as you move from one
phase to another do you rebalance the
entire existing stock portfolio to
update to obtain the desired exposure in
each sector it sounds like we’re
rebalancing a lot right but in reality under
most conditions what we’ll be doing
is selling three stocks and moving
those to a different sector okay out of
18 so for example let’s say that we’ve
moved we went from golden cross phase
one to aging cross phase two well so
how much is our allocation changed well
we had nine stocks in value now we’re
supposed to have nine stocks in growth
but we already had six stocks in growth
so what do we do sell three value stocks
which one’s the highest performing
ones and move those over to growth that’s
it for the allocation of the stocks so
is that a hue is that a major change
it’s a fair let me see for a few weeks and they’ll be
allocated this is a in the MOU that so if you’re coming for the
first time see if that worked a little bit I think we’re in good shape trick that I’ve now fortunately
robbed I think we can just pick up right
where we left off but I wanted to show
you how we made this selection for our
current stocks we have our growth stocks
value and income stocks but those were selected according to Rosa am I
just coming and going now I wonder if
it’s because we have a pretty big
audience this morning I might have to
check that out but I’m gonna do this I’m gonna
continue the last 10 minutes of the
webcast or so and you might need to just go
watch the archive the archive shouldn’t
have this buffering issue okay but I’m
gonna go to the charts and just explain how
we came up with this allocation look at
the 1040 position right now we have a
Golden Cross but that happened back in
March that was March of 2018 we’re now
in January of 2019 been 10 months
so we are now in phase 2 we’re in an aging
golden cross so cliff says you’re good
I presume you use a scan to find
candidate yet yeah cliff as a matter of
fact what we’ll do in the coming weeks
I’ll show that scan we actually do pretty frequently classes on how to do
scans it’s pretty simple on the TD
Ameritrade dot-com website Tarrance it looks like we’re
back in business Jerri I know I knew
that today I was gonna have somebody say
that and you’re right Jerri says I
thought this was gonna be about options 2020
is gonna be all about options but I had
to lay the groundwork for this new
stocks portfolio all right or veterans
can can can attest to the fact that we
do spend every Friday morning really just
talking about options except today now Robert thank you yeah
perfect all right so there’s our allocation
we were looking for mid to large cap
growth stocks primarily not all growth
45% growth thirty percent value fifteen
percent income to be to to provide the underpinnings for our sample
stock portfolio for 2020 that’s only
gonna change occasionally so I’m only
going to talk about stocks occasionally
we will do a quick check in on our
104010:40 crossover to see if things have
changed if they haven’t we’re going
right to options that day that sound fair
so we may have a class that emphasizes
stocks as much as this one did maybe
once or twice a year alright thank you
Paul I appreciate that yeah very good all right so for today should we
put on a quick options trade I think we
should I’d feel a little bit remiss if
I didn’t overall what we need to do is
outline our portfolio Delta now I’ve
already shown you how you can customize
this to add that Delta column I’ll go in
and add this for next time so that we
can see our overall portfolio Delta I
happen to check it at my my other desk
before coming here and we were around a
$200 Delta what does that mean well
that means if the S&P were to go up
one point we might expect to see our
portfolio make about $200 hey on a day
like today where the S&P has gone down 19
points what does that mean we’re taking
a bit of a hit is that part of the
ownership of about 500 or 450,000
overall stock portfolio it is but since we’re
in this aging Golden Cross phase what do
we want to do with our options we’re
going to dial up the bullishness of our
portfolio how do we do that we’re going to
add a bullish options trade so we have
a number of options trades that we
could add today today I think what
we’re gonna do is just do a bull let’s do a
bull put spread okay if you’re not
familiar with bull put spreads I’ll spend more
time on them in coming weeks I’ll also
link a video on the YouTube archive
right up in the upper right hand corner your screen that will
explain what bullets are but I’m gonna go to
work let’s let’s actually first bring
up a stock let’s see I believe do we
