July 31, 2013

Advisors Option: The Wheel of Fun

57 minutes

Options 101: Alternate methods for entering and exiting stock positions using options - aka "The Wheel of Fun."

Caveat 1: Short puts are excellent tools for income generation, but most advisors and clients should limit themselves to only writing puts at prices, and on underlyings, that they don't mind owning.

Caveat 2: The income generation portion of these trades are extremely volatility-dependent. This strategy is not suitable for all trading/volatility environments. Don't force an income trade when the volatility is too low. You're simply incurring risk without enough reward to offset it.

Listener Mail:Help us help you.

Question from Walter T., Tampa, FL. Why are retirement accounts restricted to only buying options and writing covered positions?

Question from NorthForkSpur. What do the hosts think of advisors using futures options for exposure to non-correlated assets like commodities? Is this the right path? Should most stick with ETF options instead?

Question from Alejandro Vega, CFP, Los Angeles, CA. I enjoyed your episode on collars. They can certainly provide great benefit to my clients. But I'm confused as to the difference between a collar and a risk reversal. They seem to be the same trade. Are these just two different terms for the same thing?

The Buzz: S&P 500 "Persistence Scorecard" result are out - Most managers still fail to beat the market. Two great reasons to add options to you client portfolios. Correlation is kicking into high gear.

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By The Options Insider Radio Network

33 ratings