Option Cash Flow
QFA, LLC actively manages cash flow by selling options on equities and cash. Our strategy is comprised of a core allocation of select Exchange-Traded Funds (ETF’s) and/or Single Stocks, coupled with conservative and time tested option strategies. QFA utilizes Covered Calls and Asset Secured Puts to achieve this end. We can also implement our strategy utilizing concentrated stock positions to enhance the cash flow on your large stock positions. Give us a copy of your current portfolio and we will give you a hypothetical analysis of the option premiums your stocks could yield.
- Selling Covered Calls on select securities is done to generate option premium income when you own an equity and participate in the potential for equity appreciation. Note that this may limit the appreciation of the equity in some cases. Our expertise over the years helps reduce the occurrence of equities being “called away” or sold.
- Selling Asset Secured Puts on select securities is done to generate option premium income and provide the opportunity to buy shares of a security at a price lower than the original market price when the Put was initially sold. This strategy helps reduce cost basis if and when a security is “put” to us or when the stock is bought.
- Transparent – 24-hour visibility of your own account held at TD Ameritrade Institutional. Also, we use a separate reporting system called Blueleaf that allows us, as well as yourself, to run reports on performance at any time.
- Actively Managed – QFA trades each week and/or month depending upon what option expirations look attractive. We also monitor all option positions each day.
- Liquid – Most all the equities and options we use have excellent liquidity and are tradable during open market hours.
- Asset Based Pricing for Trading Fees – QFA clients and our actively managed accounts have negotiated a flat annual fee, excluding cash, for the trading fees at TD Ameritrade. Since we normally trade weekly, the savings on all the option trades we do typically is better than a transactional fee system.
Methods of Analysis for QFA
Quantitative analysis seeks to understand the behavior of a security using mathematical and statistical modeling to measure certain unique characteristics such as, for example, revenues, earnings, margins, and market share. Mathematical and statistical modeling helps us to ascertain security price and risk to ultimately help identify profitable opportunities.
Technical analysis utilizes current and historical pricing information to help us identify trends in the broader domestic and foreign equity, fixed income markets, and in the underlying assets themselves. This may involve the use of various technical indicators, such as moving averages and trendlines among others.
Market cycles provide historic tried and true timing mechanisms to indicate turning points in future market prices. By tracking historic data through charts and graphs, we can improve entry and exit timing strategies. Coupling cyclical analysis with technical analysis helps to ensure the most favorable buy/sell signal.
CORE ASSET ALLOCATION for QFA
- One component of our Core Allocation can represent Index Exchange-Traded Funds (ETF’s). These ETF’s are diversified into Small Cap, Mid-Cap, and Large Cap Funds, including but not limited to, the S&P 500 and the Russell 2000. We also use specific sector ETF’s as well. Some examples of sector ETF’s we use but are not limited to are: utilities, health care, consumer staples, and financials. Our Single Stock selections can represent all sectors based on screeners that we use to find the best optionable securities.
- Another component of our Core Allocation is the optional use of cash reserves that serve as collateral for our Asset Secured Puts. These cash reserves, in addition to all client funds, are held by our custodian TD Ameritrade. The options or “puts” sold on the cash are based on the same structure as the above Core Allocation.
Why QFA’s Strategy?
Contrary to many myths and misconceptions, most options can be a conservative alternative investment vehicle for the investor. Especially the strategies that we, QFA, mostly use by selling covered calls and selling cash secured puts. Options demand attention from the minute you trade them. Over the past decades, we have felt both personally and professionally that our expertise of when to enter, exit, roll, or let the stock be assigned is a huge advantage we can give any investor rather than a company that does not dedicate 100% of their time to an option strategy.
Past performance is not a guarantee of future performance. Individual returns may vary substantially from those presented due to differences in the timing of contributions and withdrawals, account start dates, individual holdings the client deposited or transferred and client specific hedge positions. Before engaging in the purchase or sale of exchange-traded options, investors should understand the nature and extent of their rights and obligations, as well as to be aware of the risks involved. This includes the risks pertaining to the business and financial condition of the issuer of the underlying stock. Listed options are not suitable for all investors. Prior to buying or selling options, a person must be provided with and review a copy of CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS. A copy of this document may be obtained from QFA, LLC, 1415 Panther Lane, #390, Naples, FL 34109. Please see a full list of our disclosures at http://qfallc.com/individual-investor/disclaimer-privacy-policy