RiverTree’s Trading Goals
When RiverTree began trading in 2021 its goal was to generate a profit while limiting risk and maintaining principal. During the first year, trading was based on an income strategy, and the portfolio value increased by more than 24 percent. However early in 2022, a number of economic and geopolitical challenges appeared in the financial markets. The first quarter of 2022 saw the $VIX volatility index rise and the major stock indices (S&P, Dow, and Nasdaq) trade lower.
Options Trading and RivertTree
Options income strategies had worked well during 2021. However, these strategies relied upon holding long stock positions or short options contracts until expiration. This year's volatile market has made trades depending on time decay less predictable and at times less profitable.
As RiverTree develops during 2022 it will move toward an active trading strategy encompassing spread and defined risk trades. In addition, trading will include common stock as well as sector ETFs. Fortunately, options strategies make it possible to respond to market events adjusting strategies and managing portfolios.
RiverTree’s guidelines are intended to help structure income trading processes and improve performance outcomes in a variety of market conditions. However, these strategies are not without risk, and individuals unfamiliar with these trades should seek additional information.
RiverTree’s guidelines are intended to make decisions more routine, objective, and measurable as well as profitable. Guidelines also consider trade selection, trade size, and time until expiration. The guidelines are also a working document that will be periodically revised and supplemented with articles and spreadsheets.
Portfolio Management and Trading Guidelines
- General Guidelines
- Monitor economic activity and events that affect the market.
- Trades and portfolio adjustments are small and routine.
- No naked puts or calls (funds are reserved to secure puts).
- The overall portfolio Delta is near zero to slightly positive.
- Review IV rank and Delta for potential trades.
- Balance options premium with the likelihood of being ITM.
- Time - Until expiration
- Limit expiration dates to between 30 and 60 days.
- Overall Theta values are moderate.