The Options Insider Radio Network

The Advisor's Option


Simple diversification is no longer enough to shield the assets under your management. Registered investment advisors, financial planners and asset managers need a new weapon in their war on risk. Welcome to The Advisors Option  - the only program designed to arm busy advisors with the information necessary to properly manage risk in this volatile environment. From options education, trading strategies and tips to options industry news and interviews with leading advisors, you will find it all on The Advisors Option. 

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 The Advisors Option is brought to you by:

The Advisors Option is brought to you by the Options Industry Council. The OIC was created to educate investors and their financial advisors about the benefits and risks of exchange-traded equity options. For more information on how the OIC can help you implement options in your practice, please visit optionseducation.org

 

SwanGlobalInvestments

The Advisors Option is also brought to you by Swan Global Investments. Since 1997, Swan has been the leader in hedged equity and option income strategies with GIPS verified results. Swan provides unique and valuable solutions to the inherent weaknesses of asset allocation. Offering defined risk strategies that allow upside participation while also protecting advisors and investors against market risk. For more information about our advisor program for separately managed accounts, the Swan Defined Risk mutual fund or our proprietary option overlay strategies please contact Randy Swan at swanglobalinvestments.com. Think outside the style box. Think Swan when deciding on risk management solutions to market risk.

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Show Archive

Advisors Option 55: The Truth About Options Backtesting

In this episode, Mark is joined by co-hosts: Chris Hausman, Portfolio & Chief Technical Strategiest, Swan Global Investments Aash Vyas, Director of Portfolio Strategy and Overlays, Swan Global Investments Matt Amberson, Principal, Option Research...
Posted May 22nd, 2017

In this episode, Mark is joined by co-hosts:

  • Chris Hausman, Portfolio & Chief Technical Strategiest, Swan Global Investments
  • Aash Vyas, Director of Portfolio Strategy and Overlays, Swan Global Investments
  • Matt Amberson, Principal, Option Research & Technology Services.

Tricks of the Trade: Looking at Options Backtesting

  • What is it?
  • Options vs. Stocks: Why is it so difficult to backtest options effectively?
  • What are some common mistakes that are made when attempting to backtest options?
  • Are some options strategies easier to backtest than others?
  • How do you deal with assumptions when backtesting options?
  • How can advisors use backtesting to test the efficacy of their options strategies?

The Buzz: A recap of the 2017 OIC Conference. Cerulli study says financial advisors who currently use options expect to increase use of options by 30% in three years.

Office Hours: Options Question of the week

This volatility implosion is starting to make people nervous. It's VIX limbo time: How Low Can It Go in 2017?

Currently:

  • 38% - 9.0 is the Bottom
  • 18% - No lower than 8.5
  • 15% - Cannot get below 8.0
  • 29% - <8 = Lookout Below!

Listener Questions:

  • Question from Aidan Chance - I heard you guys discussing the problem of lumping options funds and strats into the alts ghetto on the last show. I understand your complaints. What do you think would be a better category to gauge options performance?
  • Question from Steve - With the VIX so low, I am not selling a lot of options anymore, because I'm afraid that I will not collect enough premium. Am I thinking of this incorrectly?

The Advisors Option 54: Live from the Swan CIO Summit

Recorded live at the Swan CIO summit, Mark is joined by: Chris Hausman, Portfolio & Chief Technical Strategist, Swan Global Investments Aash Vyas, Director of Portfolio Strategy and Overlays, Swan Global Investments They discuss: What is the...
Posted April 13th, 2017

Recorded live at the Swan CIO summit, Mark is joined by:

  • Chris Hausman, Portfolio & Chief Technical Strategist, Swan Global Investments
  • Aash Vyas, Director of Portfolio Strategy and Overlays, Swan Global Investments

They discuss:

  • What is the CIO Summit?
  • What were the highlights of the Summit?
  • Upside/Downside Capture
  • The importance of education
  • Are options becoming more mainstream?
  • Harvesting risk premium
  • Why Swan takes a longer-term view for choosing expirations
  • Looking into crystal ball for realized volatility levels
  • New participants in the overlay space
  • Shifting the paradigm from harvesting premium to premium extraction
  • Navigating the spike in skew
  • The efficacy of skew

Office Hours: Listener questions and comments

  • Lumping options funds into the 'alts ghetto.' Is there a better category?
  • Are there too many options exchanges?

Advisors Option 53: What Do Advisors Think About Volatility?

In this episode, Mark is joined by co-hosts: Chris Hausman, Portfolio & Chief Technical Strategist, Swan Global Investments Aash Vyas, Director of Portfolio Strategy and Overlays, Swan Global Investments Ilya Feygin, Managing Director and Senior...
Posted March 30th, 2017

In this episode, Mark is joined by co-hosts:

  • Chris Hausman, Portfolio & Chief Technical Strategist, Swan Global Investments
  • Aash Vyas, Director of Portfolio Strategy and Overlays, Swan Global Investments
  • Ilya Feygin, Managing Director and Senior Strategist, WallachBeth Capital

The Buzz: What are the hot topics in the world of financial advisors?

  • A recap of the CBOE Risk Management Conference.
  • Beware of Correlations, and Other Investment Tips: Janus Funds 2017 Wealth Advisor's Guide identifies the intended and unintended risks of advisors? asset allocations in their model portfolios
  • Why stock market volatility is not really as low as it appears.
  • Trump is biggest global risk in 2017, Alt Funds says.
  • OCC Educating Lawmakers on Potential Impact on Tax Reform on Listed Equity Options Market.by Craig Donohue, OCC Executive Chairman and CEO

Office Hours: Answering listener questions and comments

  • Question from Steve - With the VIX so low, I am not selling a lot of options anymore because I am afraid that I will not collect enough premium. Am I thinking of this incorrectly?
  • Question from Avec11 - According to Financial Planning magazine, ?More than a third of the nations largest RIAs lost AUM in the past year.? What is going on? Does this reflect the trend toward passive investing and away from active management? You would think a bull market period like 2016 would result in more AUM for advisors not less. Do you think using options could have stemmed the tide?

Advisors Option 52: Fitting Options into Your Portfolio

The Buzz: What are the latest developments in the options market for advisors? Fiduciary rule, revisited. What does it mean? Will options be back on the chopping block? Why does the law of unintended consequences seem to hit options so often? The new...
Posted February 15th, 2017

The Buzz: What are the latest developments in the options market for advisors?

  • Fiduciary rule, revisited. What does it mean? Will options be back on the chopping block? Why does the law of unintended consequences seem to hit options so often?
  • The new white paper from Swan, "Where the DRS Fits in a Portfolio"
  • How to fit options into portfolio allocation?
  • What is the optimal asset allocation?
  • Are there not enough financial advisors (planners) to meet demand?
  • The alts didn't do well last year. Why should advisors increase allocation to what some consider an alt?
  • Are options the veggies of your portfolio?

Advisors Option 51: Trump, ETFs, Covered Calls and More

Today, Mark is joined by co-hosts Chris Hausman and Aash Vyas from Swan Global Investments and Russell Rhoads from the CBOE Options Institute. The Buzz: The Dawn of a New Regime - how will it impact the markets? An overview of the STAC Regulatory...
Posted January 31st, 2017

Today, Mark is joined by co-hosts Chris Hausman and Aash Vyas from Swan Global Investments and Russell Rhoads from the CBOE Options Institute.

The Buzz: The Dawn of a New Regime - how will it impact the markets? An overview of the STAC Regulatory Reform Session: the Choice Act, the Volcker Rule, migration of OTC derivates and DOL fiduciary rule.

A breakdown of Inside ETFs Conference:

  • What is it?
  • Who goes to it?
  • What interesting developments/research came out of it?

A preview of the CBOE RMC Conference:

  • What is it?
  • Who attends it?
  • Learn the latest risk management tools and tactics from top traders and strategists.

A new paper from Swan Global Investments: What Return Are You Targeting? Setting Expectations and Benchmarking in a Myopic World

Next Swan Conference:

Office Hours: Options #PopQuiz: What are you primarily looking for when buying an options-oriented fund?

  • Levered Returns (2x, etc)
  • Income Generation
  • Hedge/Protection
  • Other (reply/dm w/answer)

Listener Questions: What's on your mind?

  • Question from Tim Avery - If I choose an advisor that uses options do they traditionally charge higher fees than straight-up equity advisors?
  • Question from Aisling Davis - Seems as though correlation is trending upward across asset classes. Do you find that this is a more favorable environment to trade options vs other assets? What are your clients saying about this?
  • Question from Angelo Miles - Hello. I found your program while searching for options informations for RIAs. Let me just say it was a refreshing breath of fresh air after the dense material available on other outlets and broker sites. It seems that most of them (see here) just say options are risky and link to something called the Characteristics and Risks of Standardized Options. What is this omnipresent booklet and why should I care? I tried looking at it a few times and it just put me to sleep.
  • Question from Adam - Could you please explain what it means to "gamma scalp" and why this is not called delta scalping? Thanks and your show has saved me a lot of money now that I have come to the dark side!
  • Question from Yukoner - Are covered calls still a viable strategy in a 401k these days?


Advisors Option 50: Mark Cuban Mystery Puts

The Buzz: A rundown of CBOE RMC Asia conference with Russell Rhoads. What is it? Who attends it? What compelling options research came out of the conference? What is the asian perspective on volatility? #QuestionOfTheWeek: Financial advisors...
Posted December 20th, 2016

The Buzz: A rundown of CBOE RMC Asia conference with Russell Rhoads.

  • What is it?
  • Who attends it?
  • What compelling options research came out of the conference?
  • What is the asian perspective on volatility?

#QuestionOfTheWeek: Financial advisors represent the last options frontier. What level of options knowledge do you expect from your advisor?

  • None: I will do it myself
  • Level 1: Buy Puts/Calls
  • Level 2: Income & Vol
  • Level 3: Option Specialist

Trump watch

Office Hours: Listeners have their say

  • Question from Zachary - I am learning a lot about options from your program. I am a relativity new convert so I apologize if you have discusses this on past episodes, but exactly how much of my portfolio should I allocate to defensive strategies like puts? Thank you for providing so much great free content!
  • Question from Rice Landa - Did you guys see this? Is Mark Cuban talking about buying puts or something else? Guess he has a savvy financial advisor?
  • Question from FundConsept: Do you think activist investors will encounter more opportunities in the U.S? seems like they are in the UK

The Advisors Option 49: Analyzing the Impact of Post-Election Volatility

Options 101: Looking back at post-election volatility. How has it impacted the options market and your current trade style or outlook? Takeaways: Patient volatility traders won the day. Many options traders were on the sidelines in most names...
Posted December 6th, 2016

Options 101: Looking back at post-election volatility. How has it impacted the options market and your current trade style or outlook?

Takeaways:

  • Patient volatility traders won the day.
  • Many options traders were on the sidelines in most names after-hours.
  • Always watch out for skew.

The Buzz: What do busy advisors need to know?

Office Hours: Taking listener questions and comments

Options#QuestionOfTheWeek: Commodities are capturing a lot of attention and generating a lot of #Volatility. What's your option of choice?

  • $GLD / Comex Gold
  • $USO / $WTI
  • $TLT / ED / 10YR
  • EUR/USD, GPB/USD
  • Question from Jay Allen - What do you typically recommend for hedging portfolio risk SPY puts or SPX puts? Can you please explain some of the differences and why one product is superior to the other. Thanks for the show and the app.
  • Question from JT Monroe - I overwrite calls for a handful of clients mostly in SPY. I?ve tried to grow my options book of business but it seems like I?m mostly lumped into the Alts segment. I refer to it as the Alts ghetto because the allocations are so paltry. How do I get clients to start viewing basic overwrites as part of their traditional equity allocation rather than a paltry 2% Alts allocation?

Advisors Option 48: Elections And Volatility

The Buzz: What are the hot breaking topics in the world of options? Presidential Elections and Option Implied Volatility by Chris Hausman, Swan Global Investments. Is the market pricing in a Clinton victory? Have we already seen the peak of election...
Posted October 26th, 2016

The Buzz: What are the hot breaking topics in the world of options?

