The Option Writer

99% boredom vs 1% mega stress

📅 May 26, 2023 edition

Option Writing: A Strategic Approach to Portfolio Management

Option writing can be a powerful ⛏️tool for portfolio diversification and profit generation. While it may not be my main focus in finance, as I am primarily a crypto investor and day trader in crypto and forex, I've discovered that option writing offers a unique way to 🏗️leverage my investment portfolio and extract value from my stablecoin allocation.

Maintaining a significant portion of my investment portfolio in stablecoins and consistently dollar-cost-averaging into crypto, I found in option writing a profitable and low-risk strategy. The only risk I assume in this endeavor is associated with the protocols themselves, considering the inherent 💀 hazards of the crypto space, such as hacks, rug pulls, or regulatory changes. Nevertheless, I understand and accept this generic risk as part of doing business in the crypto industry.

In terms of actual option writing, I consider that it is virtually 🏖️risk-free when approached conservatively—as I strive to do. Yes, it may be boring, but that's precisely its beauty. There are minimal emotions involved, and the overall market direction becomes irrelevant. I engage in selling WAY out of the money puts and calls during each epoch, focusing on mitigating risk and optimizing premiums. The only 🎢thrill lies in this strategic process, which requires a mere 10 to 20 minutes of my time each week.

For me, writing options is the perfect way to unlock value from my stablecoin holdings. By compounding these profits, I have various options at my disposal (pun intended!):

• Regular, effortless, and riskless passive income: I can aim for a consistent income stream without much effort.

• Increasing my stablecoin supply: I can grow my stablecoin allocation with the intention of reinvesting in crypto during the next bullish market phase.

• Balancing compounding and reinvestment: I have the flexibility to compound some of the profits into the option writing business, generating passive income, while allocating a portion back into crypto.

The optimal balance for my portfolio 🎯goals is yet to be determined, as I experiment with different approaches. However, regardless of the final decision, my stablecoin holdings are actively working for me—a goal we should all strive for as investors and traders.

Let's put our money to work and seize the opportunities that option writing presents.

📋May 26 Epoch review

No secrets here: 4 very conservative strikes and almost no management required during the week. At one point, I contemplated closing the $1700 put on Thursday, but the price action clearly indicated that it was not necessary.

• $2050 CALL

• $2000 CALL

• $1700 PUT

• $1650 PUT

📋June 2 Epoch plan

I had a preemptive position of 1600 Put, and got 1950 and 2000 Calls. We will see how price action unfolds today and during the weekend scams, but I already allocated the majority of my capital. This is what I am watching:

• $2050 CALL

• $2000 CALL

• $1950 CALL

• $1650 PUT

• $1600 PUT

📈📉My results

In May, I opted for partial allocation of collateral for two weeks, resulting in slightly lower results compared to April. Despite this, I still achieved a decent 4.5% increase in capital for the month while maintaining a safe environment and mindset even during significant news events. Looking ahead, I have decided to resume full allocations, except during major events, and focus on being less greedy in optimization and more decisive in allocation.

Average Yield %: 1.77%

Projected APY %: 150%

Growth %: 20%

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Nothing in this newsletter is financial advice. I just share my thoughts and personal experiences on Options and the markets in general

Disclaimer: I utilize AI writing tools to assist me in refining the English language, as English is not my native tongue. While the content is entirely original, the form may contain some AI-driven enhancements.