For those of you with the capital and risk appetite to trade options, The Blue Collar Investor is one online resource that I use to read Alan Ellman’s low risk strategy in trading options to increase your money’s return. His strategy is somewhat similar to the option trading strategy I mentioned in my previous blog. Disclaimer: I don’t claim that strategy is mine; Alan Ellman probably created it earlier than me; I merely discovered upon it and share to you guys. His website can be found here.
Actually I chanced upon his strategy a long time ago when I was reading his book “Alan Ellman’s Selling Cash-Secured Puts: Investing to Generate Monthly Cash Flow” from my local library. But at that time, I was improvising part of his technical analysis strategy to trade iron condors and was not too concerned with his general strategy. Now, I realised that his strategy is lower in risk compared to the iron condor strategy recommended by Jeff Tompkins in “Options Trading – How to Win with Weekly Options” Udemy trading course.
Alan Ellman’s “Selling Cash-Secured Puts” is a comprehensive options book that holds your hand from the basics of an option to what counters to trade to technical analysis to trade management to the brokers that you can use to place your trades. However, for me, after paper trading in a demo account in Interactive Brokers, I found that if the put options are exercised, the net option premium yield in my stimulated portfolio is about 6.6%. Maybe its comparatively higher than the 3% plus dividend yield for US S&P 500 ETF for US investors, but in my local country Singapore, I can get about 5.5% dividend yield with lower risk by investing in REITs. I would also incur less commission charges as I can merely buy and hold good quality REITs. So, I wouldn’t sell options as the increase in return is negligible. Maybe its because I trade US blue chip stocks which are expensive in today’s market conditions. But maybe for other US traders out there, they can tweak the strategy to trade more riskier stocks like small cap stocks which cost less.
I’m just recommending this online resource for those who are interested in trading a relatively low risk way of selling put options for monthly cash flow. I even bought Alan Ellman’s ebook for US 9.00. I think its a great options trading resource and its better than trading iron condors as this strategy is less risky. To each trader opinion to his/her own.
Thanks for reading this post!