  • Presidential Elections and Option Implied Volatility by Chris Hausman, Swan Global Investments.
  • Is the market pricing in a Clinton victory?
  • Have we already seen the peak of election volatility?
  • How should a typical advisor/asset manager that writes covered calls, buys protective puts or trades collars adjust their strategies for this market?
  • Should advisors consider adding a volatility/VIX component to their client portfolios during this period?
  • What about the ETFs / ETPs?
  • VIX in October in election years.

Advisors Option 47: Collars Revisited

Options 101: Collars Revisited. Inspired by a listener question, we review the collar strategy Question from Talos - I enjoyed your panel presentation on The Holy Grail of the financial markets with Randy Swan and Mike Cavanaugh. I realize this panel...
Posted September 26th, 2016

Options 101: Collars Revisited. Inspired by a listener question, we review the collar strategy

Question from Talos - I enjoyed your panel presentation on The Holy Grail of the financial markets with Randy Swan and Mike Cavanaugh. I realize this panel was from a few years ago. Have there been any updates with regards to data on collars? Are they still effective tools for advisors looking to mitigate portfolio risk? On a specific note are they applicable to concentrated equity positions? I would appreciate any information you could provide.

If you want to hear the episode that inspired this question, you can find it at: The Holy Grail of the Options Market

Its time for an update on collars!

  • What are collars?
  • What makes them so effective for financial advisors?
  • Why are they the "Holy Grail"?
  • Types include:
    • Collars with a kicker
    • Zero cost collars

The Buzz: New Wilshire Analytics study finds options indexes offered noteworthy returns over 30 years.

Office Hours: Listener questions and comments

  • Question from Nick Tanner, CFA - The most recent Janus report on metals discusses their outlook for these "volatile products." What is your opinion of the recent volatility in these products? Does that make them less suitable for options-oriented clients or more suitable? Are there particular products you recommend for different clients? Read report here.
  • Question from Javier Mendoza - We are in a relatively low volatility environment right now which is contrary to the seasonality of volatility which points to Sep and Oct as the most volatile months. Do you think we're headed for a return of volatility this month or next month? Is it worth adding a few VIX calls to my holdings?
  • Question from LVX65 - Great breakdown of the problems with 60/40 this episode. I'm curious what part you feel options should play in a traditional portfolio. Should there be an options allocation? What about volatility. Do you agree that volatility is its own asset class and should have an allocation in every portfolio?


Advisors Option 46: Futures Options Revisited plus the 60-40 Debate

Options 101: Futues Options Strategies Covered calls and protective puts Stock/Futures replacement strategy Vertical call spread Spreads with wings Other topics: Metals futures Energy Ags Volatility futures and options The Buzz: With experts...
Posted September 2nd, 2016

Options 101: Futues Options Strategies

  • Covered calls and protective puts
  • Stock/Futures replacement strategy
  • Vertical call spread
  • Spreads with wings

Other topics:

  • Metals futures
  • Energy
  • Ags
  • Volatility futures and options

The Buzz: With experts questioning the 60/40 rule, advisors should consider incorporating alternatives.


Advisors Option 45: Options Strategies for Advisors

Options 101: Today we feature guest host Russell Rhoads, author of Options Strategies for Advisors and Institutions. He discusses: An overview of your background in the options markets? Why did he feel compelled to write this book? Which core options...
Posted July 21st, 2016

Options 101: Today we feature guest host Russell Rhoads, author of Options Strategies for Advisors and Institutions.

He discusses:

  • An overview of your background in the options markets?
  • Why did he feel compelled to write this book?
  • Which core options strategies he focuses on in the book?
  • What about the collar: The "holy grail" of advisor option strategies?

Regarding the advisor audience. They are a somewhat odd blend of the retail and institutional audiences. That makes creating content for that audience a unique challenge.

  • What are some of the responses he is hearing from advisors when he approaches them about options?
  • Evolution of the advisor audience. Does he feel they are becoming more receptive to using options?

Office Hours: Listener questions and comments

  • Question from Nellius: How did the recent Brexit market meltdown affect the Swan DRS?
  • Question from Skiball: Where do you see the VIX going and how will it impact stock picking in this market?
  • Question from Ignacio Reale: This is a very informative program. I would like to ask you to please explain the benefits and drawbacks of credit spreads and debit spreads. Why should I utilize one versus the other. My clients portfolios typically utilize retirement assets with the goals of capital appreciation and income. Your input would be most welcome.

Advisors Option 44: John Oliver and the Hunt for Yield

Tricks of the Trade: Today's guest co-hosts are Chris Hausman, Portfolio & Chief Technical Strategist, Swan Global Investments and David Beth, Co-founder, Wallacbeth Capital. They discuss: Has the low yield fixed income environment of the last...
Posted June 17th, 2016

Tricks of the Trade: Today's guest co-hosts are Chris Hausman, Portfolio & Chief Technical Strategist, Swan Global Investments and David Beth, Co-founder, Wallacbeth Capital.

They discuss:

  • Has the low yield fixed income environment of the last few years squeezed premium collection trades?
  • How has the low volatility environment impacted premium harvesting strategies?
  • What can advisors do to boost income in low volatility/low yield environments?
  • Which strategies should they avoid/adjust in low volatility environments?

Options 101: The topic of this segment today comes to us courtesy of a listener question.

  • Question from Andrew Seever: I would like to politely request an episode that covers trade adjustments. This is a challenging area particularly when a stock moves against you. I imagine your listeners would find it useful as well. Thank you for this informative program.

Adjustments are where the rubber meets the road from an options perspective:

  • What are adjustments?
  • Why have an adjustment strategy?
  • When do you make the adjustment?

Office Hours: Listener questions and comments

  • Comment from James Biggs: My hairdresser knows more than my financial planner. Terrifying! Your show made it hard for me to sleep at night. Thanks for that.
  • Question from Alain Joubain: Please discuss this story on your Advisors Option radio program (http://www.newsweek.com/john-oliver-last-week-tonight-retirement-investing-469670). John Oliver really took it to financial advisors on his show this week. I have already got my official financial advisor certificate printed out and its hanging on my wall. But seriously I would like to hear your thoughts on his comments and his recommendations for financial planning.

Advisors Option 43: Financial Advisors Vs. Hairdressers

The Buss: Looking back at the Swan Advisor Conference What were some of the interesting takeaways, panels and developments from this conference? Visit the Swan Conferences website And the Swan Global Investments website The ugly from the Swan April...
Posted June 2nd, 2016

The Buss: Looking back at the Swan Advisor Conference

The ugly from the Swan April newsletter:

  • Coca-Cola is fighting 12 consecutive years of soda consumption decline. Its stock is at an all-time high.
  • Tesla is ?changing the world?, and orders for its new car are off the charts. Its stock is lower than it was 18 months ago.
  • Cigarette consumption has dropped 44% since 1981. Altria stock is up 71,000% since 1981.
  • Walmart net income has tripled since 2000. Its stock has lost 1.5% since 2000.
  • Apple has earned almost a quarter trillion dollars of profit since 2012. Its stock has barely budged.

Office Hours: Listener questions and comments

  • Question from Njord: I would like the host to express their views on the following article. Is it time to raise the bar for becoming a financial advisor? How do options play into this?
    http://blogs.wsj.com/moneybeat/2016/04/08/how-come-its-still-harder-to-become-a-hairdresser-than-a-financial-adviser/
    Refers to the article: "How Come It?s Still Harder to Become a Hairdresser than a Financial Adviser?" by Jason Zweig.
  • Question from JBigg: Does the presidential election cycle have any notable impact on the options market?
    Question from Alan Riggs - There seems to be a volume of data recently about the effectiveness of selling weekly instead of monthly premium. Does the team at Swan utilize weeklies for any portion of the DRS? If not, have they considered incorporating them in the future?
  • Question from Nathan Jones: I have always been intrigued by options and as I expand my client services I would like to incorporate them. I have listened to your programs and reviewed the material provided by the OIC advisor team. I understand the mechanics of the strategies. At this point I find myself hung up on the starting point. What should be my initial objective when using options? Do you view them primarily as a hedging and risk management tool or primarily as an income generating tool? Also when your present them to potential clients how do you categorize them? Thanks and I am looking forward to finally pulling the trigger.

Advisors Option 42: Live from the Swan Global CIO Conference

In this episode, Mark is joined by Marc Odo, Micah Wakefield, and Chris Hausman. They discuss their big take-aways from the conference, including: Good reception to the thoughts on the retirement conundrum Using options for safety and income...
Posted April 12th, 2016

In this episode, Mark is joined by Marc Odo, Micah Wakefield, and Chris Hausman. They discuss their big take-aways from the conference, including:

  • Good reception to the thoughts on the retirement conundrum
  • Using options for safety and income generation
  • The importance of discipline in risk management. (Have a plan!)
  • How options have become more mainstream
  • The importance of education
  • Fragmentation and the proliferation of options exchanges
  • Inside, outside, and outer rim markets
  • How to get more liquidity providers in the markets?
  • Comparing and contrasting ETFs and futures in terms of execution, management fees, etc.
  • And more...

Advisors Option 41: The Dark Math Behind Investment Returns

The Buzz: Today we are joined by Micah Wakefield, Director of Research and Product Development at Swan Global Investments. They discuss: A preview of the upcoming Swan Global CIO Conference. When it is? What is it? Who is attending? Who should...
Posted March 31st, 2016

The Buzz: Today we are joined by Micah Wakefield, Director of Research and Product Development at Swan Global Investments. They discuss:

  • A preview of the upcoming Swan Global CIO Conference.
  • When it is? What is it? Who is attending? Who should consider attending future Swan events?
  • Math Matters: Rethinking Investment Returns and How Math Impacts Results by Micah Wakefield
  • IRA ban on options raises its ugly head again - By late March, investors should learn if the Labor Department will ban options trading in retirement accounts. The outcome right now is too hard to call.

Office Hours: Listener questions and comments

  • Question from NVid - The junk bond market is melting down and interest rates are hovering around zero. Is the best place to find income these days via options writing rather than investing in fixed income or related products.
  • Question from Bas431 - A client recently contacted me regarding the concept of pin risk in conjunction with options. I was unfamiliar with the term so I turned to the experts. Can you explain what this risk is and where it occurs? Is this something that I need to take into consideration with my clients positions. FYI - the vast majority of my options positions are call overwrites in broad equity ETFs like SPY. Thank you for your highly informative program. It is now on regular rotation on my iPhone along with Options Boot Camp and the Options News Rundown.

Advisors Option 40: Dealing with Black Swan Events

The Buzz: Today we have special guest Chris Hausman, Senior Trader & Chief Market Technician at Swan Global Investments. Chris is the author of "Do Market Anomalies Occur More Frequently Now?" They discuss: Normal distributions and when models...
Posted February 26th, 2016

The Buzz: Today we have special guest Chris Hausman, Senior Trader & Chief Market Technician at Swan Global Investments. Chris is the author of "Do Market Anomalies Occur More Frequently Now?"

They discuss:

  • Normal distributions and when models blow up
  • Five- and 10-sigma events
  • What do financial advisors need to look for?
  • How to be prepared
  • Plus, options within IRAs
  • Annuities
  • More data from CBOE regarding Russell 2000 Index related products

Office Hours: Listener questions and comments

  • Question from Patrick D. -What is your opinion of volatility ETFs such as VXX? Does it make sense to include them in diversified client portfolio?Perhaps 3%-5%?

Advisors Option 39: The Retirement Gordion Knot

The Buzz: Today's guest is Marc Odo, Director of Investor Solutions, Swan Global Investments, and author of "The Retirement Conundrum: Untying the Gordian Knot" Good, Bad, and Ugly Q4 2015 review: This has been the worst start of a trading year in...
Posted February 1st, 2016

The Buzz: Today's guest is Marc Odo, Director of Investor Solutions, Swan Global Investments, and author of "The Retirement Conundrum: Untying the Gordian Knot"

Good, Bad, and Ugly Q4 2015 review:

  • This has been the worst start of a trading year in history.
  • Volatility is elevated across all products- from VIX to crude oil
  • How does this current environment impact options trading?
  • Is this a good time to consider hedging strategies?
  • Income strategies?
  • New study: An analysis of index option writing with monthly and weekly rollover
  • First comprehensive study to examine strategy benchmark with traditional stock, bond indexes incorporating weeklys options.

