Exploring updated 45+ DTE income strategy with increased DTE to 120 days and selling a 15 Delta short put. Introducing bomb shelter add-on with two long puts for each short put sold. New Black Swan Hedge Strategy discussed for portfolio margin efficiency.
Income strategy now uses 15 Delta short put for varied entry frequencies.
Bomb Shelter strategy provides security against extreme market events with long puts.
Deep dives
New Income Strategy Mechanics: 120 DTE, 15 Delta Short Put
The podcast introduces updated mechanics for the income strategy, shifting from 60 DTE to 120 DTE. Sellers now use a 15 Delta short put instead of a 5 Delta, allowing for varied entry frequencies based on account size and credit targets. The exit mechanic remains with a bracket order set at a 50% profit target or 200% stop loss, providing concentrated credits with fewer contracts.
The Bomb Shelter Strategy for Black Swan Hedge
The 'Bomb Shelter' strategy aims to protect against extreme market events like nuclear catastrophes. Historical backtesting shows manageable drawdowns in severe market gaps, prompting the creation of this hedge. Designed for a 20% gap scenario, the strategy involves buying long puts at 90 DTE using funds from short puts to limit potential losses, offering a sense of security against unprecedented market volatility.
Capital Efficiency and Optional Add-On Benefits
The podcast details the capital efficiency of the 'Bomb Shelter' strategy on portfolio margin accounts due to the combination of short and long puts. While providing a layer of protection against severe market gaps, the strategy carries a cost equivalent to 19-20% of potential profits. Emphasizing that the hedge is optional, it offers a tangential benefit of increased capital efficiency for portfolio margin accounts, reducing notional leverage requirements.
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Exploring the Bomb Shelter Add-On and Updated 45+ DTE Income Strategy Mechanics