A total of 76 options trades were placed in May, June, and July as the market rebounded after the COVID-19 market lows. During this timeframe, all 76 trades were winning trades to lock-in a 100% option win rate with an average income per trade of $190 and an average return on investment (ROI) per trade of 7.6%. After the tumultuous market lows of March and into early April, leveraging a minimal amount of capital, mitigating risk and maximizing returns was paramount. The objective of an options-based portfolio can offer the optimal balance between risk and reward while providing a margin of downside protection with high probability win rates.
As the market continues to rebound, optimal risk management is essential when engaging in options trading as a means to drive portfolio performance. When engaging in options trading, risk mitigation needs to be built into each trade via risk-defining trades, staggering options expiration dates, trading across a wide array of uncorrelated tickers, maximizing the number of trades, appropriate position allocation and selling options to collect the premium income.
Getting creative and customizing your option trade structure is another element that can be layered into the overall strategy for long-term success in options trading. Maintaining disciple via continuing to risk-define trades, leveraging small amounts of capital while maximizing return on investment, is essential despite the impressive streak of 76 consecutive winning trades.
3 Months Post COVID-19 Results
After placing 76 trades throughout May, June, and July, a 100% win rate, 99% premium capture, and 7.6% ROI per trade was achieved. This was accomplished via leveraging a minimal amount of capital and maximizing return on investment with risk-defined trades. Deploying a combination of put spreads and custom put spreads was used to optimize the risk-reward profile for these 76 trades. Whether you have a small account or a large account, a defined risk (i.e., custom put spreads) strategy enables you to leverage a minimal amount of capital, which opens the door to trading virtually any stock on the market regardless of the share price. Risk-defined options can easily yield double-digit realized gains over the course of a typical one month contract (Figures 1, 2, and 3).
Figure 1 – Average income per trade of $190, the average return per trade of 7.6% and 99% premium capture over 76 trades in May and June
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