Office Hours: Listener questions and comments

  • Question from James M. - Watching my trading screens this earnings season I am struck by my need for extra hedging in my portfolio. But when i look at the prices for protection for names like apple going into earnings the costs seem prohibitive. In your opinion is it worth paying the additional earnings premium for protection in these volatile periods? Do you have any strategies to mitigate the cost of this protection?
  • Question from JValerio1 -The robots are invading the advising space! I know a few of my colleagues are concerned about these services cannibalizing their business. What are your thoughts about these services and ?Robo Advisors? when it comes to options? Is this an issue with these products as well?

Advisors Option 38: Top Options Trends of 2015

The Buzz: SEC to crack down on derivatives use in funds. Mutual funds face leverage caps under SEC rule on derivatives. Looking at the financial advisory business of tomorrow - Volatility skew. Tricks of the Trade: Looking Back at 2015: Top Options...
Posted December 23rd, 2015

The Buzz: SEC to crack down on derivatives use in funds. Mutual funds face leverage caps under SEC rule on derivatives. Looking at the financial advisory business of tomorrow - Volatility skew.

Tricks of the Trade: Looking Back at 2015: Top Options Trends/Stories for Advisors/Asset Managers

  • Fallout over IRA use in options.
  • Impact of rising volatility on options prices.
  • Impact of fed rate hike on options / rho.
  • Ongoing fascination with crude oil options.
  • Year of great data regarding options efficacy for fund managers:OIC Harris Poll - CBOE white paper on fund use of options in portfolio management.
  • Honorable mention - Rise of the robo advisor.


Advisors Option 37: Taking on Listener Questions

Office Hours: Listener questions and comments Question from Peter D - Stocks are being hit by latency sensitive strategies like HFT. Is that happening in options as well? Should I steer clients to other products instead? Question from Batram -...
Posted November 25th, 2015

Office Hours: Listener questions and comments

  • Question from Peter D - Stocks are being hit by latency sensitive strategies like HFT. Is that happening in options as well? Should I steer clients to other products instead?
  • Question from Batram - Thank you for the information you provide on your advisors option program. I have found it very useful in my business. I have evaluated multiple online platforms for use with my clients but have not found the optimal solution yet. I would like to hear your recommendations for platforms that can handle basic covered calls, put writes and collars on approximately 200 SMAs. My concerns are ease of use, reporting and compliance. Cost is less of an issue as I do not mind paying for good functionality.
  • Question from Neal M - I recently attended a seminar where a financial advisor mentioned using straddles and strangles to make money no matter which direction a stock moved. He was a little light on specifics so I did some google research and found your program. Can you please give overviews of these strategies and explain if they are suitable for longer-term investing via a retirement account?
  • Question from AVX16 - The fed is set to raise interest rates in December. While this raise will be nominal it sets the stage for future raises in 2016. I am a relatively new convert to options thanks to this program. I have only used them in the current zero rate environment. Are there any performance peculiarities that I should know before putting my clients into options positions in a rising environment? My primary strategy is 2% out-of-the-money covered calls on spy although I am considering more aggressive income strategies such as covered strangles and iron condors. With the prospect of a rising interest rate environment on the horizon are there certain impacts on options that i should note before using these strategies for clients.
  • Question from AngeloM4 - Can you clarify what is meant by a naked options position vs a covered options position? Sexy name aside - is the former truly exposed to unlimited risk?
  • Question from beansie - Is there such thing as a commitment of traders report for options? Something that shows bullish and bearish positions in the marketplace?
  • Question from Ben A - Are the options prices more volatile going into events like earnings and crop reports? What is the cause of volatility in the options market? Where does it come from?
  • Question from Sebastian - What is the status of the Chinese options market? Are options going to be listed in anytime soon? Do you expect they will be accessible to outside investors? I have multiple clients interested in investing in china but I do not see many viable options offerings.
  • Question from INC451 - I saw a recent headline stating that the second BATS options exchange launched on 11/3 bringing the total number of options exchanges to 13. Should I be excited or concerned that there are so many exchanges listing spy and apple options? In my experience with equities more venues does not always equal more liquidity and deeper markets. In fact, it can frequently be the opposite.
  • Question from Kevin D - Hi Mark, I love your shows! What happens to my options if the underlying gets halted permanently? Would I ever be able to close them? I am remembering Sino Forest from a few years ago in Canada- stock got halted pending a fraud investigation and never came back. I am worried that I will not be able to cash in on my BABA Puts! Thanks, Kevin Sent from my iPhone

Advisors Option 36: Options Data You Can Use

Tricks of the Trade: An overview of leading options studies & options fund studies. New OIC Study Shows Increased Knowledge of Listed Options by Investors. Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs Advisors...
Posted October 29th, 2015

Tricks of the Trade: An overview of leading options studies & options fund studies.

The Buzz: What's the Latest News?

  • Department of Labor IRA Proposal - seems like the worst is out. DOL is open to changing fiduciary proposal, but some press for it to be scrapped.
  • A tax to curb excessive trading could be a boon to returns - Senator Bernie Sandrs wants to tax stock trades at 0.5 percent of the value of the transaction, 0.1 percent for bonds and 0.005 percent for derivatives.
  • Hillary join the "Tax HFT" movement.
  • New York Stock Exchange launches enhanced buy-write index, ?NYBW?. The New York Stock Exchange, part of the Intercontinental Exchange ICE, +2.00% global network of exchanges, today announced the launch of a new index that aims to provide an innovative, smart beta solution for investors wishing to access the buy-write strategy.

Office Hours: We will take your questions now.

  • Question from Nic L. - Interesting stuff. Hard to believe. What major changes do you expect in options market in 2035? - re: This recent OIC advisor tweet - [email protected]_Advisor: Avg. daily volume in 1995 = 1.1 million contracts, an amount surpassed today in first 30 mins of trading.
  • Question from Tod B., CFA - What is the best way to discuss volatility with new potential clients? Should I highlight it as an opportunity for income generation, highlight the benefits of options to reduce portfolio volatility or simply steer clear of it?
  • Question from 777 - Does the panel see the possibility of options exchange mergers anytime soon? Seems like there are just too many right now and it needlessly complications trading.
  • Question from Genus P - Would you counsel managers focus their income generation in the weekly options? Short-duration products appear to do well for generating income.

Advisors Option 35: Your Options Questions, Our Answers

The Buzz: Final days for comment letter on DOL IRA proposal. Office Hours: So many questions. Question from TLand66 -I would like to submit a question for the Advisors Option radio program. I have reviewed a wide variety of options products for my...
Posted September 28th, 2015

The Buzz: Final days for comment letter on DOL IRA proposal.

Office Hours: So many questions.

  • Question from TLand66 -I would like to submit a question for the Advisors Option radio program. I have reviewed a wide variety of options products for my clients. Aside from large widely held products like SPY and QQQ, there seems to be a surprising lack of liquidity in many of the products that I research. Spreads are wide and size is relatively limited - particularly in my preferred time frame of 2-3 months. My strategy is 4-5% OTM covered calls. I do not want a substantial amount of size. 200-300 contracts will typically suffice for the needs of my clients. Still this seems to dramatically outstrip the available bid in most calls by several orders of magnitude. I have to sell through the bid, sometimes by a substantial margin, to complete my transaction costing my clients substantial amounts in slippage. After all a $.10 hit on 300 contracts amounts to $3000. If I do that on every trade it adds up fairly quickly. Do you have any tips that will help me find more liquidity or help me improve my execution on behalf of my clients? I find your program tremendously informative. I particularly enjoyed the episodes on the VIX and income trading. Although I found your most recent episode discussing the issues with IRAs to be extremely alarming. I am drafting my comments on the proposal as we speak.
  • Comment from Steve A - With respect to the OIC study on various options strategies since 2003 - Are you really surprised the highest return was gained by a synthetic short put stupid in what has mostly been a bull market? (Covered strangle => short call + long stock = ITM short put, plus OTM short put). So, yes! Selling 2 puts brings in more money than selling only 1! Yes, the lobster and meatball have taught me enough to figure this out and they should feel good that something has stuck. Keep the great shows coming - Hawkeye
  • Question from NewBQuestion - How does premium selling work when selling options - Do I get the capital right away? How does that work from a margin perspective?
  • Comment from VoxPopuli - Great program. I have shared it with a number of my colleagues because I agree that more fund managers and advisors should use options. You would be surprised how many of those guys still look at me like I am crazy when I tell them to buy a put - they prefer to save the money and rely on stops. Hopefully last month finally put that thought process to bed. What good is a stop order when the market opens down 1000 points? Seems like these are great times to be a proponent of options. Guys like Randy must have their phone ringing off the hook from people who have "seen the light."
  • Question from Alan K - I have heard discussion in several outlets post 8/24 that options can exacerbate market volatility, particularly at the beginning and end of the session. Is this true? Do you agree with this assessment?
  • Question from Mousin - Monday market move was difficult to believe. Could it be that the huge options portfolios held by macro hedge funds are to blame for big move Monday in the market? Does this phenomenon also exhibit itself around options expiration?
  • Question from Vivian: I came across this article recently and immediately thought of your program. Do you feel this information is accurate? If so how should someone treat options that are deeply in-the-money? Are there any guidelines for when they should be exercised or how they should be treated in a portfolio?
  • Question from KDiddy - Hi Mark, I love your shows! Question: what happens to my options if the underlying gets halted permanently? Would I ever be able to close them? I am remembering Sino Forest from a few years ago in Canada- stock got halted pending a fraud investigation and never came back. I am worried that I will not be able to cash in on my BABA puts! Thanks.

Advisors Option 34: Market Meltdowns and the Great IRA Option Battle

The Buzz Segment: Today we are joined by Joe Corcoran, the Head of Government Relations at OCC. He discusses: An update on the Notre Dame study. A preview of the Nielsen study on financial advisors. OCC and U.S. Securities Market Coalition ask...
Posted August 31st, 2015

The Buzz Segment: Today we are joined by Joe Corcoran, the Head of Government Relations at OCC. He discusses:

  • An update on the Notre Dame study.
  • A preview of the Nielsen study on financial advisors.
  • OCC and U.S. Securities Market Coalition ask U.S. Department of Labor to allow use of listed options in retirement accounts.

The links for Financial Advisors and investors to post comment letters for the DOL fiduciary legislation are up on OCC website: www.theocc.com and the OIC website: www.OptionsEducation.org.

Tricks of the Trade: Extreme volatility: Takeaways from the recent extreme volatility in the marketplace. The Dow Jones Industrial average briefly slumped more than 1,000 points, its biggest point-drop ever. VIX cash hit 53.29 at 10am. Our discussion from last episode was very timely: Why even bother hedging volatility?

Office Hours: Listener questions and comments

  • Question from Traders_Inc - I have listened to a few of your earlier episodes and considered adding protective puts for my clients. They are mostly active in broad equity indices with a few large cap single names such as apple. But the outlay for protective puts on these positions is substantial - often over 2-3% of the portfolio's value. That seems to be too much - particularly when the client is paying me to manage their funds. They rely on me to close out positions when they turn negative rather than an exotic insurance product. I feel that it's preferable for advisors to manage their client's positions for them and save the dramatic outlay on puts. If a stock is dropping your manager should know enough to close out that position when it reaches a certain level. Or simply work a stop loss order to achieve that same level of protection. I am sure you feel that I am drastically outmoded in this viewpoint but I have a feeling that I am not alone among wealth managers.

Advisors Option 33: The Great IRA Options Debate and a VIX Refresher

The Buzz: OCC and U.S. Securities Market Coalition ask U.S. Department of Labor to allow use of listed options in retirement accounts. Wealth Adviser: Seeking clarity on derivatives in mutual funds. The skewed debate on Millennials. Options...
Posted July 31st, 2015

The Buzz: OCC and U.S. Securities Market Coalition ask U.S. Department of Labor to allow use of listed options in retirement accounts. Wealth Adviser: Seeking clarity on derivatives in mutual funds. The skewed debate on Millennials.

Options 101: Lots of "Volatility of Volatility "recently. ?Low VIX? is all over the financial media these days. But:

  • What is implied volatility?
  • What is the difference between realized and implied volatility?
  • What is the VIX?

Office Hours: The advisors will see you now.

