This strategy is from Cameron Skinner, a trader that was on the Option Alpha #61 Podcast.
His background in options trading was selling covered calls and cash secured puts, and he felt like he was able to bank 12% pretty easily with that strategy. He did that for several years and then around ’09 switched to a different strategy that is quite mechanical.
- Instruments – SPX and RUT because of their high liquidity.
- Sell 10% OTM Puts (10% is 2 standard deviations)
- Buy Puts 3 strikes lower for protection
- Opens a position that is 60 days out (or or as close to that as possible) using the weekly’s
- Open 1 trade everyday
- Closes positions that are 30 days out
- Close 1 trade everyday
During spikes in volatility and bearish times, he does credit spreads on the call side (close to the money) for 90-100 days out on the VIX and VXX. When Volatility recedes, he takes off these trades. In an aggressive bear market, he will keep adding trades up to 8-10% of his account.
Check out the podcast notes from the link at the top for examples and further explanation as Cameron was pretty responsive to comments and questions from listeners.
We can write to Cameron directly at krazyrent (at) gmail.com if we have questions.