Updated: Dec 6, 2018
There's no question that the most important part of my work by far, and what I take most seriously is giving people the best trade signals to get the highest rate of return possible while still maintaining an adequate level of safety. Basically, keeping that purple line in the TPS chart above upward sloping with as shallow of drawdowns as possible and continuing to crush the returns of the financial industry. And this safety factor is becoming increasingly important every day we move forward in this stretched market.
But teaching and helping people grasp some of these important concepts are also important to me. Case in point, the last few days. The collapse in emerging markets (EEM) has presented an opportunity but I wanted to try to open things up for discussion and learning by doing it in slow motion over a few days. Given the response I've received I think it's safe to say people enjoyed it and I will do this type of thing again.
But when I had the original idea a few days ago the plan was to open a Bull Put Spread. Well, unfortunately, that trade window is closed now. The technical bounce I was expecting to happen has happened. So we are now going to look at this EEM crash with fresh eyes, forget the past, and just pick the best trade at the moment.
Right now, it's an Iron Condor. But I don't love the trade, I just like it so another tip: Allocate more to the best trades and a little less to the ones that aren't perfect. There's nothing wrong with staying in cash or taking smaller allocation trades.
The Trade:Iron Condor on EEM
Buy to Open 10 x 16 Nov 18' EEM 37 Put Sell to Open 10 x 16 Nov 18' EEM 39 Put Sell to Open 10 x 16 Nov 18' EEM 45 Call Buy to Open 10 x 16 Nov 18' EEM 47 Call Credit: ~ 0.45 Days to expiry: 63
* prices move around, so just get the highest premium you can
Margin Requirement: 1 option contract = 100 shares The margin requirement is the strike gap minus the premium (2.00 - 0.45) * 100 = 155 per contract 10 contracts * 155 = 1,550 margin requirement
The VTS Discretionary Options model portfolio is at 26,035.35 so 1,550 margin is 5.9% of the portfolio
* You can scale your trade to roughly 5-10% of your VTS Discretionary Options funds
I also recorded a quick video that goes over the 5 option types that we considered for this trade for those of you who prefer videos to articles. Have a fantastic weekend!
Want to join the awesome VTS community?
* All information, analysis, and articles on this site are provided for informational purposes only. Nothing herein should be interested as personalized investment advice as I make no recommendations to buy, sell, or hold any securities or positions. I'm making this website available "as is" with no warranty or guarantees of it's accuracy, completeness, or current's. If you rely on this website or any of the information contained, you do so entirely at your own risk. I do not hold myself out as a financial advisor and nothing herein is a solicitation for any fund or securities mentioned. Although I may answer general questions about the information herein, I'm not licensed or registered under security laws to address your personal investment situation. Past performance is not indicative of future results. Any and all financial decisions are the sole responsibility of you the individual.