  • Question from Andrew Malyan - It looks like rates will be climbing on the horizon if not this year than certainly in 2016. What should I as a relative newcomer to the options space consider when thinking about embracing these products in rising rate environment? Does this make these products more or less attractive? Any strategies that are particularly well-suited to a rising rate environment?
  • Question from Timothy Keen - Love the show. Great info. Great insight. I wonder why no one else is beating the derivatives drum for financial advisors? Maybe you should start your own conference series speaking to this critically underserved area of the space.

Advisors Option 32: Options & Concentrated Positions

Options 101: Managing concentrated positions What do you do if a client has a concentrated position? What if it?s a position in a company they manage/own? Options to the rescue! Protective puts Covered calls Collars The collar...
Posted June 30th, 2015

Options 101: Managing concentrated positions

  • What do you do if a client has a concentrated position?
  • What if it?s a position in a company they manage/own?
  • Options to the rescue!
  • Protective puts
  • Covered calls
  • Collars
  • The collar with a kicker

The Buzz: What?s happening in the options world?

  • Wealth Advisor Summit
  • Robo advisors
  • Digital technology for advisor
  • What is notable is what is missing: options, alternative investments, etc.
  • SEC tries to hone in on derivatives exposure in funds

Advisors Option 31: Performance of Options-Based Investment Strategies

Today, Mark is co-hosting with Randy Swan, Co-Founder, Swan Global Investments and Pat Stiefel, Director of Trading, Swan Global Investments Interview Segment: Mark, Randy and Pat are joined by Thomas W. Miller, Professor of Finance and Jack R. Lee...
Posted May 29th, 2015

Today, Mark is co-hosting with Randy Swan, Co-Founder, Swan Global Investments and Pat Stiefel, Director of Trading, Swan Global Investments

Interview Segment: Mark, Randy and Pat are joined by Thomas W. Miller, Professor of Finance and Jack R. Lee Chair of Financial Institutions and Consumer Finance at Mississippi State University.

He discusses The Performance of Options-Based Investment Strategies: Evidence for Individual Stocks During 2003-2013, which he conducted with Professor Michael L. Hemler, University of Notre Dame.

The Buzz: Financial Advisor Forum

Catching up with the Financial Advisor Forum going on in Miami

  • What are the main topics at the event?
  • How has the turnout been?
  • Catching up with swan global investments What is the latest on the mutual fund (s)? Any other appearances on the horizon?

Listener Mail: Listener questions and comments

  • Comment from Mark Brant: Fascinating how the Swan Process can be condensed to weekly's and succeed for the same reasons it does with monthly's.
  • Question from Allan: Do you feel that fear of generating additional commissions is a reason why so many financial advisors out there don't want to use options?
  • Question from BigJim: I've heard you guys recommend against rolling your covered calls. But I'm closing in on retirement and I've had this stock position for a number of years. It would be a sizable tax hit if I let it be called away. I also don't want to keep closing and re-opening it and generating taxable events. So what should I be looking at when managing my covered calls? What strike should I be writing? How close to the strike should I think about rolling it?
  • Question from Tom: Love the AO show. Stumbled across it in iTunes last month and I've been scrambling to catch up. You guys have spread a lot of knowledge to your listeners and I'm working to digest it all. Rather than waste your time with an options question -the answer to which I probably won't understand (yet) let me ask something more basic. Where can I find an advisor in my area that utilizes the practices and strategies you discuss on your program? Is there a database or website I can go to find options-using advisors. Thanks and also please ask Randy why he relocated swan to Puerto Rico? The weather is certainly nice but were there also other reasons - tax, family?

Advisors Option 30: Rise of the Robo Advisor

The Buzz: What is going on in the world of advisors? An overview of the OCC study (with Notre Dame and the University of Mississippi) on performance of options-based strategies versus long equity strategies on the nine stocks widely held in 401k...
Posted April 29th, 2015

The Buzz: What is going on in the world of advisors?

  • An overview of the OCC study (with Notre Dame and the University of Mississippi) on performance of options-based strategies versus long equity strategies on the nine stocks widely held in 401k plans.
  • How Robo-Advisors will sink pretenders and propel true financial advisors.
  • Investors must look beyond US assets - using options for international diversification.
  • Russell becomes the latest to unveil digital tools for advisors.
  • President Obama will order the Labor Department on Monday to begin developing new rules for financial managers who handle retirement accounts for working Americans.
  • Transaction Tax?
  • Elizabeth Warren: Tax the banks - questions SEC chair on broker reforms.

Office Hours: In which the group takes on listener comments and questions

  • Question from Neal A, Detroit MI - Can I use options to establish bullish positions in an IRA. I am particularly interested in bullish equity option positions using risk reversals. But I am concerned about the short put leg of the trade. Can I take advantage of the benefits of this position in an IRA?
  • Question from Averyman - The 2015 contribution limit for an IRA account is $5500. Are there techniques to increase or circumvent this limitation utilizing options or derivatives?
  • Question from Charles D, Richmond VA - I typically invest in dividend-paying equities on behalf of my clients. I am interested in adding covered calls to the equation. I would like to know if you have any tips for me as I embark on this road. Are there any particular characteristics of dividend-paying equities that make them better-suited, or perhaps not well-suited, to writing covered calls? Most of my clients are investing through retirement accounts. I plan to write 10% out-of-the-money calls when possible. Are there also any strategies for increasing the returns for my clients with these strategies?
  • Question from Tom B - Great show. It now has a regular spot on my iPad playlist. I recently intended an alternative investment conference where one of the instructor discussed the benefits of naked put writes. I am familiar with covered calls but I?ve been actively discouraged by my custodian against put writing because it was ?too risky.? So I never investigated them significantly as an investment alternative. Some of the points raised at the conference drew my attention including the fact that put sellers typically generate more income than call sellers. Do you agree with that as well as the overall sentiment that more investors should be utilizing naked puts as an investment option? Also are these strategies available to retirement investors? Thanks for all your insight.

Advisors Option 29: Paying For Your Put

Options 101:Paying for Protection The most common strategies we will outline are: basic put spreads, ratio put spreads, collars and a collar with a kicker (Swan-style). Listener Mail: Listener questions and comments Question from Rose Sparza -...
Posted March 30th, 2015

Options 101:Paying for Protection

The most common strategies we will outline are: basic put spreads, ratio put spreads, collars and a collar with a kicker (Swan-style).

Listener Mail: Listener questions and comments

  • Question from Rose Sparza - This question is for the advisors option program. I came across this article recently (http://www.valuewalk.com/2015/03/hedge-fund-jacob-whol/) and immediately thought of this program. This young manager utilizes options and overlays, two topics frequently discussed on advisors option. Of course the story has a negative bent because the manager appears to have run afoul of the law. Does the negative perception and coverage of options-oriented managers drive you crazy? Even if some of these guys seem to deserve it.
  • Question from JacksonHole - Am I correct when I say that I can use any options strategy in my IRA account as long as it does not require leverage?
  • Comment from Mark Brant - Started first Wheel of Fun selling AAPL April 125.71 Puts $2.17. Hope 2B put to and sell $2 covered Calls with a $1 long put hedge...@Options Front-week AAPL weeklys Wheel of Fun is looking sweet once you crunch the numbers. Collecting premium 52X a year really adds up! Quite the move toward my strike in the last hour! Nice start and a good omen!
  • Question from George S - Is it true that a lot of the stock movement we see on expiration day comes from the options traders defending their positions? So does that mean options traders tend to move stocks toward specific prices on expiration days? What should I as an equity advisor and aspiring options trader do to profit from this?

Advisors Option 28: Breaking Down How Options Can Benefit Advisors

Listener Mail: Listener questions and comments Question from Nancy N. - Would you recommend a covered call fund for a newcomer to options? How reliable is the income stream from these funds versus a typical dividend income-fund? What about put...
Posted February 27th, 2015

Listener Mail: Listener questions and comments

  • Question from Nancy N. - Would you recommend a covered call fund for a newcomer to options? How reliable is the income stream from these funds versus a typical dividend income-fund? What about put selling funds? Are these too risky for someone of my relatively advanced age and low risk tolerance? Thank you for this wonderful program. I am currently in the market for a financial advisor and I have used your episodes as a guideline.
  • Question from Sanjay Puri - Thank you for your very informative podcasts on the options insider radio network... Been an avid listener for the past year and have devoured most if not all of your podcasts, converting this erstwhile buy and hold equity investor into an amateur-ish options trader / investor!!! :) Deeply appreciate the good work you guys are doing - and look forward to more insightful content from the crew! My options trading has been mainly done from Roth IRA accounts, mine, as well as others in my family - wherein the earnings are tax-free. Curious to learn from the expert panel on your suggestions for ways to achieve the following:
    • Increase the capital deployed / contributed within the Roth IRA accounts and overcome max contribution limits of $5,500/year, to reap bigger tax-free earnings in the Roth IRA, by larger trades while still keeping ~50% of the capital as dry powder for potential adjustments, and for other attractive opportunities as they emerge. AND / OR
    • Minimize (or better still, eliminate! ;-)) the impact of taxes on earnings in other non-tax-advantaged account types, such as a regular brokerage account etc., with more flexibility on cash-in and cash-out.
    • Are there ways to have a business entity such as an LLC or an S Corp etc. own these ROTH / brokerage accounts, resulting in different tax treatments arising out of factors such as business expenses etc., with me either as an individual or another legal entity being appointed as the "money manager" or something along those lines for these accounts? The gist of what I am trying to achieve is increase capital deployed and eliminate or at least minimize taxes. Some additional context for you better see the big picture is as follows:
    • Currently have ~$30k in Roth IRA accounts.
    • Interested in deploying another $30k currently, and potentially more over time in a tax-optimized way - since taxes are the single largest, and almost certain expense item on the P&L - barring for trades gone bad, resulting in losses.
    • I realize and am fully aware that I should consult a CPA and that you do not provide tax advice on the show - but I am sure you fine gentlemen have probably come across ways these goals may have been achieved. Besides, the couple of CPAs I have spoken with so far, seem to have been mainly focused on the more conventional salary / W2 income - so if you are able to point me to some CPAs / firms that might be able to help, I would deeply appreciate that too! Thanks a million in advance for your feedback and for featuring this rather long email. :) Eagerly awaiting enlightenment from the wise ones!

Tricks of the Trade: Today's guests are Keith Black, Ph.D., CAIA, CFA, Managing Director of CAIA (Chartered Alternative Investment Analyst Association) and Ed Szado, Ph.D., CFA, Assistant Professor of Finance, Providence College, Director of Research, INGARM (Institute for Global Asset and Risk Management).


Advisors Option 27: Groundbreaking New Options Study

The Buzz: The Chicago Board Options Exchange announced today the release and publication of a groundbreaking new study: "Highlights of Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs." The study analyzed SEC-regulated...
Posted January 26th, 2015

The Buzz: The Chicago Board Options Exchange announced today the release and publication of a groundbreaking new study: "Highlights of Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs." The study analyzed SEC-regulated investment companies (mutual funds, exchange traded funds (ETFs) and closed-end funds (CEFs)) that focus on use of exchange-listed options for portfolio management (options-based funds). The study analyzed the equal-weighted performance of a subset (nearly three-fourths) of the 119 options-based funds -- those that focus on use of U.S. stock index options and/or equity options -- during the 15-year period from 2000 through 2014.

Key Takeaways: The number of options-based funds is growing. Options-based funds averaged 4.2% total return over the 15-year period - tied with the S&P500 over the same period. The options-based funds had higher risk-adjusted returns (as measured by the Sharpe Ratio and Sortino Ratio) than the S&P 500 and S&P GSCI Indexes. The options-based funds had lower volatility and lower maximum drawdowns than the S&P 500 and S&P GSCI Indexes.

Listener Mail: Listener questions and comments

  • Question from Alpha Numero. Happy 2015. It seems like we are looking somewhat top-heavy in the broad indices these days. I typically run portfolios as long equity - usually spy - with an OTM 1-2 month covered call - typically around 2.5%-3% out of the money. I often pair that with a farther 2-3 month OTM put - typically 5% OTM. In the current market would you recommend tightening up on that put - perhaps to around 2% OTM? This will undoubtedly result in a debit but I am ok with that if if preserves my portfolios. Would you also recommend tightening the covered call strike to reduce the net outlay on the position? What other strategies would you recommend for practitioners like myself who want to remain in the market but are concerned about near-term risk?
  • Question from RVC10. Are there any special tax considerations I should consider before using options on behalf of my clients?
  • Question from John D. Can you please explain the concept of risk premium as it applies to options trading and hedging?
  • Question from JPK211. On several of your programs you mention that it is important to understand the VIX Cash level at a given SPX level. Can you please explain this further?