already want any shares of Apple nope
okay so I’m going to go to our margin
account and let’s put on a bullish trade
on Apple and you can see with Apple
if we go to a one year chart look at
that trend upward trending let’s just
assume that we think it’s going to
continue that way 10 is above the 40 so
on a on a stock on an individual stock
basis we’re also bread time talking about but in okay but how about I’m gonna number of strikes available and
let’s use our Greeks as a guide and
I’m gonna look for a bull put spread with
a delta let’s say around 30 all right
let’s look at maybe selling the 285 and
buying the 280 puts that’s a bullish option strategy I’m gonna come up here
to spread single go to vertical
there’s the 280 to 285 put
spread to place that trade I’m gonna click on the bid
price and that’s gonna create an order
for 10 contracts ok this creates a 146
credit that’s gonna leave about 354 per
share in risk or 300 right now about
$350 per contract of risk on a hundred
thousand dollar port of pardon me aa
$500,000 portfolio that would be a very
very small risk but we’re gonna do 10
over all options positions not today
but we’re gonna build on those in
coming weeks so let’s if we did one contract
that be $350 10 contracts would be three
hundred and thirty five hundred dollars
we’re gonna need to do about 15
contracts here alright so let’s go ahead and
place this order I think I’m gonna back off
on that credit requirement let’s take
this down to maybe a dollar 45 click
confirm and send we’re gonna sell 15 of
those put verticals dollar 45 limit
transaction fees are certainly still a
consideration and anytime you put it in a
limit order you run the risk that the order
might not feel but let’s send that
order off let’s see if we get a quick fill
here that order is now working looks
like art we’re pursuing a dollar forty
five credit the current market price
is a dollar fifty might need to back
off on that credit requirement just a
little bit I do want to get this filled
before the webcast ends let’s take this
down yeah prices are moving in the early
hours of trading pretty quickly let’s try
for a dollar 35 all right there we go
sold that for a dollar 35 so what
we’ve just done is we’ve added to the
bullishness of this portfolio we did that by entering into a short option
trade a net credit position which keeps us
in a positive theta position now
these sorts of details were going to explore
you know at a little more granular
level in the coming weeks but we had a
lot of heavy lifting to do this Friday
morning webcast is scheduled for 45
minutes each Friday morning so I cover as
much as I can if you join us for I would
say for a few weeks the gaps will start to
fill in and you’ll start to feel very comfortable with what I’m what
I’m doing now obviously everybody has
their own their own rate of learning so I
can’t speak for everyone for how
quickly they pick things up but everybody
it’s time for me to set you loose this is
I think it’s an ambitious thing that
we’re doing for 2020 I hope you join me for
the ride I think it’s gonna be fun so Thanksgiving your time today
I’m gonna set you loose but we’re
gonna come back in just a little bit and if
you feel like Boy Cameron this is
somewhat advanced I need to take it back
a step well coming right up is barb
Armstrong’s discussion of getting started
with options she always does a great
job just laying the groundwork for those
that aren’t terribly familiar with
options strategies like a bull put
spread that we just did that we just did
everybody I’m really looking forward to
2020 join me again next week we’re gonna
reassess our portfolio’s overall
bullishness we’re going to look at that
1040 crossover context and then
continue to build out our options portfolio
in keeping with our plan for are we enhancing portfolio bullishness
or will you as a hedge yeah hey thank you
sir easy up sorry about the buffering it
does happen from time to time but I
now know a quick fix that I can I can
employ and I think I’ll be able to address
that if it if it happens to crop up
again I probably can take care of it in
a few seconds everybody have a great weekend looking forward to next week but
a quick reminder of the risks associated
here investing risks are real we did
use real examples in today’s discussions
not a recommendation or endorsement of
those securities or those strategies
and you can join me in my other
regularly scheduled sessions between now
and Friday but hey whenever I see
you again until that moment arrives I want
to wish you the very best of luck happy investing bye bye [Music]