Fuzzy,
Based loosely on Jeff's work. There are a number of things I don't like about his approach that I'll be modifying in 2020. The high cash balance, as you've noted, is one of those.
Rules and guidelines are currently a work in progress. Jeff advocates at least two contracts minimum per transaction. I've found that doesn't work very well and am looking at percentages as a possible solution. This year based on trading activity I'm comfortable in the ~5%+ range.
In some instances you are correct. I started WBA (the poster child for me for this system this year) with nine contracts and it has been a grind. With the precipitous drop I was holding more than 40 contracts at one point with a large negative cash balance, but WBA has since recovered and I'm holding less contracts. However, if the underlying had moved in the other direction my sell levels would have been uncomfortable holding only nine initial contracts. On the other hand, GE, at a fairly low initial entry price, allowed me to establish the position with more than 30 contracts giving me a lot more latitude. GE accumulated over 60 contracts at one point, but has had a number of sells since late October.
AIMStudent