Tricks of the Trade: Short-duration contracts are all-the-rage in the options market these days. SPX Weeklys acounted for approximately 32% of overall SPX contract volume in 2014, up from approximately 23% the previous year.


The Advisors Option 26: Lessons Learned from 2014

Looking Back on 2014: Misperceptions from 2014 - Despite "low" VIX options, volume still strong in 2014. Vol/VIX was too cheap. OTM call buyers did well. Ukrainian crisis in Q1/Q2 and market volatility in October were two primary drivers this...
Posted December 31st, 2014

Looking Back on 2014:

  • Misperceptions from 2014 - Despite "low" VIX options, volume still strong in 2014. Vol/VIX was too cheap. OTM call buyers did well.
  • Ukrainian crisis in Q1/Q2 and market volatility in October were two primary drivers this year.
  • The ongoing oil meltdown as well.
  • What option strategies worked in 2014? Put credit spreads and "Wheel of fun."
  • Takeaways from 2014 - Do not get married to a single strategy.

Looking Ahead to 2015:

  • Things to keep in mind - It might be time for a smart hedge. Volatility has volatility.
  • Exchange fragmentation will continue.
  • Expand your horizons.

Advisors Option 25: Mystery of the Covered Strangle

Advisors Option 25: Mystery of the Covered Strangle Options 101: Covered Strangles/Covered Combos What is it? Long stock, covered call, short put. Why do it? To collect more income than a standard call or short put. Why not do it? Increased margin...
Posted December 10th, 2014

Advisors Option 25: Mystery of the Covered Strangle

Options 101: Covered Strangles/Covered Combos

What is it? Long stock, covered call, short put. Why do it? To collect more income than a standard call or short put. Why not do it? Increased margin requirement, you will increase your stock position to the downside.

Note: Call and put should only be sold on strikes where you are comfortable buying/selling the stock.

Listener Mail Extravaganza

  • Question from Neil Berg - Love the show. You have discussed financial advisors using options for income generation and risk management on previous episodes. Is that the only acceptable use case for advisors and their clients? What about the speculative usage of options? Do you feel it is suitable for advisors to utilize options for that purpose? If so, which strategies would you recommend?
  • Question from Spartan16 - I have noticed that options tend to lose a substantial amount of value approaching long holiday weekends (Thanksgiving, Labor Day and others). Is this a known phenomenon in the markets, and is this something I can take advantage of as an income trader?
  • Question from Allen B, Baton Rouge, LA - First - love the network. You fill my commute with knowledge. Second - I have just discovered advisors option and have been listening to the archived episodes. In an earlier episode the RCM representative - sorry, I do not remember the name - mention a triple income strategy. I understand the two income components of selling the put and selling the call, but what is the third income component to this strategy? Thank you again for so much great free education.
  • Question from Michael Roberts - I came across your program while looking for new diversification options for my clients. I find your suggestions about collars and protective puts very interesting. I have also been reading new research about volatility itself being positioned as an alternative asset class. This leads me to two questions:
    1. Do you agree that volatility is an asset class?
    2. What is the best process to gain exposure to that asset class for my clients? Is simply buying an options with a substantial vega component sufficient, or must I purchase a dedicated volatility asset such as VIX options or an ETF life VXX?

Advisors Option 24: Listener Mail Extravaganza

It is all listener mail today on the Advisors Option, so let's dive in. Question from Luke Davis. Hi, I am wondering whether advisers are legally enabled to use any strategy that an individual might use in his own account. In other words, if I...
Posted October 31st, 2014

It is all listener mail today on the Advisors Option, so let's dive in.

  • Question from Luke Davis. Hi, I am wondering whether advisers are legally enabled to use any strategy that an individual might use in his own account. In other words, if I allow an adviser to invest a portion of my assets, may he use them for day trading, arbitrage strategies, etc.? I have heard of U.S. based un-registered advisers doing this for foreign clients, but refusing to do it for domestic clients, and am wondering if there is some compelling reason why they could not register and do so. Thanks
  • Question from Frank. My advisor has expressed concern in the past over the time commitment and complexity that come with using options strategies. He says I am the only client who requests them so he would be spending an inordinate amount of time for just one account. What strategies would you suggest to minimize his time investment and make him more open to the possibility of using options? Thanks for this program.
  • Question from Lucas Nuel. Got a question for Randy from Swan. He talked about buying two-year LEAP puts and then rolling them at the one-year mark. Why the two-year period? Would it be cheaper and perhaps more effective to use one-year LEAPS and perhaps rolling them when they hit the six or perhaps four-month period? That would save on the initial premium outlay but also avoid the rapid time decay period that occurs in the final few months of an options life. Can he talk a little more about the thought process that went into selecting the longer-term put vs shorter-term as well as the roll period.
  • Question from Mitch76. Can you talk about the place that individual equity options should have in your portfolio vs. broad indexes. Judging from previous episodes it seems that the bulk of your focus is on indexes. Is that due to the volatility risk posed by individual names like APPL, NFLX, etc. Would an overlay or "holy grail collar" approach even be as effective in individual names vs. indexes or are they better suited to premium harvesting strategies like iron condors. Great program touching on a very underserved area of the options market.
  • Question from Timothy Andrews, Spokane, WA. Can you talk about the influences of 60/40 tax treatment on your option strategies?
  • Question from Neal Magny. Question for Advisors Option. What questions or topics would you like to see on any forthcoming options certification or test for for financial advisors? Trading? Regs? Bit of both? Thx.
  • Question from TheInca. This may be a touchy subject, but it is important - What is an appropriate pay rate for option advisors? 2/20%? Some flat hourly rate? since they are doing more, should they get more? What should I look for when I am picking one of these guys?
  • Question from J. Ingrisali. Hello everyone and thank you for your time. I would like to know what you consider to be an appropriate level of options involvement for a typical financial advisor. Should I just expect them to have a basic understanding of income and risk management - aka protective puts, covered calls and collars? Or should I expect them to facilitate my active trade mentality with strategies such as iron condors, butterflies, time spreads, etc. I guess what I am asking is how active should my advisor be with options? If I expect him to help me adjust and roll my positions, am I asking too much from a guy with dozens of other clients?

Advisors Option 23: Diversifying With Futures Options

Options 101: Options on Futures as a Diversification Tool Futures options strategies. Covered call & Protective puts both require underlying futures positions - Most advisors looking for diversification typically want bullish exposure to the...
Posted October 1st, 2014

Options 101: Options on Futures as a Diversification Tool

Futures options strategies. Covered call & Protective puts both require underlying futures positions - Most advisors looking for diversification typically want bullish exposure to the underlying. Stock/Futures replacement strategies. Vertical call spread. Spreads with wings.

The Buzz: Commodity Trading Advisors bounce back to post positive performance in August. Following a tough month for returns in July, all managed futures indices calculated by Newedge reported positive performance in August. The strong month means that all Newedge managed futures indices are also now in positive territory for 2014 YTD.


Advisors Option 22: Managing Collars and More

Listener Mail: Listener questions and comments Question from Kevin Duggan. Regarding no cost collars with long put LEAPS and short term call writes. How do you manage them when the stock drops? Then the calls. I want to write have little premium...
Posted August 27th, 2014

Listener Mail: Listener questions and comments

  • Question from Kevin Duggan. Regarding no cost collars with long put LEAPS and short term call writes. How do you manage them when the stock drops? Then the calls. I want to write have little premium since they're now way OTM and, I don't want to lock in a loss by getting assigned at a lower strike than I paid for the stock. So a question for Randy since he has a lot of experience in this area: When it becomes apparent that my client won't be able to recover the premium paid for the put, how do I manage/close the collar without a loss? Details please (fry my brain, I can take it!). Also, the lure of "no cost insurance" gets me the meeting, how do I explain the worst case scenario and still get the order? Thanks.
  • Question from Alan Charles. I am a client of Wells Fargo. After listening to your show, I decided to check out Well Fargo's options offerings. This particular paragraph caught my eye: "Please note: Although options can be used to hedge an existing investment, options can also expose you to potentially significant risks. An investor who purchases options may lose the entire amount committed to the options in a relatively short period of time."I understand that they have to include disclaimer material, but does that seem like they are essentially saying "do not use these products at any cost."What is your view of Wells Fargo? Are they an options friendly shop or should I take my business elsewhere? Great show! Great network! Nothing else like it on the dial.
  • Question from Sea Biscuit. Hey guys! Digging the Advisors Option program. Just discovered it while listening to Options Boot Camp through you mobile app for android. I heard you guys mention extrinsic value on an early show. I am still not clear on the difference between extrinsic and intrinsic value. I know intrinsic changes with the value of the underlying, but what about extrinsic? Does that also change with the underlying, or can it move without it?
  • Question from Christian. If you buy an option on a company that ends up merging or being bought out with another, what happens to the option you own?
  • Question from Ingraham. Question from the OIC boys Eric and Alan G - You guys travel the world talking to advisors about options. Which firms do you feel are the most options-centric?
  • Question from C. Dutney, Ithaca, NY. How do I find an advisor in my area who is skilled in the topics that you discuss on your program? Is there some database I can access? Does Mr. Swan's firm take individual clients from my area? My account size is in the low six figures.
  • Question from Cat. I want to set up an options trading account for my son (who is 23 years old) and I want him to learn to trade options in a risk-managed way - I do not really want him to know that he can use options for taking stupid risks (he will probably figure that out on his own soon enough). I contacted the customer services people at Firm X to see how an account could be set up to achieve my goals and was told that initially all he could do would be to buy puts and buy calls. Seriously? That's exactly what I do not want him to do. I want him to control his risks better than that and to learn to put on spreads from the get go. Is there any way that my goal can be accomplished?

Advisors Option 21: Options for Protecting Profits

Options 101: Many clients are sitting on gains in their portfolios right now and are rightfully concerned about protecting them. Selling the assets with gains is a sure bet but eliminates future upside potential. This is an ideal use case for...
Posted July 31st, 2014

Options 101: Many clients are sitting on gains in their portfolios right now and are rightfully concerned about protecting them. Selling the assets with gains is a sure bet but eliminates future upside potential. This is an ideal use case for options.

Basic hedging strategies:

  • Protective put: the basic defensive play.
  • Put spread: ideal for protecting gains due to limited outlay.
  • Collar: the holy grail of options positions for advisors.
  • Ratio spreads/back spreads: ratios are tempting but can add risk to a portfolio. Back spreads may be more appropriate for some experienced.
  • Hedging an individual asset is relatively straightforward: simply implement the hedging strategy in the product you want to protect.
  • Hedging a broad portfolio is a little more difficult and requires determining the beta of the portfolio and the appropriate number of shares of the index product to hedge as result. Any tools or platform recommendations to assist with this process?

Listener Mail: Listener questions and comments

  • Question from Tyler Madison: I'm studying to become a CFA in Virginia. Your program has been tremendously helpful in preparing me for any options components of the exam. It has also armed me with potential options strategies to use for my clients. Thank you for this great content. You could really charge for this. If I may, I'd like to ask a question about open interest. I see this mentioned quite frequently by options analysts. What impact does open interest play in the options market - does an option with high open interest behave differently than an option with low open interest? Is this something I should pay attention to when trading options for my clients or is this not important? Thanks again for all of your insight - Tyler.
  • Question from J. Schaw, Ontario: Can the advisors options hosts recommend any good listed products that generate options income? I like the strategies you discuss on the show but simply don?t have time to manage all the strikes and such for my people. Available in Canada is obviously a big plus for me.

Advisors Option 20: Volatility and Options

In this episode, Mark and Randy are joined by Joe Cusick, Vice President of Wealth and Asset Management at MoneyBlock. Options 101: "Low VIX" is all over the financial media these days. Which makes it an excellent time to review the relationship...
Posted June 30th, 2014

In this episode, Mark and Randy are joined by Joe Cusick, Vice President of Wealth and Asset Management at MoneyBlock.

