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When managing a trading portfolio, it's important to diversify both the strategies used as well as the products within your account. Additionally, you can also reduce risk by spreading your trades out across multiple durations. One such example of this is by laddering short Put options. Today, tastytrade and TD Ameritrade combined the idea of diversifying with duration and with products by trading backwardated, laddered puts in correlated underlyings. To demonstrate, Tom Sosnoff, Tony Battista and JJ Kinahan sell Puts in $CVX (Chevron) and $XOM (Exxon). While both of these companies are closely tied to the price of Crude Oil (/CL), selling backwardated (shorting a lower strike price as duration increases) Puts in both products reduces the impact of binary risk from trading one stock alone, yet both still benefit from an increase in the price of oil. |
Trading Strategies for Beginners: Laddered Puts
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