Author: The INO.com Team

Mitigating Election And COVID-19 Volatility

Posted on by The INO.com Team

The confluence of the impending U.S. Presidential election, rising COVID-19 cases domestically and abroad, and market dependency on stimulus measures give rise to a potentially volatile environment in November. Positioning your portfolio to be as agile as possible is essential when navigating these potentially volatile events. Cash on-hand, exposure to broad-based ETFs, and options is an ideal mix to achieve the portfolio agility required to mitigate uncertainty and volatility expansion.

Options trading at its core defines risk, leveraging a minimal amount of capital, and maximizing investment return. Proper portfolio construction is essential when engaging in options trading to drive portfolio results. This cash liquidity position provides portfolio agility to adjust when faced with extreme market conditions such as the September market correction rapidly.

An agile options based portfolio is essential to navigating these pockets of volatility. The recent September correction is a prime example of why maintaining liquidity is one of the many keys to an effective long term options strategy. In May, June, July, August, September, and October, 141 trades were placed and closed. An options win rate of 97% was achieved with an average ROI per trade of 7.5% and an overall option premium capture of 88% while outperforming the broader market despite the September correction (Figures 1 and 2).

volatility
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Stimulus Concerns Stall Market

Posted on by The INO.com Team

The stock market ended Friday trading relatively unchanged, with the DOW closing -28 pts lower or -.10%. The S&P 500 and NASDAQ both finished higher on the day with +.34% and +.37% gains, respectively. The weakness towards the end of the week was tied to stimulus plan news after Treasury Secretary Steven Mnuchin said that "We've offered compromises, the speaker on a number of issues is still dug in, if 'she wants to compromise, there will be a deal. But we’ve made lots of progress in lots of areas, but there's still some significant areas that we're working through."

On a weekly level, The DOW and S&P 500 snapped a three-week winning streak with weekly losses of -.95% for the DOW and -.5% for the S&P 500. The NASDAQ had its first weekly loss in five weeks losing just -1%. Rounding out the weekly losses are the US Dollar which lost -1% and crude oil lost over -3%. Continue reading "Stimulus Concerns Stall Market" →

98% Options Win Rate Despite September Correction

Posted on by The INO.com Team

Options trading, at its core, is defining risk, leveraging a minimal amount of capital, and maximizing return on investment. Options trading in combination with broad-based index funds and cash-on-hand provides portfolio agility in the face of market corrections and volatility expansion. Although options trading provides a margin of downside protection and a statistical edge, no portfolio is completely immune from sharp double-digit declines when a correction occurs. A liquidity position provides portfolio agility to contend with and rapidly adjust when faced with extreme market conditions such as the September market correction.

An agile options based portfolio is essential to navigate pockets of volatility. The recent September correction was a prime example of why maintaining liquidity is one of the many keys to an effective long term options strategy. Over the past six months (May, June, July, August, September, and thus far in October), 127 trades were placed and closed. An options win rate of 98% was achieved with an average ROI per trade of 7.4% and an overall option premium capture of 91% while outperforming the broader market despite the September downturn. Along with these metrics, three losses were suffered in September. Analyzing these three losses via self-reflecting and learning will enable traders to make positive future adjustments to their trading strategy.

Despite September Sell-Off – Positive Returns

Since March, the September sell-off was the worst technology rout, while the Dow and S&P 500 posted four-week losing streaks, their longest losing stretches since August 2019. The Nasdaq had its first weekly gain in four weeks at the tail end of September. All the major indices sold off double-digits and into correction territory throughout September. This recent September correction provides a great opportunity to demonstrate the durability and resiliency of an options-based portfolio. Continue reading "98% Options Win Rate Despite September Correction" →

New Green Weekly Trade Triangles

Posted on by The INO.com Team

With the positive week, both the DOW and S&P 500 joined the NASDAQ with new green weekly Trade Triangles indicating that a long position is in order for the market. With the new green weekly Trade Triangles, all three indexes now have Chart Analysis Scores of +100, with green Trade Triangles across the board.

The DOW jumped +3.2% for the week and posted its biggest one-week gain since August erasing the steep September losses that the market endured. The S&P 500 and NASDAQ were up +3.8% and +4.5%, respectively. Both indexes had their biggest one-week gain since early July of this year. Continue reading "New Green Weekly Trade Triangles" →

Options Based Resiliency - September Outperformance

Posted on by The INO.com Team

Options trading, at its core, is defining risk, leveraging a minimal amount of capital, and maximizing return on investment. Options trading in combination with long equity via broad-based index ETFs and cash-on-hand provides portfolio agility in the face of market corrections and in times of volatility expansion. COVID-19 was the linchpin for the major indices to drop over ~30% in March. Logging the worst sell-off since the Great Depression and inducing extreme market volatility that hasn’t been since the Financial Crisis.

Although options trading provides a margin of downside protection and a statistical edge, no portfolio is immune from the wreckage when hit with a black swan event. Thus proper portfolio construction is essential when engaging in options trading to drive portfolio results. One of the main pillars of building an options-based portfolio is maintaining ample liquidity by holding ~50% of one’s portfolio in cash. This liquidity position provides portfolio agility to adjust when faced with extreme market conditions such as COVID-19 and the September market correction rapidly.

An agile options based portfolio is essential to navigating these pockets of volatility. The COVID-19 induced sell-off and recent September correction are prime examples of why maintaining liquidity is one of the many keys to an effective long term options strategy. In May, June, July, August, and September, 121 trades were placed and closed. Options win rate of 98% was achieved with an average ROI per trade of 7.3% and an overall option premium capture of 90% while outperforming the broader market over the September downturn (Figure 1).

Options

Figure 1 – Smooth and consistent portfolio appreciation while matching the broader market gains and outperforming during the market sell-off in September. An overlay of an options/cash/long equity hybrid portfolio and the S&P 500 post-COVID-19. Even under the most bullish conditions, the hybrid portfolio outperformed the index with ~50% in cash
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