A.I.M. Users Bulletin Board

[AIMStudent]

AIM LEAPS portfolio for 2020

Given the relative success I had running the AIM LEAPS portfolio during 2019, I'm modifying my rules/guidelines and will be running it again in 2020.

• Stock universe is large US, high cap companies that have some amount of perceived stabilization (e.g. consistent earnings, consistent and increasing dividend payer, strong dividend coverage ratio, etc.)
  
• All options written on the Jan 15, 2021 expiration.
  
• All options purchased as close to At-The-Money as possible.
  
• Corresponding option price needs to be low enough to purchase at least 15 contracts. (Thus corresponding to lower priced and/or lower volatility stocks.)
  
• Initial LEAPS-to-Cash allocation is 70% / 30%.
  
  • Use entire Cash pool across portfolio to buy as needed.
    
  • % Cash in green represents cash holding above initial allocation of 30%.
    
  • % Cash in red represents a negative cash amount.
• Buy SAFE initiated at 10%. Sell SAFE initiated at 5%.
  
• Target 8 - 10 separate issues.
  
• Diversify across sectors and industries.
  
• Use the 30-day rule between subsequent buys.
  
• No time based rules for subsequent sells. (And currently no other rules, but I'm investigating Tom's cash threshold idea of avoiding a sale by raising the Portfolio Control by half the Sell Market Order value.)
  
• Trade order targets ~5% - 6% of value of total contracts held for each issue. (15 initial contracts will only allow for 6.7% minimum.)
  
• Roll to next expiration series in April.
  
  • Nine months remaining to expiration on "rolled from" series, well ahead of major premium decay.
    
  • 1.75 years remain to expiration on "rolled to" series.
    
  • Determine adjustments to portfolio
    
    • Consider replacement if perceived better opportunities exist.
      
    • Rebalance positions to beginning LEAPS-to-Cash allocation during annual roll.
  • Hold positions for a year and a day for favorable tax treatment if trading in a taxable account. (I'm trading in a Roth IRA.)
    
• Investigating increasing Buy SAFE % on subsequent buys and reducing on subsequent sells (to a 10% floor) (similar to what Tom has explained for individual (non-ETF) issues.) Currently, +10% on subsequent buys and -10% of subsequent sells, to the 10% floor, will likely work with the volatility of options.