Dynamic Option Strategy
Tactical Long/Short is a proprietary equity strategy that seeks to generate capital appreciation in rising and falling markets using two principal trades. The strategy uses technical trading indicators to actively trade the SPDR S&P 500 (SPY) and the ProShares Short S&P500 (SH). During periods when a trade signal does not indicate a trend in either direction, the strategy will signal investing in cash. The strategy is directional, positioning either long or short.
Dynamic Option Strategy – January 2015
Capital appreciation along with income generation and lowered volatility than the broad market.
This strategy embodies the idea of selling naked put options against cash and collecting premium as a consistent income stream for the portfolio. Targets income generation and lowered volatility than the broad market. The strategy involves selling out-of-the-money puts collecting premiums as long as the stock price of the underlying remains above the put strike price at expiration. Stocks may be assigned at a price discounted from current trading prices. The put options are used as a tool to acquire a security at a discounted and pre-established price, which is the strike price of the option. Covered calls are used as a tool to exit assigned stocks and generate income in the interim. This strategy is appropriate for a long-term investor looking to generate profits from the collection of premium and/or to go long equity positions at a significant discount to their current trading prices. The strategy can only be implemented for taxable accounts, IRA accounts cannot utilize this strategy given the nature of naked put selling.
- Put writing is executed to earn consistent profits by ongoing collection of premium.
- Assignment through put writing, if it occurs, purchases the underlying stock at a discount.
- Can be a very prudent way of generating additional portfolio income.
- Writing options on stocks can produce higher returns and lower volatility vs. owning stocks outright.
- Option writing basically reduces both extreme positive and negative monthly returns in exchange for more consistent monthly returns.
Monthly Performance (Net of Fees)
The Dynamic Options Strategy (“DOS”) Composite was created in September 2011. The accounts selected to represent the DOS Composite over time best represented the DOS strategy as the accounts were typically large enough to be fully and continuously invested in the DOS model and therefore able to fully implement the DOS trading positions and size requirements for maximum effectiveness. Margin requirements (Portfolio margin vs. Reg. T margin) however, varied throughout the lifetime of the DOS composite which led some composite accounts to have varying levels of notional exposure (leverage) which had a direct effect on performance. Most of the performance presented in this presentation occurred prior to inception of the option strategy now being managed by Elite Wealth Management and the portability of this track record was lifted out of previous accounts managed in a substantially similar manner by prior Firm(s). The performance for the period September 2011 through January 2014 was achieved while Mr. Lennil was the Chief Investment Officer (“CIO”) with his prior firm, Exagroup, Inc. (“Exagroup”). While Mr. Lennil, was not affiliated with Elite Wealth Management during that time period, the accounts that comprise the performance of the DOS Composite were all managed on behalf of clients of Elite Wealth Management or Lattice Capital Management. The performance achieved for the period January 2014 to present was achieved while Mr. Lennil was affiliated with Elite Wealth Management, as he continues to make all investment decisions for all client accounts managed with Lattice as he did while employed at Exagroup. Returns are shown net of a 1% management fee, trading costs, and other direct expenses, but before custody charges, withholding taxes, and other indirect expenses. There was a 15% performance fee up until November 2014 that is now eliminated. This Strategy has the ability to utilize options which involve risk and are not suitable for all investors. SEE IMPORTANT DISCLOSURE STATEMENT