To The Moon

Hello everyone! Today I want to share some option strategies with you!

6 Steps for Structuring a Successful optionselling Portfolio

Step 1 = Set Your Objectives. Your first step in constructing your portfolio is to decide why you are starting the portfolio and what you hope to accomplish (aka your goal). Knowing your objectives from the beginning will help you to better define, build, and adjust your trading plan.

Step 2 = Determine What You Will Do When Your Objectives Are Attained. Knowing where you are going means making more focused decisions. It helps to have a general idea of what you will do when you reach your portfolio goal.

Step 3 = Decide What You Are Willing to Risk to Achieve Your Objectives. In selling options, you get high odds of success in your favor, but the trade-off is that the risk-reward is not in your favor and you have to take steps to manage your risk. Your success as an option-seller will have not so much to do with the trades you win as it will have more to do with how you handle the trades that go against you.

Step 4 = Diversify Your Option-Selling Portfolio. A cornerstone to a successful portfolio is diversification. You will want to build towards diversifying your option sales across several different sectors. If you are diversified over several sectors and one goes bad, chances are that it is only a smaller percentage of your overall portfolio. You take the loss, you move on, and you make it up somewhere else. This doesn't mean that you have to equally balance your portfolio across all sectors. You may like some markets better than others or feel there is less risk in some trades than others. There is nothing wrong with overweighting certain sectors at certain times.

Step 5 = Manage Your Cash Margin. Effective margin management is crucial to your success as an option seller. Over-positioning (i.e. position sizing too large) is probably the number one reason traders lose money selling options. Make sure you have a sufficient amount of excess margin available in your account to cover your positions.

Step 6 = Do Not Overtrade. Over-positioning usually results from over-trading. Over-trading usually results from overzealous traders getting greedy and trying to chase profit. You should execute a trade only when everything (fundamentals, technicals, strike, premium, market) appears to be in your favor. Wait for your opportunities; pick your battles.

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