No. of Recommendations: 12
Can you explain the 30/60/90 strategy?
I suppose you mean the 6/3 Options strategy - Select stocks with good price appreciation prospects over the next three months, buy call options that are six months from expiration, and sell them after three months.
More specifically, I start with the 400 stocks ranked T1-T2 in the VL universe. I rank them by RRS126-2s, i.e. Regression Relative Strength over the latest 126 trading days, minus 2*each stock's price volatility over the last year. IOW, seek the stocks with highest momentum adjusted for volatility, lower volatility is better. Eliminate from the list the 10% of stocks with highest total return over the last 5 trading days. Recent extreme strength is not a good sign for short term future returns.
Buy options on the top 5 stocks produced by this screen. I list the top ten, and pick out of them the ones that have tradeable options (most do), for which I don't already own call options. I look for options that expire 6 to 8 months forward, and a strike price between 0% and 10% OTM.
I do this every month on the Monday after option expiration. I sell the options that I've held for three months and buy the new set.
As a matter of risk management, I run this option strategy in a separate account in which I do no other stock trading. 1/3 of the account is held in options and 2/3 in cash or equivalents. At each monthly cycle this 1/3-2/3 balance is restored by buying new options in an amount equal to 1/9 of the current total account balance.
Elan
