Also NOT-ADVICE but strongly related to another topic on my mind.
Portfolio management, and in particular my own plan...
NOT-ADVICE. And maybe even an outright bad idea
I've been thinking more about this portfolio management idea, and I think I'm honing in on something more precise, more formulaic, and that I like.
It amounts to using 1/2 of the cash / value that I devote to creating an income and holding that as cash (for selling puts / put spreads), and holding the other half as deep ITM calls (for the delta, and to sell covered calls). I don't make adjustments to these two pools on a weekly basis, but I do make changes as needed so I'm in the vicinity of 50/50.
I use the cash to back put spreads and because it's 1/2 of the total pool I can use roughly all of it (very far / low risk positions). If I get a full loss situation then I would sell enough of the deep ITM calls so I'm back to 50/50, and go on like nothing happened (well - hopefully I learned something from being stubborn and eating a 100% loss
).
Meanwhile I'd use the deep ITM calls as the backing to sell leap covered calls. Knowing full well that these will occasionally get assigned (sold) for the calls. I am intentionally staying away from call credit spreads - plenty of people burned this last week by those; 1 of my 3 biggest mistakes, and the most traumatic, was the 40-70% losses I ate on some call credit spreads back in June. Part of the dynamic I don't like about the call spreads is that they can't be resolved by taking assignment using the shares or DITM backing calls - they can only be resolved in cash and that can be an actual loss, rather than an opportunity cost loss.
I think that I solve my call credit spread problem by not selling them in the first place, and instead owning leaps that I use to back covered calls.
As the income / realized profits accumulate I will naturally end up with a steadily increasing pile of calls AND a slowly growing pile of cash to write an increasing number of put spreads. This approach keeps me from intentionally or not, doing 100% compounding on the put spreads. 100% compounding looks great on a spreadsheet, but the spreadsheets never have a 100% loss on them, and full compounding means that the first 100% loss is also the last loss (wipe out the account).
Over time when the shares are going up, I'll take assignment on some (or even all!) of those covered calls as a means of transferring value from shares to cash and staying close to that 50/50 relationship. If I got into a position where I took assignment on them all, that's ok too - I'd immediately pick my new deep ITM call and buy enough to be back to 50/50.
If the shares are going down then the cash is reasonably constant while the shares (calls) are losing value. I would periodically use some of that cash to add calls to the pile and bring the calls side of the pool back to 50/50.
The overall dynamic I'm aiming for is more complete use of the resources, while also having resilience to a full loss. I think I'll get some degree of buy low / sell high from the flow of money in and out of the deep ITM calls and that's a nice bonus. Choosing those DITM calls will be its own chore - I find myself waffling minutely between really far / really long calls (like Jan 2024 400s) and much closer - time and strike - calls. For the larger purpose I'm probably better off with the longest dated calls. Or at least longer dated calls.
Maybe I go with thirds - 1/3rd cash, 1/3rd calls, and 1/3rd cash that just sits there
. The idea and the approach doesn't change.