A strategy is useless if you lack conviction.
What exactly is my SPX trading strategy?
I replicate a long SPY portfolio by selling put options on either /MES, SPY, or SPX. Depending on the week, I use a SPY puts strategy and will generally sell to open about 1–2 contracts which are dependent on my account size and risk tolerance at the time.
The idea is that I am trying to generate a higher sharpe ratio than the market utilizing an SPX trading strategy instead of just owning shares of an S&P 500 fund.
I do this by shorting puts and controlling my delta exposure by rolling the contracts when I feel it is a good time. Additionally, you can use the S&P 500 futures options to sell puts instead of SPX.
Additionally, I spend some of my premium from selling puts to purchasing long puts to hedge.
What do financial advisors recommend?
Many people will go to a financial advisor to manage their money because they do not want to deal with the stock market. Most advisors will put you in an index fund that will perform similar to the S&P 500. Depending on your age, they may also put some of your money in the bond market.
Many famous investors, such as Warren Buffet, also recommend that most people simply invest in the indexes and hold them long-term. If American companies continue to do well, this index has proven it will go up over time. However, deciding to trade stocks vs options is a decision depending on each person’s situation.
As you can see in the TradingView chart above, the market has had rough times but always recovers. The same thing cannot be said about all stocks, though. A great example is the company General Electric (GE), as you can see in the chart below. This company used to be one of the top S&P 500 companies, but now it has fallen and never recovered to its previous highs.
The point here is that those safe companies can quickly turn into losers depending on when you buy them. If you stick to trading the indexes like the S&P 500, all bad companies are automatically removed, so you don’t have to worry about stock picking.
