23. Managing an Options Portfolio

Capital Usage

  • The percentge of your net liquid value you use for trades
  • Since options are leveraged instruments you want to only use a certain percentage of your funds or to open positions when market positions are very favorable
  • Sugested guideline is to use 20% to 50% percent

Trade Management

Premium selling

  • Profit target: %50 of Max Profit for OTM strategies
  • Profit target: %25 of Max Profit for ATM strategies
  • Profit target: %10 of Debit for calendar spreads

Premium Buying

  • Profit target: %100 of Debit

Adjustments and Rolls

  • Modifications to your original positions
  • Keep track of all adjustments and rolls for a trade. Your platform will NOT do this

Beta-Weighed delta

Between -1% and +1% of your net liquid, Example if your net liquid s 100k, then you should have between 1k deltas or minus 1k deltas

Porrfolio Theta

  • Total theta for all your positions
  • This value you can add all undelyings, you don't need to normalize like Beta-Weighted Delta
  • Delta/Theta ratio should be as low a number as possibe
  • Aim for portfolio between 0.2 and 0.5 percent of net liq.
  • Remember that theta is a daily value so your can calculate your annual theta: 0.2 X 365 = %73
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Table Of Contents
23. Managing an Options Portfolio
Capital Usage
Trade Management
Adjustments and Rolls
Beta-Weighed delta
Porrfolio Theta