Review of "If I Could Only Trade ONE Strategy, It Would Be This (Options Retirement Strategy For Beginners)"

 2024-09-11


Link:  https://www.youtube.com/watch?v=dk9d7a0rh9U

Put ratio spread - 1 long OTM put and 2 short OTM puts with lower strike prices

The long OTM put is for defense if the market goes down.  The short OTM puts are for premium.

Trade setup

Strikes

  • Shorts
    • Can be at resistance levels
    • Buy shares where underlying stocks can have low stochastics (be oversold)
    • Can use delta levels, too (e.g., 25%) 
  • Long
    • Closer to short if bullish - will have more premium
    • Closer to ATM if bearish - will be more defensive

DTE

  • Shorter DTE 
    • Gives more overall ROI
    • Less premium to buy long position
    • Less premium for lower strike prices, hence, in case of assignment, higher strike price

Management
  • If OTM, then collect premium
  • If "near" expiration and only long is ITM, close out
  • If shorts are ITM
    • Do nothing, or
    • Close out half the trade and roll out remaining short

Observations
  • Looks like an iron butterfly, but because of the ratio nature, requires a lot more capital in case one of the shorts is assigned.
  • At 26:24 - "I generally like 45 DTE because that's where the edge lies...  where the realized move is less than the expected move."
  • In the roll out scenario, need to figure out whether it's worth it.  The money for the roll out is locked and not generating income while we wait for the roll out to play out.
  • Need to look up the use of the stochastics

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