Options 101: "Low VIX" is all over the financial media these days. Which makes it an excellent time to review the relationship between volatility & options. Haven't discussed volatility on the program since Feb 2013 and the VIX products since October 2013 so we'll review the following topics:

  • What is implied volatility?
  • Difference between realized and implied volatility?
  • How does high and low implied volatility impact options pricing?
  • If you trade options for your clients do you want high or low volatility?
  • What does it mean to have a "low VIX"? Is this level of implied volatility actually low?
  • Should advisors use VIX options to hedge their client's portfolios?

The Buzz: Credit unions help advisers expand use of options:

Listener Mail: Listener questions and comments

  • Question from Charlie Durant. I love the advisors show. Can you guys recommend a good tool or platform that will help me roll covered calls on my spy and individual equity positions more effectively? Right now I?m pretty much running a spreadsheet for my clients and then manually trading in and out of each position. Seems like there should be a better or easier way.
  • Question from Firestar. Can I use VIX options in my IRA accounts or are futures options banned due to leverage?

Advisors Option 19: Pension Problems and PUT Writes

The Buzz: News out of China: OIC, Shanghai Stock Exchange content licensing agreement. Pensions seek bond diversification. Report: UK pensions miss out on returns. Chuck likes index funds. Retail investors not afraid of equity markets. Low VIX: what...
Posted May 29th, 2014

The Buzz: News out of China: OIC, Shanghai Stock Exchange content licensing agreement. Pensions seek bond diversification. Report: UK pensions miss out on returns. Chuck likes index funds. Retail investors not afraid of equity markets. Low VIX: what does it mean for volatility?

Listener Mail: Your comments and questions

  • Question from Neil Staffenberg: thank you for this program. It is very informative. I've heard you mention SMAs on this program in the past. I'm not familiar with this term. Can you explain what you are referring to and the significance it has for the advisor community.
  • Question from Avow: what do the hosts think of recent claims from advisor-centric firms like Charles Schwab that the market is rigged against individual investors? Should I be instructing my advisor to move me to cash? Is purchasing a put sufficient protection to my broad portfolio or are the options market rigged against me as well?
  • Question from Tim Nichols, Fredericksburg, VA: can you provide an overview of the CBOE put write index. The BXM has been discussed widely but I haven't come across much discussion or analysis on this sister product. From all the research I've encountered the product appears to perform quite well. It seems that structured products that include automation are the preferred tools for many financial advisors and planners. Would the panel recommend the put write index as a viable alternative for advisors looking to add options to their portfolio without the hassle of writing the options themselves?

Advisors Option 18: Listener Mail Extravaganza

The Buzz: An overview of the upcoming Options Industry Conference. What topics are discussed at the conference? Who attends? Is there any benefit for advisors? Listener Mail Extravaganza: The Advisors Options mail bag is filling up, so we are going...
Posted May 22nd, 2014

The Buzz: An overview of the upcoming Options Industry Conference. What topics are discussed at the conference? Who attends? Is there any benefit for advisors?

Listener Mail Extravaganza: The Advisors Options mail bag is filling up, so we are going to tackle as many as possible this episode:

  • Question from Neal Santos. I am in the market for a new advisor and your program has awakened me to the benefits of using options. What sort of licensing should I look for in an advisor to make sure he is qualified to handle options investments? Is there a specific options exam offered by the exchanges or perhaps OCC that I should look for? Thanks for the show.
  • Question from J. Andrews, Philadelphia, PA. I have multiple clients with retirement assets in broad based equity portfolios. I have already done the correlation work and calculated how many SPX and SPY puts it would require to both fully and partially hedge the positions. My initial thought is to utilize SPX contracts as the larger size will reduce the number of contracts and reduce the overall commissions. But I have serious concerns regarding slippage in the SPX. I fear that over the long-term the dramatic difference in the bid-ask spread of the two products will result in lower returns for my clients in the SPX. One or two bad fills is all it would take to wipe out several years' worth of commission savings. Are these fears warranted?
  • Question from Darren. Hi, does OIC have any option alert services? Thanks and I truly enjoy the program.
  • Question from Andrea Tillwell. I would be interested in crafting a custom overlay to my retirement portfolio. Does Swan offer a bespoke service to individual investors or only to institutions?
  • Question from Hudson Trader. I am starting a new RIA with a focus on covered calls. What firms do the best job handling options focused funds - tools, understanding, etc?
  • Question from A_Firm. My clients are pushing for more commodity and volatility exposure in their portfolios. I am comfortable with options but have not traded many futures, so I am looking at ETF options, particularly SLV, GLD, VXX, USO and UNG. What is your view on these products from an options perspective? Do they offer suitable depth and liquidity for clients looking for commodity exposure?
  • Question from TBard. You have discussed leveraged ETFs in the past but have not touched on structured products. This to me is the more interesting of the two product categories for a busy advisor or asset manager. Many of my peers use fee-based products that replicate protective put strategies. I have several clients in funds linked the BXM and am taking a long look at PUT. Since you've complained about lack of options tools and awareness on the part of major BDs in the past perhaps these products are the necessary half step. The goldilocks porridge of options products for advisors.

Advisors Options 17: Stock Replacement Using American-Style Calls

The Buzz: Overview/highlights for advisors from the RMC. Are advisors genuinely interesting in volatility products such as ETN, VIX ETPs, etc.? The one-year anniversary of mini options is upcoming, what's the feedback from this product? What is the...
Posted April 23rd, 2014

The Buzz: Overview/highlights for advisors from the RMC. Are advisors genuinely interesting in volatility products such as ETN, VIX ETPs, etc.? The one-year anniversary of mini options is upcoming, what's the feedback from this product? What is the panels take on the most recent Goldman-Sachs study?

Listener Mail: Stock Replacement Using American-Style Calls

Question from Greg S. I am looking for some advice from an experienced options professional regarding stock replacement using American-style calls. Really the question comes down to- for a higher dividend yielding stock, should I be buying a LEAP or rolling out approximately every three months after exercising very close to expiration and capturing each dividend? I get that the dividend lowers the price I pay the longer dated the options are, but does not reflect as much as if the options were available as European-style. It seems that if the dividend yield is high enough, the American style cannot fully compensate the option holder for the missed dividends as the value cannot drop below intrinsic value. Does this call for the shorter term options to capture each dividend? The caveat seems to be that the roll out should cost more extrinsic value on ex-dividend. Since I have a buy-and-hold objective, euro-style or warrants would be ideal to avoid transaction costs, but again, not available. So far, I have been rolling an ITM call option position on a relatively high dividend yielding (5-7%) stock I have wanted concentrated exposure in as part of my overall portfolio but limited risk. It makes regular scheduled quarterly dividend payments and the timing of the annual increases is known to occur in Q1 each year. Well just yesterday (day before ex-div for my stock), I figured I would skip the dividend capture and roll out the May contract to the August one cheaper than I could today because today it trades ex-dividend. I confirmed this using the CBOE calculator, holding price constant. It showed the time value paid to roll should have been more today due to trading without the dividend vs. yesterday. Though just eyeing the bid x ask spread it didn't appear to do so by much and implied volatility looked to be the same.


Advisors Option: Straddles & Strangles

Options 101: Straddles & Strangles Straddle: Buy/sell a call and put on the same strike. Long straddles. But be careful of high decay. Flip that around and you have a short straddle. Strangles allow you to benefit from significant underlying...
Posted February 27th, 2014

Options 101: Straddles & Strangles

  • Straddle: Buy/sell a call and put on the same strike.
  • Long straddles. But be careful of high decay. Flip that around and you have a short straddle.
  • Strangles allow you to benefit from significant underlying with smaller premium outlay compares to straddles. High decay still exist. Flip that around and you have a short strangle.
  • Covered Straddles and Strangles.

Listener Mail: What do you want to know?

  • Question from Avid Gardener - I am looking for ways to use options to establish very low cost, or hopefully free, bullish positions on stocks and ETFs. Is this possible or are my expectations unrealistic? Any specific strategies you could recommend would be greatly appreciated.
  • Question from Istafan - I am thinking of becoming an RIA or CFA. What should I expect on the exams from an options perspective? Any tips for an aspiring advisor? Thanks for your informative program. It has inspired me to pursue this as a career path with an emphasis on options.
  • Question from INY06 - Quick question for Randy - Just what is reinsurance?

Advisors Option: Mini Options

Options 101: Mini Options What are mini options? Which underlying stocks? The SEC approved mini options on five underlying securities: Apple Inc. (AAPL), Amazon Inc. (AMZN), Google Inc. (GOOG), SPDR S&P 500 (SPY) exchange-trade fund, and SPDR...
Posted January 27th, 2014

Options 101: Mini Options

  • What are mini options?
  • Which underlying stocks? The SEC approved mini options on five underlying securities: Apple Inc. (AAPL), Amazon Inc. (AMZN), Google Inc. (GOOG), SPDR S&P 500 (SPY) exchange-trade fund, and SPDR Gold Shares (GLD) exchange-traded fund.
  • What is the use case?
  • Why would you not want to use mini options?

Tricks of the Trade: The Right Skill Set

Today we will discuss the options skill set that a good advisor should bring to the table: how to hedge. It's a critical skill, particularly in this market environment. Every advisor should understand buying puts. How to write calls:Generate income on an equity portfolio. Put it together:How to construct a collar. Understanding how high and low volatility impacts options prices. Writing puts instead of using limit buy orders for stocks. Understand basic vertical spreads.

Listener Mail: Keep those questions coming in

  • Question from C. Davis, Portland, ME. Did you guys hear the episode of NPRs Marketplace where the financial advisor slammed options as "riskier than penny stocks?" What do you think?
  • Question from Dog Fan. How much should I reasonably expect to pay for a financial advisor who can do all of the things you discussed? Is there a set percentage or rule of thumb that I should go by? I imagine all of these skills would result in hefty fees.

Advisors Option: Year in Review

Advisors Option: Year in Review Options 101: A Year in Review Options in Lieu of the Underlying Stock Replacement Strategy Stock Repair Strategy "Wheel of Fun" Listener Mail: So, what do you want to know? Question from Charles A. - I have heard it...
Posted December 30th, 2013

Advisors Option: Year in Review

Options 101: A Year in Review

  • Options in Lieu of the Underlying
  • Stock Replacement Strategy
  • Stock Repair Strategy
  • "Wheel of Fun"

Listener Mail: So, what do you want to know?

  • Question from Charles A. - I have heard it said that you should never exercise an option early. Is that accurate? Are there no scenarios when it would be appropriate? What is the point of paying for a right that you never intend to utilize?
  • Question from Mr. Underhill - In your opinion, what is the sweet stop between paying too much time premium for a position versus paying too much time decay for a position?
  • Question from Tom G. - My advisor uses leveraged short SPY ETFs to hedge my portfolio. Your thoughts versus using puts?
  • Question from "Joe Bagadonuts" - Hey Longo! Is that Italian? Cause I got a cousin, Vinny Longo from Bensonhurst. This is Joe Bagadonuts from Boca Raton. I go naked short on puts sitting here in my NY Jet boxers, and I've made a ton of moolah on them GOOG thingies. What you guys think of them mini doo-dads? Are those minis like the little cannoli I get at Publix Market here on SW 18th St? I love those little things! My wife won't let me eat the big Italian Arthur Avenue Dolce anymore, so thank the Lord for the minis!

Advisors Option: Stock Replacement Strategy

Options 101: The Stock Replacement Strategy Using options in lieu of stock. What is stock replacement? What are the advantages of stock replacement over just owning stock? What are some scenarios where you might want to consider a stock...
Posted December 5th, 2013

Options 101: The Stock Replacement Strategy

  • Using options in lieu of stock.
  • What is stock replacement? What are the advantages of stock replacement over just owning stock?
  • What are some scenarios where you might want to consider a stock replacement strategy?
  • Jazz up your covered call by using a stock replacement to save money and improve returns.

Listener Mail: What do you want to know?

  • Question from Sal S, Fort Worth, TX - Most of the firms where I house my client account are pretty worthless when it comes to options. Rather than go through the hassle and paperwork of buying a put, what do you think about using an ETF like VXX to generate a volatility hedge for my portfolio?
  • Question from Avantage - Do I need to fully understand the Black-Scholes formula to trade options?
  • Question from Nick Thomas - How long do I have after the close of trading on expiration Friday to decide whether to exercise my clients call options? Also, do you have any good rules of thumb when deciding whether or not to exercise?

