I plan to buy equities on margin and wanted to see if you have suggestions.
I have a view that it is odd that conventional thinking is to get a portfolio beta of 1 or less. I would like to push that assumption a bit.
- Currently I own a portfolio of about $115k that I don't mind adding "extra" risk to. This is not money that my family "needs" and I am willing to suffer the consequences.
- The portfolio currently has about $20k of fixed income type etfs.
- Historically I would have cash reserves and setup limit orders to purchase equities at 10% to 20% of the market and hope they hit
The plan (I am still optimizing the amount of leverage):
1. Get the fund up to about $150k
2. Move the account (in process) to Interactive Brokers (lowest margin rates)
3. Write $20k (sell) naked put options of SPY (seems to have the most option liquidity) at about two months periods at a strike price 15% below current market prices and write another $30k of put options at 25% below the market.
If the first 20k of options are exercised, I would sell the fixed income ETFs to pay for them, if the second 30k of options are exercised this will result in the margin debt that I am looking to add to this portfolio.
Questions
1. Has anyone read much research on optimal option length to optimize price deterioration?
2. Is targeting ETFs with significant option liquidity the right choice?
3. I hope to dust off my statistics knowledge and run some Monte Carlo simulations to optimize the size of the contracts that I write. Do you have any suggestions on this?
Is there anything else that I am missing?
Thank you in advance.
I have a view that it is odd that conventional thinking is to get a portfolio beta of 1 or less. I would like to push that assumption a bit.
- Currently I own a portfolio of about $115k that I don't mind adding "extra" risk to. This is not money that my family "needs" and I am willing to suffer the consequences.
- The portfolio currently has about $20k of fixed income type etfs.
- Historically I would have cash reserves and setup limit orders to purchase equities at 10% to 20% of the market and hope they hit
The plan (I am still optimizing the amount of leverage):
1. Get the fund up to about $150k
2. Move the account (in process) to Interactive Brokers (lowest margin rates)
3. Write $20k (sell) naked put options of SPY (seems to have the most option liquidity) at about two months periods at a strike price 15% below current market prices and write another $30k of put options at 25% below the market.
If the first 20k of options are exercised, I would sell the fixed income ETFs to pay for them, if the second 30k of options are exercised this will result in the margin debt that I am looking to add to this portfolio.
Questions
1. Has anyone read much research on optimal option length to optimize price deterioration?
2. Is targeting ETFs with significant option liquidity the right choice?
3. I hope to dust off my statistics knowledge and run some Monte Carlo simulations to optimize the size of the contracts that I write. Do you have any suggestions on this?
Is there anything else that I am missing?
Thank you in advance.