OPTIONS & DERIVATIVES
Options are my tool for asymmetric risk. I use them to generate income on existing positions, hedge downside, and express directional views with defined risk. This page covers my approach to options as part of a broader portfolio strategy — not as speculation, but as engineering.
WHY OPTIONS?
Options let me do three things that buy-and-hold can't: (1) generate income through premium selling on positions I'd own anyway, (2) define maximum loss before entering a trade, and (3) profit from volatility itself, not just direction. I treat options as a risk management layer on top of my core ETF and equity portfolio.
CORE STRATEGIES
My primary strategies are covered calls on long equity positions (income generation), cash-secured puts on stocks I want to own at lower prices (entry optimization), and vertical spreads for defined-risk directional bets. I run the Wheel strategy on select blue-chip and ETF positions, cycling between selling puts and selling calls. For hedging, I use protective puts and collar strategies during high-uncertainty macro regimes.
RISK FRAMEWORK
Every options position follows strict rules: max 2-5% of portfolio at risk per trade, no naked selling, delta-neutral where possible on income trades. I track the Greeks — primarily delta and theta — to manage exposure. Position sizing is based on max loss, not notional value. I avoid earnings plays and highly speculative short-dated options. Time decay (theta) should work for me, not against me.
TOOLS & EXECUTION
I use IBKR for execution and options analytics. For scanning, I look at IV rank and IV percentile to time premium-selling entries. I journal every trade with entry thesis, planned adjustment triggers, and exit criteria. Weekly review of open positions against macro thesis from my Regime Mapping framework.
LESSONS LEARNED
The biggest lesson: selling premium consistently beats buying premium over time, but only with discipline. Early mistakes included over-leveraging on earnings plays and ignoring assignment risk. Now I only sell puts on stocks I genuinely want to own, and only sell calls above my cost basis. Patience and position sizing matter more than being right on direction.