Advisors Option: The World of VIX

Options 101: Using VIX options/futures and volatility products as hedges. What is the VIX? How is the VIX calculated? How are VIX options priced? How do the greeks work with VIX options? VIX is not a perfect hedge that offers pure inverse...
Posted October 31st, 2013

Options 101: Using VIX options/futures and volatility products as hedges.

  • What is the VIX? How is the VIX calculated?
  • How are VIX options priced?
  • How do the greeks work with VIX options?
  • VIX is not a perfect hedge that offers pure inverse correlation to the S&P.
  • Beware of the VIX settlement process and some of the other issues traders encounter during it. VIX settlement was 10/16 this month.
  • There is an entire universe of VIX-related products out there including VXX, TVIX, etc.

Listener Mail:It's like Dear Abby, but for options

  • Question from Neal Tillman, CFA: We are at all-time highs in the market right now. Most of my clients account are long equity. My average account is sitting on gains of $60K-$100K for the year. I do not want to lose those gains if the market corrects, but I also do not want to sell these positions and miss out on future rallies in the broad market. For the sake of this discussion let's assume I am sitting on a $1M portfolio with heavy exposure to SPY. How would I insure this portfolio to protect a $100K gain using SPY options? How much would it cost me to protect that $100K gain through the end of the year? Your insight on this issue would be most appreciated.
  • Question from Alamo: If I buy puts to protect a stock that I already own in my account, does that count as a sale for tax purposes? Is that a taxable event?

Advisors Option: Stock Repair

Advisors Option: Stock Repair Options 101: The Stock Repair Strategy Have a downturn in your account? Options can help make that money back. Stock repair strategies are a popular way for many advisors to regain some or all of the losses in a...
Posted September 26th, 2013

Advisors Option: Stock Repair

Options 101: The Stock Repair Strategy

Have a downturn in your account? Options can help make that money back. Stock repair strategies are a popular way for many advisors to regain some or all of the losses in a clients' portfolio. When should you use a stock repair strategy? How does it differ from just holding the stock? You can trade calls on a ratio for additional income, etc.

The Buzz: Clients are ready to listen to advisers on alternative investments: Natixis survey finds mass majority open to adviser recommendations, up dramatically from past two years - http://www.investmentnews.com/article/20130917/FREE/130919907#

Mail Bag: In which we tell it like it is

  • Question from Gabe Shahir. The majority of my clients have large concentrations of assets in 401K plans. These plans are usually very limited from an asset selection perspective (very broad mutual funds, large cap, small cap, etc). With such a prolonged rally in the stock market many of my clients are looking for ways to protect the gains in their 401Ks. Short of divesting the positions and going into cash, the typical 401K does not offer much in the way of hedging opportunities. How can I use options to protect my clients?
  • Question from Alex Tophas. I often utilize leveraged short S&P ETFs to hedge my equity accounts. Is this a preferable options to buying puts - pun intended - for most advisors, since they do not need to master a new asset class to protect their clients?

Advisors Option: Spreads with Wings

Advisors Option: Spreads with Wings Options 101: We have discusses collars and verticals on this show in the past, and now it?s time to explore some of the more elaborate option spreads that many advisors/asset managers may be familiar with -...
Posted August 27th, 2013

Advisors Option: Spreads with Wings

Options 101: We have discusses collars and verticals on this show in the past, and now it?s time to explore some of the more elaborate option spreads that many advisors/asset managers may be familiar with - particularly spreads with wings.

What is a butterfly? When would an advisor want to use a butterfly spread?

What is an iron condor? How does it differ from a butterfly? When would an advisor want to?

What is an iron butterfly? How does an iron fly differ from an iron condor and a standard fly?

Listener Mail: So, what do you want to know?

Question from Tom S. - How do dividends impact option prices? Let?s say my clients own a put on a stock and it declares a substantial dividend. Do they collect all of the profit from the stock drop in the price of the put, or is there some sort of change made to the strike price to reflect the new value of the stock?

Question from TheNewt - If I own a call on a stock and it declares a special dividend, do I collect the dividend?

Question from Mike Z., Tampa, FL - I would like to gain some volatility exposure in my portfolio. Which volatility products should I recommend to my financial advisor at our next meeting?

Industry Buzz: Attention Chicagoland Financial Planners, Insurance Agents, Certified Public Accountants, and financial services practitioners! Early bird registration for the Financial Planning Association of Illinois Fall Forum ends in a few days. Don't miss our awesome Hyatt Oak Brook event September 19th. For more information click on the link below and look for Fall Forum 2013!


Advisors Option: The Wheel of Fun

Options 101: Alternate methods for entering and exiting stock positions using options - aka "The Wheel of Fun." Caveat 1: Short puts are excellent tools for income generation, but most advisors and clients should limit themselves to only writing...
Posted July 31st, 2013

Options 101: Alternate methods for entering and exiting stock positions using options - aka "The Wheel of Fun."

  • Caveat 1: Short puts are excellent tools for income generation, but most advisors and clients should limit themselves to only writing puts at prices, and on underlyings, that they don't mind owning.
  • Caveat 2: The income generation portion of these trades are extremely volatility-dependent. This strategy is not suitable for all trading/volatility environments. Don't force an income trade when the volatility is too low. You're simply incurring risk without enough reward to offset it.

Listener Mail:Help us help you.

  • Question from Walter T., Tampa, FL. Why are retirement accounts restricted to only buying options and writing covered positions?
  • Question from NorthForkSpur. What do the hosts think of advisors using futures options for exposure to non-correlated assets like commodities? Is this the right path? Should most stick with ETF options instead?
  • Question from Alejandro Vega, CFP, Los Angeles, CA. I enjoyed your episode on collars. They can certainly provide great benefit to my clients. But I'm confused as to the difference between a collar and a risk reversal. They seem to be the same trade. Are these just two different terms for the same thing?

The Buzz: S&P 500 "Persistence Scorecard" result are out - Most managers still fail to beat the market. Two great reasons to add options to you client portfolios. Correlation is kicking into high gear.


Advisors Option: The Problems with Annuities and Structured Products.

Advisors Option: The Problems with Annuities and Structured Products. Tricks of the Trade: The problems with Annuities and Structured Products. Many advisors gravitate toward structured products instead of using options/derivatives in client accounts,...
Posted June 28th, 2013

Advisors Option: The Problems with Annuities and Structured Products.

Tricks of the Trade: The problems with Annuities and Structured Products.

Many advisors gravitate toward structured products instead of using options/derivatives in client accounts, but structured products frequently present problems:

  • Accuracy
  • Options Exposure
  • Time Management
  • Expense
  • Evaluate your product.

Listener Mail: How may we be of service?

  • Question from Charles Sullivan - Is the primary stumbling block for options use by advisors the fact that the leading names in the advisor space (Charles Schwab, Morningstar, etc.) seem to have no interest in these products?
  • Question from Thomas Folk, CFP - Most of my clients invest through retirement accounts. Can I trade options in these accounts? If so, what strategies can I pursue?
  • Question from Nathan Phillips - I have several clients with odd lot positions in Apple. I've toyed with using options in the past, but it never made sense given the size of the positions. But the launch of the new mini Apple products has piqued my curiosity. Are these products the same as regular options only with a reduced notional value? Are the any nuances or hidden issues I should be aware of before I consider using these for my clients? Thank for this program; I learn something new every episode.

Advisors Option: Listeners Take Over

Advisor?s Option: Listeners Take Over Listener Mail: It?s all mail, all episode long. Question from Jackson_CFA: What do the hosts think of annuities as a tool for diversification and income generation for risk-averse clients? Question...
Posted June 6th, 2013

Advisor?s Option: Listeners Take Over

Listener Mail: It?s all mail, all episode long.

Question from Jackson_CFA: What do the hosts think of annuities as a tool for diversification and income generation for risk-averse clients?

Question from Alexander Sarsgard, Portland, OR: Just adding puts to your client's portfolios is expensive. What is your favorite methodology for reducing the cost of protection when structuring client portfolios?

Question from Tim Dinahar, Houston, TX: Do I really need to understand the greeks when writing/buying options for my clients? Or is everything I really need to know encapsulated in the option's price? Thank you very much for this insightful program. I don't think anyone else has tackled the advisor space like this.

Question from Anthony Deshanti, Stracuse, NY: How can I approach the topic of options with my clients when mainstream outlets like New York Times are slamming options as risky and dangerous - http://www.nytimes.com/2013/05/25/business/growth-in-options-trading-helps-brokers-but-not-small-investors.html?ref=nathanielpopper

Question from JBerg: What time frame do you use when constructing collars/risk overlays? Six months is my preferred time frame to buy put/sell call.

Question from Alejandro Vega, San Antonio, TX: I don't use options in my client accounts. If I want leveraged exposure to underlyings I simply turn to leveraged ETFs. What do you think of using these instruments in lieu of options in client portfolios? Am I missing something by not using options?

Question from Mr_Nick: Can I as an individual investor buy into Randy's fund? What is the ticker?

Question from Jim Schulman, Mobile, AL: Adding options to client accounts would generate significant fees to accommodate opening and closing the positions, rolling to new strikes, etc. Do you find your clients are receptive to these instruments even with the added costs?


The Advisors Option 5: Asset Allocation

The Advisors Option 5: Asset Allocation Tricks of the Trade: The myth/lie of asset allocation. It used to be 20 different underlyings to be fully diversified. Now with increasing correlation, it is closer to 40. Debunking asset allocation as a method...
Posted April 30th, 2013

The Advisors Option 5: Asset Allocation

Tricks of the Trade: The myth/lie of asset allocation.

  • It used to be 20 different underlyings to be fully diversified. Now with increasing correlation, it is closer to 40.
  • Debunking asset allocation as a method of defense. The old style of asset allocation in no longer effective.
  • Absolutely nothing about options, hedging or volatility was discussed at the Morningstar Advisor Event last year.
  • You are not fully diversified in this market unless you have something that gives you volatility exposure and negative correlation, i.e. protective puts, collars, volatility instruments, etc.
  • "Hedging is too expensive!" The cost of the protection is mitigated, particularly if you manage the positions effectively.
  • Outperforming to the downside is still outperforming.
  • Defensive positions can still generate competitive returns.

The purpose of this conversation is not just to promote Swan, but also to show that incorporating options into you asset allocation is part of the fiduciary responsibility of any advisor in this marketplace.

Listener Mail: Tell us what you want to know:

  • Question from (Name withheld) - As an active financial manager coming to options for the first time, I'd like to know what the hosts consider to be the most effective options position for busy advisors? If I only have time to learn one, I'd like it to be the best.
  • Question from Tom Meadows, Pittsburgh, PA - What percentage of financial advisors and planners do you estimate currently use options?
  • Question from Allan Gregory, San Diego, CA - If options education for financial advisors is such a problem, why doesn't OIC or some other entity offer a certification course for planners and advisors?

Advisors Option: Tales from the Front

Mark, Mike, and Randy are joined by Alan Grigoletto and Eric Cott from the Options Industry Council. Tricks of the Trade: OIC has issued a new white paper, "Tales from the Front," that looks at the use of options from the advisor point-of-view.Eric...
Posted April 9th, 2013

Mark, Mike, and Randy are joined by Alan Grigoletto and Eric Cott from the Options Industry Council.

Tricks of the Trade: OIC has issued a new white paper, "Tales from the Front," that looks at the use of options from the advisor point-of-view.Eric and Alan give an overview, the purpose, and some of the findings.Randy and Mike give their perspective as advisors who already use options.Each person gives their key surprising takeaway.

Listener Mail: Do you want to know what we're talking about? What are your questions?

  • How do I find an advisor who uses options?
  • How do I find out which funds use Randy's overlay?

Advisor Option: Volatility

Advisor Option: Volatility Options 101: Volatility --What is Vega? --Implied vs. realized volatility. --What is the impact of low vs. high volatility environment on options trading? --Correlation and becoming fully diversified by adding a volatility...
Posted February 20th, 2013

Advisor Option: Volatility

Options 101: Volatility

--What is Vega?

--Implied vs. realized volatility.

