Advisor's Option 85: Options Strategies to Avoid

• HOST: MARK LONGO, THE OPTIONS INSIDER MEDIA GROUP
• CO-HOST: MATT AMBERSON, PRINCIPAL, OPTION RESEARCH & TECHNOLOGY SERVICES
• CO-HOST: CHRIS HAUSMAN, PORTFOLIO MANAGER, MANAGING DIRECTOR OF RISK, SWAN GLOBAL INVESTMENTS

THE BUZZ

• THOUGHTS ON CURRENT MARKET/VOLATILITY CONDITIONS
• EARNINGS VOLATILITY: EARNINGS SEASON RUNDOWN

OPTIONS 101:  TRICKS OF THE TRADE

• INSPIRED BY THIS QUESTION FROM DEREK: Are there any options strategies that you feel RIAs should flat out avoid? Thx and love the earnings reports. Any chance of sector earnings updates - maybe tech earnings or retail earnings? 
  • RATIO SPREADS/NAKED SHORT UNITS
  • DEPENDS ON RIA’S STRATEGY/OUTLOOK?
  • DEPENDS ON CLIENT’S RISK TOLERANCE?
  • DEPENDS ON MARKET CONDITIONS
  • LONG EQUITY MIGHT WANT TO AVOID ADDITIVE SHORT PREMIUM STRATEGIES SUCH AS NAKED SHORT PUTS
  • AVOID OVERLY COMPLEX/TIME CONSUMING POSITIONS LIKE IRON CONDOR SWAPS
  • AVOID EXTREMELY SHORT-TERM POSITIONS LIKE WEEKLIES UNLESS YOU HAVE TIME TO COMMIT TO POSITION MANAGEMENT. 

 

 

OFFICE HOURS 

 

• QUESTION FROM CROSBY: I don’t get why people are saying commissions have gone to zero when they are clearly still sixty-five cents a contract. Am I crazy?
• COMMENT FROM BRIAN CAMBELL: I complained about the fees per contract for my fund to td and they “generously” offered me $.65. Next thing I know they are offering the same “deal” to the world. So much for my special rate. 
• QUESTION FROM NELSON: Do large option players like Swan still pay $.65 per contract for their options trades?
• QUESTION FROM  MRMEZ: Should I be concerned that nearly a quarter of all options-based funds were launched last year? Not exactly a strong track record. 
  • RE: MORNINGSTAR OPTIONS-BASED FUND RATINGS
  • From the calamos breakdown of morningstar funds
  • https://www.calamos.com/blogs/investment-ideas/understanding-the-options-based-funds-category-infographic/
• QUESTION FROM CRLANE: Thank you for creating this network and for providing quality content like the Advisors Option. It is my constant companion at my office. *My question is for the Director of Risk. I understand that they offer their DRS strategy using the SPX. I would like to know if they have evaluated this approach for other indices like nasdaq or russell? Does the different volatility structure of those products make them more or less suitable for the two year vs 1 month approach of the DRS. Thank you.
• QUESTION FROM MILES: What the best options conference for advisors?
• QUESTION FROM TONY KYLE: What are the panelists thoughts on annuities? Sales appear to be soaring. What does this mean for the options market? Is this really just a way to get indirect derivatives exposure without diving into the deep end. Does this hurt options volume and growth?

• • Sales of Variable Indexed Annuities Shine
  • Re: This link:  https://www.thinkadvisor.com/2019/11/19/sales-of-variable-indexed-annuities-shine-institute/
• QUESTION FROM PATRIC:  If I want to buy an option during earnings season should I buy it early or right before the announcement?
• QUESTION FROM SLAIP: What is the minimum trade size for a flex order? I’d like to construct something approx. 5 years out in spx 20% OTM Calls. 
• QUESTION FROM INTHEBOATHOUSE: Why do so few funds offer optionality? Outside of the swan drs and gateway there are only a few others that have any substantial aum or history. Why such a sparse playing field
• COMMENT FROM Tom Madison: RIAs should get CE credits for listening to this show. It’s amazing. You guys rock.