I just like to sell insurance before the hurricane. To do it, however, there is certain certain know-how needs to be used.
Lets say, I have 50,000 account. Current market conditions: low-vol environment. Market sectors that are moving: agriculture commodities + emerging markets + crude oil.
This is all I need to build a portfolio. Then I just follow very basic steps:
1. Since volatility is very low, I don't want to commit too much money to trading. Also, I dont want to sell too much naked premium. Accordingly, I think that only $10,000 (20% of the account) needs to be committed at this point.
2. soybeans and agriculture commodities are getting killed for some reason and trade at the low end of their trading ranges. So I can buy 300 shares of SOYB and 200 shares of DBA. Just a small directional bet.
3. Brazil is also getting killed. So I wouldnt mind opening 3 or 4 covered calls.
4. Oil has wild swings lately and trades in the high end of its range. Sold one 14 put against two 14.5 calls.
5. Then, I have to add some general short delta to balance the portfolio. QQQ are at the highest price extreme so this is no-brainer. Sold few QQQ call spreads to get my partfolio delta to zero.
This is pretty much it
With 10K invested I want to make 10-15% return in July. If I am successful, it would be 2-3% on entire 50K. If volatility increases, I will commit additional 5K to trading ..... If /VX gets to 30, will commit approximately 50-60% of the account to trading. If /VX is at 100, like in 2008, will be playing with entire account.
