The Beauty of Options - Portfolio Insurance at a Discount

[guru]

You have a mishmash of a backspread and a calender..Nothing special here

Ah, so everyone has a mishmash of some other basic option spreads or combos, or long/short stocks. And it is nothing special. Pure genius.

 

[lindq]

My portfolio has no risk to the upside whatsoever and I make lottery like returns in the event of a crash.

And Bernie Madoff couldn't have said it better.

 

[Sweet Bobby]

Selling covered calls to finance expensive puts is not rocket science and definitely doesn't make you "the greatest options trader that ever lived." You'll get murdered at market bottoms/high vol environments initiating this one-trick pony trade. You would have gotten killed during the March lows buying expensive puts and selling covered calls that limited your long portfolio upside. And like the OP points out, you'll lose big if the market grinds lower.

This strategy maybe only works when vol is low and market is near its highs and has limited upside. Even then you're selling dirt cheap calls to finance super high-skewed puts. Those lottery tickets and downside protection puts are super expensive any way you look at it. No free lunch.

Sorry, Einstein! I do not sell covered calls.

 

[Sweet Bobby]

You have a mishmash of a backspread and a calender..Nothing special here

Pleasee learn how to spell "calendar." There are no calendar spreads in my portfolio, idiot!

 

[Sweet Bobby]

Ah, so everyone has a mishmash of some other basic option spreads or combos, or long/short stocks. And it is nothing special. Pure genius.

It's nothing special to you, because first you don't understand how to do it. There's no way a simple mind like yours could implement my strategy!

 

[Sweet Bobby]

Never heard of you in this Capital.

You are irrelevant. Next . . .

 

[Sweet Bobby]

And Bernie Madoff couldn't have said it better.

Bernie Madoff never had a risk profile like this! Insurance at your back, sell a few naked puts. Take your profits. Rinse and repeat. Yawn . . .

 

[ironchef]

As most of you know, I am probably the greatest options trader that ever lived. My humility prevents me from saying I’m the best human that ever lived.

The beauty of options is that they allow you to protect an entire portfolio at pennies on the dollar. Insurance is expensive. We are told that long put options are also expensive.

The secret is to offset the cost of the protection with other trades. What I do in my portfolio is finance the protection with various income trades. And my income trades are shorter in duration than my insurance, so I Am able to flip a few income trades while they are perfectly protected in my portfolio by the insurance.

Let me give you an example. In my current portfolio, my insurance should cost $2,500 per tranche. That was the market value of the protection when it was put on. But, my total cost of the hedge is only $1,600 per tranche! Plus, I have an additional 100 long puts per tranche in the portfolio for absolutely free! If only I could figure out a way to do this with my homeowners insurance or automobile insurance.

The purpose of this post is to let you know that if you are purchasing portfolio coverage, look for ways to reduce your basis and generate profits that are fully protected by your hedge. With options, this is a viable strategy.

My portfolio has no risk to the upside whatsoever and I make lottery like returns in the event of a crash. My only risk lies in a very slow market grind down, but I have plenty of time to make adjustments.

Happy trading all!

Sweet Bobby

You and Taleb chasing tails.

 

[taowave]

That's how fucking clueless you are..If you have a buy write and are long 2-3 downside puts further out,WTF do you think you have??

You have a backspread and rolled your puts out in time..

I'll let you try and figure out the rest of the equation

Pleasee learn how to spell "calendar." There are no calendar spreads in my portfolio, idiot!

 

[Sweet Bobby]

Hey, clueless calend"er" boy, you say that I have rolled me puts out in time. I do NOT roll any position you maggot! Nice try though, acting like you know what you're talking about so others might show some minuscule level of respect for your opinion. Get back to Robinhood, son, and let the men get back to making money.

That's how fucking clueless you are..If you have a buy write and are long 2-3 downside puts further out WTF do you think you have??

You have a backspread and rolled your puts out in time..

I'll let you try and figure out the rest of the equation