Options Consulting to Generate Yield and Income

Options Consulting – Advisor

With a combined 50+ years of experience in technical analysis and active trading of equities and options, Greg Capra and Dan Gibby provide a unique pooled talent to generate additional yield for assets under management.

Their skills/strategies apply to any asset manager, hedge fund, family office, endowment, pension fund, firms serving high net worth individuals, RIAs, and persons/firms holding large positions of optionable U.S. equities or commodity futures.  You can review Capra/Gibby's resume.

Options Consulting for Portfolio Managers

Our value add is in generating additional yield and better risk-adjusted returns for portfolio managers using option layover strategies based on technical analysis, market internals, and volatility.

We do not use traditional fundamental analysis in our trading decisions. Our approach is a “Techno-Fundamental” one.

Simply, we make your portfolio (of liquid optionable equities and Futures) superior through properly timed premium selling to lower cost basis.

Research shows that systematic call writing programs on long term portfolios generate superior ROI (e.g., routinely selling 45-day .30 delta calls on long-term holdings).

You are the expert at what you do; we are experts at what we do – but the goal is the same:  to make your overall returns more profitable with our methodology.

Options Consulting for Investors

With record low interest rates, investors are desperately searching for yield on their investments.  Selling options through an objective option layover strategy is an excellent way to generate this periodic additional income.

Capra/Gibby use technical analysis, market internals, inter-market analysis, sentiment indicators, and volatility to trade equities and options to hedge or generate premium.

Their strategies thrive in times of high volatility and extreme market euphoria or fear.

Services for IRA Accounts and Other Long-Term Holdings

Writing Options on Existing Positions.

Depending on volatility, we can generate additional ROI of up to 1%/month.  We time trade initiation and management primarily based on technical analysis.

Our goal is to routinely and consistently sell premium to lower your cost basis over time – even with a goal of eventually owning the underlying for free.

The only downside in writing options on existing positions is capping gains.  We only sell call options if the underlying is neutral (range bound) or bearish (breaking down).

We give medium-term timing recommendations which are based off of weekly and daily chart signals and medium-term market internals.

This approach historically produces between 1-5 trades per quarter and focus on selling option with an expiration of 1-2 months.

For the trader who prefers selling further out options less frequently, we offer longer-term timing recommendations which are based off on weekly and monthly chart signals and longer-term market internals.

This approach historically produces between 1-2 trades per quarter and focus on selling options with an expiration of 3-6 months.

We obviously make more money after selloffs when volatility (and option prices) expands.

If the underlying then turns bullish and we don't want to cap gains, we can:

(a) do nothing and manage further into the option cycle.

(b) stop out (which still generates a net gain); or.

(c) roll the short call option out further in time and/or strike.

Traders with huge unrealized gains on positions with a low cost basis who don't want the risk of early assignment need to discuss in advance with the broker to prevent this.

Selling Put Options to Obtain Desired Positions at a Lower Cost Basis.

If the investor is interested in buying any optionable instrument, Capra/Gibby can recommend various put-selling strategies on them to generate income – and also acquire quality positions at a significantly less cost than buying them outright.

Selling puts obligates you to buy the underlying at the strike price on or before expiry in exchange for the premium received.  When the issue stays above the strike price, you keep the premium as pure profit.

If the issue closes under the strike price, then you will be required to buy it for the strike price; however, your cost basis is lowered to the difference between the strike price and premium received.

We refer to this approach as buying quality stocks “at a discount.”

For example, assume you want to purchase 1,000 shares of AAPL at $100 for a cost of $100,000.

We might recommend selling a 45-day $100 put option for $3.40/share.

If AAPL closes above $100, you keep the $3,400 (less commissions) as pure profit.

If AAPL closes under $100, then you will be required to buy it for $100/share; however, your cost basis is lowered to $96,400 (i.e., the difference between $100,000 and the $3,400 premium received).

If assigned, then we thereafter give you covered call ideas as discussed above.

If the option expires worthless and you kept the $3,400 profit, then we continue to give short put ideas to generate additional income until you own it – if that is your final objective.

Services for Small- to Medium-Sized Hedge Funds and Family Offices

Writing Options on Existing Positions. Identical to what is described above based on the desired trading time horizon.

Selling Put Options to Obtain Desired Positions at a Lower Cost Basis. Identical to what is described above based on the desired trading time horizon.

Generating Alpha With New Speculative Option Trades. We are skilled in generating revenue from selling naked options and credit spreads into weekly and short-term option expiration where theta (time decay) rapidly declines.

We also sell OTM options on bullish/bearish igniting or exhaustion gaps after earnings and other news events.

As proof of this strategy, a recent Barron's article mentioned that many hedge funds are taking advantage of weekly options to generate cash and “regularly sell thousands of out-of-the-money weekly options to collect $600,000 each week in options premium.

Using Options to Manage Desired Positions.

  1. Buying/selling positions with price improvement for all types of securities.  For example, particularly with the high beta stocks, if the wealth manager wants to buy/short into earnings or other volatility spike. Shorting puts/calls is an excellent way to buy or sell them for an improved cost basis.
  2. Suggesting Lower Risk Option Synthetics Versus Outrights. Instead of simply buying or shorting equities for a directional move, we would recommend using options for superior risk/reward profiles.

For further information on Options Consulting, contact Greg Capra at greg@mastertrader.com or Dan Gibby at dan@mastertrader.com.