Why Options must be in your portfolio: Top 5 reasons!

Whether you’re a staid, traditional buy-and-hold value investor, or a rambunctious day trading trader, our option strategy can play a valuable role in your portfolio. Here are the top 5 reasons every investor or trader should use options strategy:

1. Decrease portfolio volatility:  Options can relieve the size and frequency of portfolio fluctuations over time. It doesn’t matter whether you a have a portfolio of long-term index stocks or momentum stocks – if you want to level out the bumps along the way, trading options each month can help decrease that portfolio volatility.
2. Get market-neutral:  Sometimes it’s just too hard to know where the market is going: long plays don’t look so hot when it seems the economic is moving into recession, but short plays can get overextended and easily upturned. Well, when you consider the market might go nowhere swiftly, your choices have traditionally been limited to cash. But options strategy is specifically constructed to profit from the passage of time – no matter whether the market goes up, down, or sideways.
3. Generate income: One of the nicest things about options is that they are income-oriented. You receive a credit for opening the position, and once you pay any exits costs to close out the trade, you get to pocket the net credit and move on. You don’t have to depend on a stock or option moving dramatically to make money; quite the contrary, you can use options to bring in income ever month as a good portfolio buffer. Our trades typically average 5-9% per month, and we attribute that success to the strategy itself, not to any trading genius on our part.
4. Develop discipline:  One of the toughest aspects of trading options is that it forces you to be permanent contrarians. When the market sells off, you hope it will move right back up the next day. When the market rallies, you want everyone to take profits and send prices back down tomorrow. But one extra advantage to trading options is that it teaches you to examine your own biases and assumptions, and the character of the trades themselves forces you out of any unquestioned assumption under which you might be operating.
5. Go do something else: One great feature of our option strategy is that options trades don’t require you to sit in front of a screen all day, nervously watching your positions. Since these trades profit from the passage of time, you can go pass the time doing something more important than trading: play sports, read your favorite novel, spend time with your kids, etc. This honestly isn’t an exaggeration: a quick check on the markets every other day or so is basically all you need to do to maintain and option position until you’re ready to close it out.