Purchasing options is usually terrible advice for anyone who hasn't been doing this for a long time. Options are very difficult to do right. Even if your intentions are sound relative to what is occurring in the market (e.g. volatility plays today), you can still get some aspect wrong and lose a bunch of money.
My strategy is to operate with a margin account and use high/low water marks as the trigger points for adjusting leverage. For example:
I prefer to maintain my margin utilization under 40% of my overall portfolio balance. I also prefer to maintain a value/growth allocation such that my margin is usually self-funded via dividends, but I don't mind eating a little bit of fee for the long-term opportunity.
If my margin utilization falls below 40%, I will use the leverage until its right back at 40% (mandatory minimum).
If my margin utilization is at or higher than 45%, I will stop use of additional leverage (mandatory maximum).
The sweet spot for me is 40-45%. This is effectively my "options" range for market downturn. Within this range, I have granted myself authority to purchase equities based on daily market conditions. The window is narrow, but this morning I purchased a bunch of equities on margin right up until the 45% mark was hit. I obviously went for the ones in scope that were hit the hardest today.
Tomorrow, I will re-run that ruleset and act accordingly. The advantages of using margin to acquire shares is that you have the actual shares and can hold them long term. Contracts mean you get to pay taxes right away and have nothing to show for it after everything clears.
My strategy is to operate with a margin account and use high/low water marks as the trigger points for adjusting leverage. For example:
I prefer to maintain my margin utilization under 40% of my overall portfolio balance. I also prefer to maintain a value/growth allocation such that my margin is usually self-funded via dividends, but I don't mind eating a little bit of fee for the long-term opportunity.
If my margin utilization falls below 40%, I will use the leverage until its right back at 40% (mandatory minimum).
If my margin utilization is at or higher than 45%, I will stop use of additional leverage (mandatory maximum).
The sweet spot for me is 40-45%. This is effectively my "options" range for market downturn. Within this range, I have granted myself authority to purchase equities based on daily market conditions. The window is narrow, but this morning I purchased a bunch of equities on margin right up until the 45% mark was hit. I obviously went for the ones in scope that were hit the hardest today.
Tomorrow, I will re-run that ruleset and act accordingly. The advantages of using margin to acquire shares is that you have the actual shares and can hold them long term. Contracts mean you get to pay taxes right away and have nothing to show for it after everything clears.