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As many of you already know, I use a wide variety of options strategies that center around a quantitative approach.
I prefer to diversify my options strategies to take advantage of different market environments (bullish, bearish and neutral) and I use these options strategies over different durations (short, intermediate and long-term).
The reason: I can’t see the future.
At the beginning of 2021, I intend to discuss a wide variety of strategies that take advantage of different market environments. As investors, we need to understand not only how to make money in a bullish market, but also in neutral-to-bearish markets as well.
Again, it is incredibly important as an investor/trader to have an arsenal of options strategies at your disposal so that you have the ability to be successful in any market. Yes, making money is always the ultimate goal when investing? But keeping your hard-earned money through the use of hedging techniques is also just as important. Unfortunately, most investors don’t know to accomplish these tasks.
In 2021 I will be discussing a range of options strategies . . . bear call spreads, bull put spreads, iron condors, selling puts, covered calls, poor man’s covered calls, short strangles, straddles, calendar spreads, ratio spreads, diagonal spreads, jade lizards, etc . . .
Recently, I was asked, how am I preparing for the year ahead. What am I going to do differently?
By doing the same thing I’ve done for several decades . . . taking a quantitative approach by selling options, using a wide variety of options strategies (like the ones mentioned above), and using a high probability of success on each and every trade.
The market once again moved higher in 2020, vacillating between negative and then, defiantly positive. But there is no doubt that uncertainty has moved into the market . . . and this uncertainty can be seen through the VIX.
Volatility is well above 20 and could be trading here for at least a few more years. With volatility returning, quantitative strategies, as seen through the use of options-selling strategies, should flourish. This IS the environment where they thrive.
So, as investors, are we supposed to sit on our laurels and allow Mr. Market to dictate our returns?
Yes, we all look like financial geniuses when the market is going higher. Investors take all the credit for their success when the market is soaring but blame other factors – such as geopolitical concerns or central bankers – when investments sour. The talking heads make sure the culprits are front and center to make the blame game that much easier.
But I don’t really care.
I don’t care because the ongoing news cycle never ends. I don’t care because it has been proven that professional analysts can’t outperform the market. But, more importantly, I don’t care because stock-picking is a coin flip, and the probability of success is only slightly higher than 50% due to the risk-free rate.
I care about volatility. I care about probabilities. I want every single trade I make to have a high-probability strategy wrapped around it, and an increase in volatility allows me to increase my pot odds even further.
So, by introducing new tools every week, we can all increase our knowledge and add a few things in our investment toolbelts so that we can all take advantage of the varying market environments that we will all eventually experience . . . if we haven’t already. 😊
Be proactive and come learn and prosper with me in 2021.