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Conservative Options Trades

Discussion in 'Options' started by Daniel22, May 15, 2014.

  1. Daniel22

    Daniel22 Guest

    What options trades would you recommend for a very conservative investor looking for a 10% to 15% per year return with very little risk? Preservation of capital is more important than high returns.
    - Is it possible?
    - What types of trade(s) would you place?
    - How often would you need to monitor the trade(s)?

    Thanks for your opinion.
  2. jim

    jim Administrator Staff Member


    No trade is without risk. But the option trades that I like my conservative portfolios is selling covered calls about the money and cash secured put money on companies with very strong fund laments, steady earners, and an history of positive free cash flow. Of course you need to balance the financial strength, fundamentals and free cash flow of the company versus the implied volatility of the options. The strong fundamental companies tend to have lower implied volatility, making covered call writing and cash secured put selling less attractive. Therefore I only use this strategy for a company that I would like to own for the long-term.

    Next weekend, after I get all of the May data, I will show you several examples of this strategy.
  3. Nora L

    Nora L Member

    Hi Jim,

    I am a new member having joined after your Covered Calls presentation last week and I would like to develop further this strategy.

    Are the examples that you mentioned posted in another thread? Could you repost them here - or other such examples.

    Thank you.

  4. tom

    tom Administrator Staff Member

    Hi Nora, The covered call presentation is in the members web site library. It looks like you found it but let me know if you have any questions or problems.
  5. Nora L

    Nora L Member

    Hi Tom,
    thanks for your reply.
    I was wondering if Jim had posted the examples that he mentioned in the his reply above:

    "Next weekend, after I get all of the May data, I will show you several examples of this strategy."

  6. tom

    tom Administrator Staff Member

    I'll remind Jim to post this
  7. GreenZone

    GreenZone Well-Known Member

    Daniel, try this:
    - put credit spread on SPX or RUT
    - width: 25 or 30 points
    - around 60 DTE
    - short put at around an -8 delta
    - minimum credit of $1 for the spread
    - exit for profit if you get 80% of the initial net credit
    - exit for loss once your loss reaches twice the amount of the initial credit received

    Ideal entry: on a good "down day" (more than 10 points down), and price is near support (prior price support level, trend line, major Fib level, etc).
    Otherwise, if you want to keep it extra simple, then just enter every week or every month on any down day, as long as price is above the 50 period daily moving average.
  8. Randy Schwartzenburg

    Randy Schwartzenburg Well-Known Member

    I've been doing 90 Day Put Flies when we have two rather large red candles. Position it about 20 pts below the money depending on market action. When we have a large move down it makes 10 to 20%. Several have gone to 25%. If it goes up past the B/E point or changes to a bullish trend (several green candles) then you can either roll some shorts up or roll the longs down or let it ride until you get a reversal. I've never had an adj to the downside but could do the reverse if you think you need to. It works well when there is a pull back so I watch the charts and when were are topping and form red candles I place it. I made 15% on two of my trades and 20% on another during the Greek move down. 5/10/5 fly Margin in IRA starts at about $3k and about $5k if you roll. Some trades last a few days and some last about a month or more. Here is a sample of a possible set up. It's a paint drying trade and I set an order to close and just wait. Might move the order if I'm close. The only problem is getting filled so you might be 5 cents to 20 cents from the mid or get surprised and be filled at mid.

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