--What is the impact of low vs. high volatility environment on options trading?

--Correlation and becoming fully diversified by adding a volatility component to your portfolio.

--How do you get volatility exposure?

--What is an overlay strategy, and how do you construct one?

Misconceptions of the VIX:

--Quoting the VIX cash, which is the same as not VIX futures.

--The current pervasive attitude that the VIX is low.

--Believing it is a fantastic inverse correlation portfolio hedging tool, instead of buying a more direct portfolio hedge.

The Buzz: Potential new taxes that might be on the horizon for traders. Swan Wealth Advisors is in discussions with TD Ameritrade to start monthly options seminars.


Advisors Option: Spreads

Advisors Option: Spreads Options 101: Spreads. What is a spread? Vertical spreads? How do you add spreads to your portfolio? How do spreads affected by the Greeks? Mail Bag: Our hosts answer listener questions. Question from Tony - Glendale, AZ:...
Posted January 3rd, 2013

Advisors Option: Spreads

Options 101: Spreads. What is a spread? Vertical spreads? How do you add spreads to your portfolio? How do spreads affected by the Greeks?

Mail Bag: Our hosts answer listener questions.

Question from Tony - Glendale, AZ: Thank you for this insightful program! I typed the terms financial planner and options into the iTunes search bar on a whim and was amazed to find the Advisors Option. You have been a godsend for professionals like me who want to learn more about these products for our clients. I feel much better prepared to deal with their questions now thanks to your program. Thanks again.

Question from Spencer - Portland, OR: I mostly deal with retired clients whose assets are tied up in IRAs. I was under the impression that options were prohibited in IRAs. Is that the case? Perhaps you can do a program on options for retirees, or people with assets in retirement accounts. Thanks for your one-of-a-kind program Mark!

Question from Alexander S - Portland, ME: I've heard the Advisors Option team, in particular Randy Swan, discussing options overlays in the past. Can you explain exactly what you mean by that term? Do you modify the underlying portfolio to conform to the specifications of the options allocation, or are the options a truly separate component? Also, I listened to a recording of a buy-side panel from the OIC/FIA conference in September. One of the fund managers on that panel said he prefers to liquidate his positions, rather than purchase protective puts. Why do you think so many advisors/assets managers are still so ignorant of the benefits options offer a portfolio manager?

Question from James C: I have a 401K that is invested in the S&P. What's the best way to hedge it outside of the 401K from downside risk? Would beta weighting with SDS be a good hedge or is there a better way? Also, I heard the terms "hitting offers" and "lifting bids," I hope I got that right. What does that mean?

Question from Orlando T: Mark you're program is uniquely situated to address a serious problem in the advisor community - the lack of any real understanding of hedging and risk management using options. I think everyone on your program will agree options are the best tools for this, yet advisors don't have any substantive training on this subject. Why is that? Why don't the CFA/CFP exams offer more in the way of options instruction? Why doesn't the OIC partner with these organizations, or create their own certification exam? It seems to be the only organization that has a shot at solving this problem, otherwise we're all poised to recreate 2008/2009 the next time the market crashes.


Advisors Option: Collar Strategies

Join your co-hosts Mark Longo, founder of the Options Insider, Randy Swan, co-founder of Swan Wealth Advisors, and Mike Cavanaugh from Know Your Options, Inc., as they help advisors navigate their way through the world of options. Options...
Posted December 14th, 2012

Join your co-hosts Mark Longo, founder of the Options Insider, Randy Swan, co-founder of Swan Wealth Advisors, and Mike Cavanaugh from Know Your Options, Inc., as they help advisors navigate their way through the world of options.

Options 101: The ultimate advisor's option strategy: the collar. The group is joined by Alan Grigoletto, director of Education at OIC, to discuss the collar. The group discusses the ways in which collars can be useful for wealth advisors in particular, especially in terms of risk management and managing existing equity positions. Taking the collar to the next level: collar-plus. Do collars limit upside gains? Will advisors underperform their peers if using this strategy?


Advisors Option Episode 6: Swan Wealth Advisors

Advisors Option Episode 6: Swan Wealth Advisors Mark and Mike are joined by Randy Swan, President of Swan Wealth Advisors. In the Interview Segment, the group discusses:Two words: Risk Management.The major stumbling blocks keeping advisors from using...
Posted August 8th, 2012

Advisors Option Episode 6: Swan Wealth Advisors

Mark and Mike are joined by Randy Swan, President of Swan Wealth Advisors.

In the Interview Segment, the group discusses:
Two words: Risk Management.
The major stumbling blocks keeping advisors from using options.
How to take the first steps?
Should there be more credentials to help people feel more secure with an advisor trading options with their assets.
The wake-up call for brokerage firms.
Two more words: It's insurance.
You cannot adequately control risk without using derivatives.
The new normal - prepare for it.
The wish for problem-solving tools.

Industry Buzz: The nexus of options and advisors has produced a theme of concern over what to do about risk. Why are volumes going down? Why are options still perceived as risky? Dodd-Frank & other regulation. How the political climate affects the markets.


The Advisors Option Episode 5: Selling Puts

The Advisors Option Episode 5: Selling PutsIn this episode, Mark is joined by Mike Cavanaugh of Know Your Options Inc., and Option Block Fame.Options 101: Looking at the other end of the spectrum, the Covered Put. Reasons why you, as an advisor,...
Posted July 20th, 2012

The Advisors Option Episode 5: Selling Puts

In this episode, Mark is joined by Mike Cavanaugh of Know Your Options Inc., and Option Block Fame.

Options 101: Looking at the other end of the spectrum, the Covered Put.

  • Reasons why you, as an advisor, may want to consider selling naked short puts.
  • Less risk than buying a stock outright.
  • Examples with everyone's favorite stock: XYZ.
  • How does KYO use the naked short put to employ their Triple Income Strategy (aka the Wheel of Fun)?

The Holy Grail of the Options Market

Our exclusive OIC 2012 audio coverage continues with Options Insider Founder Mark S. Longo's compelling panel The Holy Grail of The Options Market. This session explores the tumultuous relationship between financial advisors, asset managers and the...
Posted July 6th, 2012

Our exclusive OIC 2012 audio coverage continues with Options Insider Founder Mark S. Longo's compelling panel The Holy Grail of The Options Market. This session explores the tumultuous relationship between financial advisors, asset managers and the options market. What are the major stumbling blocks keeping advisors from adopting options? Why aren't more asset managers using options to hedge their portfolios or generate income? We explore these topics and many more on The Holy Grail of The Options Market.

Joining Mark on the panel are:

  • Michael Cavanaugh, Founder, Know Your Options Inc & Co-Host, The Advisor's Option
  • Randy Swan, Co-Founder, Swan Wealth Advisors
  • Stephen Solaka, Co-Founder, Belmont Capital Group

Advisors Option Episode 3: Mysteries of the Covered Call

Options 101: Covered Calls What is a covered call? When should you use it? Reasons to write covered call Downsides to the covered call Covered call vs. naked short put Interview Segment with Sean Heron Mr. Heron is an Adjunct Finance...
Posted April 30th, 2012

Options 101: Covered Calls

  • What is a covered call?
  • When should you use it?
  • Reasons to write covered call
  • Downsides to the covered call
  • Covered call vs. naked short put

Interview Segment with Sean Heron

Mr. Heron is an Adjunct Finance Professor, CFA, Rutgers University as well as the Senior Investment Manager, Glenmede Trust Company. In this segment, the gang discusses the OIC/Rutgers options program for advisors. They touch on topics including: a lack of options education for advisors; why advisors are hesitant to use options; what can be done to increase the adoption rate of options by advisors.

Industry Buzz Segment

  • Overview of the upcoming financial advisor conference in New Orleans.
  • For more information on OIC Advisor, please visit: http://advisor.optionseducation.org/
  • For more information on the Rutgers/OIC program, visit: http://options.rutgers.edu/
  • For more information on the Options Industry Conference, please visit: http://www.optionsconference.com/2012/default.jsp

Episode 2: Playing Defense with Protective Puts

Playing Defense with Protective Puts
Posted February 22nd, 2012

The Advisor?s Option Episode Two: Playing Defense with Protective Puts

Options 101: Continuing Education:

  • Graduating from the long call to the protective put
  • The many uses of protective puts
    • Speculative - using leverage to place a bearish bet
    • Defensive - a ?married put? can limit risk against the downside while maintaining the benefits of a long stock position
  • The benefits of protective puts - maintain voting rights, collect dividends, maintain upside potential, limit tax liability
  • No free lunch - puts can be expensive
  • Finding the sweet spot between buying too much insurance and paying too much time decay
  • Put options vs. stop-loss order - which is preferable?

Tricks of the Trade:

  • How to introduce the idea of portfolio protection to your clients
  • Options are appropriate for every level of risk tolerance
  • How to take the emotion out of the advisor/client relationship using options
  • Practical tips for implementing puts into your practice
Read more: http://www.theoptionsinsider.com/radio/?id=330#ixzz1n9oBMUh8
The Options Insider: Your Inside Source For Options Information

Episode 1: Spreading The Gospel Of Options

Spreading The Gospel Of Options
Posted February 22nd, 2012

Welcome to The Advisor's Option. This is the first radio program designed to help registered investment advisors, asset managers and financial planners properly manage risk using options. Join your hosts Mark Longo, Mike Cavanaugh (Know Your Options, Inc.), and Eric Cott (The Options Industry Council) as they dive into options education, outline tricks of the trade and update advisors with the latest industry buzz.

Options 101-Continuing Education
  • Who is the OIC?
  • The results of a recent OIC study of option usage among advisors.
  • Dealing with the dreaded "D" word.
  • Options demand is growing and much of it is client-driven.
  • How to differentiate your practice by using options as risk mitigation tools.
  • Why should advisors use options?
  • What are options? We break down all of the terms that may have confused you in the past?
  • What is a call?
  • What is a put?
  • What is a multiplier?
  • How can I use options to generate leverage?
  • What are the Greeks?
  • What do in-the-money, at-the-money and out-of-the-money mean?

Tricks of the Trade

  • Practical tips for adopting options into your practice.
  • Eric discusses OIC's Seven Simple Steps for incorporating options into an advisory practice.
  • Finding the hidden derivatives exposure that may already be lurking in your portfolios.
The Buzz
  • Developments from the world of options that will impact advisors.
  • Large pension funds are beginning to allocate resources toward asset managers with derivatives expertise.
  • Record options volume coming from retail investors...don't be outpaced by your clients.

To read the full study mentioned in Options 101, visit www.optionseducation.org/advisor


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Options Playbook RadioAudio

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The Options Insider Radio Network

The Options News Rundown

Your source for the most important news and information from the world of options.

The Options News Rundown

The Options Insider Radio Network

All of our radio programs in one convenient place.

The Options Insider Radio Network

Options Insider Radio

The original options podcast. Features interviews with leading options figures.

Options Insider Radio

The Option Block

This high-octane program features education, analysis, strategies and unusual activity.

The Option Block

Volatility Views

The premier radio program for volatility traders.

Volatility Views

The Long And Short Of Futures Options

Your source for futures options information.

The Long And Short Of Futures Options

The Advisor's Option

Arming advisors with the info necessary to manage risk.

The Advisor's Option

Options Boot Camp

Get into peak options trading shape.

Options Boot Camp

Options Insider Special Events

Compelling panel & special event recordings from the options world.

Options Insider Special Events

OIC's Wide World of Options

A dynamic mix of current events, investor resources, & strategy insights.

OIC's Wide World of Options

Trading Tech Talk

We break down all the amazing technology that takes your trades from the click of a mouse to the clearinghouse.

Trading Tech Talk

Options Playbook Radio

Break down cutting-edge options strategies and learn how to incorporate them into your portfolio

Options Playbook Radio

Options Oddities

We track all the unusual options trading activity on Options Oddities.

Options Oddities

This Week in Futures Options

The program designed to help active futures options traders stay on top of this ever-changing marketplace. 

This Week in Futures Options

The Business Show

If you like business, if you like humor, if you like stock symbols, this is the podcast for you.

The Business Show

Options Playbook Radio 155: AMZN Skip-Strike Butterfly

Earnings season makes an AMZN skip-strike butterfly an interesting prospect.

Options Playbook Radio 155: AMZN Skip-Strike Butterfly