Time Decay Service
The Time Decay Autotrade service seeks to sell time premium by selling index credit spreads that are 35 to 90 days out from expiration, differing from the MCTO IC1 service that primarily sells credits spreads with 9 to 15 days until expiration. Additionally, we buy back all spreads 10 to 30 days before expiration, or during opportune times where we're able to book 40% or more of the credit as a profit. Thus, we avoid settlement and the associated risks that come with settlement. The dynamic that this service leverages is the accelerating time decay that options experience from 60 to 30 days out until expiration. Moreover, when selling spreads that are 35 to 90 days out in time, it allows us to place our strike prices farther out creating a larger zone in which the market can trade.
The Time Decay service opens credit spreads on the SPX (S&P 500) and the RUT (Russell 2000) indexes. In addition, trades will be placed on the NDX (NASDAQ 100) when liquidity and strike price availability permits.
A typical credit that the Time Decay Service collects is $1.00 to $3.00 per 10-point wide spread. For an iron condor we typically collect $2.00 to $6.00 of credit.
For risk management we roll spreads that hit predetermined levels of drawdown up or down and further out in time, with the objective of keeping the debits under $1.00. We keep 30-50% of the portfolio in cash, using the remaining cash as needed when rolling or hedging certain exposures in the portfolio.
This service is autotraded through TD Ameritrade, eOption and TradingBlock, and it is not offered as a self-manage product at this time. The recommended minimum to trade the service is $10,000. We will primarily open 10-point wide spreads, but we'll periodically leverage 20 and 25 point wide spreads when appropriate. We will typically deploy 10%-25% of the capital per trade.
How to Set Up the Autotrade Rule
When setting up the autotrade rule within your TD Ameritrade, eOption or TradingBlock account, please select the “Specified Quantity" or "Specified number of Contracts” option. We use this option because we sell spreads that generate larger credits between $1.00 and $3.00. When collecting large premiums there is risk that additional spreads could be added to the order, increasing our desired exposure. Therefore, to avoid this situation we leverage the “Specified Quantity" option.
To calculate the number of credit spreads that will be placed into your account each time MCTO sends in a trade alert, divide your desired total, at-risk capital by 10,000. As an example, in order to allocate a total of $50,000 to the Time Decay Service, one would designate quantity 5 ($50,000/10,000 = 5) and select the “Specified Quantity” option. Thus, each time MCTO sends in a trade alert the customer would get quantity 5 spreads. As a general rule, the desired total, at-risk capital amount needs to be divisible by 10,000, or more simply, it needs to be in $10,000 increments - $10,000, $20,000, $30,000, 40,000, etc….
For Return on Investment results please go here.
To sign up for this service please go here.
To talk to someone about this service please call 877-248-7455, or email us at firstname.lastname@example.org