Thank you everyone for all the kind words yesterday about our successful launch of the new strategy. I’m glad so many of you are excited about it. As I mentioned it is purely optional, but for anybody who is going to be following along with the VTS Discretionary Strategy let me go over a few things.
1) As is my investing style, it won’t be very active. We’re looking at roughly 1 trade per month, perhaps more if markets occasionally demand it, but I really don’t like to be too active. It’s also a teaching strategy as well so I’d like to give people time to absorb the mechanics and ask as many questions as you have about it so I’ll keep the trade frequency reasonable.
2) I apologize for not making it clear yesterday, but all of my option strategies will use monthly option contracts unless I specifically say otherwise. Monthly contracts have better liquidity further out in time and I find they are more conducive to stable longer term trades. Option trading is about harvesting the volatility risk premium, NOT making market predictions. We don’t need to take on the risk of shorter term weekly contracts to make a profit. I like to keep things as safe as possible and the monthly contracts are where I play.
3) The 10% total value stop-loss is for the whole trade. In our case 1 option contract requires 6,750$ in capital to be cash secured. The 10% stop-loss is on this value so we will be looking to close the trade if we breach the 675$ per 1 contract.
4) Now that we’ve sold our CVS 67.50 Put for April expiring in 42 days we basically just sit back and let the trade work. This is only step 1 of the process in the Wheel of Fun Strategy.
Step 1) Sell the cash secured put – We’ve done that
Step 2) Wait for April expiration. If we get assigned shares that’s fine. If we don’t, we can repeat step 1 and sell another put
Step 3) Sell a covered call when we have some shares
Step 4) Wait another month and hopefully lose the shares. If we don’t, we can sell another covered call until we do.
Since this trade is active now we can turn our attention back to our other strategies with a new Iron Condor today.
The US jobs report was a big beat, adding 313k jobs. I would imagine this will solidify the Feds’ planned three rate hikes this year.
If the all clear is signaled on Monday we will likely be getting back into more new trades but given volatility metrics are still very weak right now it’s best to wait until then. Have a fantastic weekend everyone!
Current VTS Total Portfolio Solution Allocations
VTS Aggressive Vol Strategy – Optional replacement for higher risk tolerance investors
VTS Conservative Vol Strategy – Optional replacement for lower risk tolerance investors
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