As mentioned on the About Two Investing page, our overall strategy involves two main approaches: dividend growth investing and options trading. We have focused on dividend growth investing since the time we both started managing our investments back in college. We strongly believe in this strategy (and the potential for growth over time with our reinvested dividends), and it will remain an essential aspect of our portfolios in the years ahead.
In the past, financial derivatives (including options) were really only utilized on a large scale by investment professionals or those in business (as part of compensation) and were not often employed by retail investors. However, that has changed significantly over the past decade or so with derivatives trading now being widely available to retail investors at most brokerages, including Schwab and TD Ameritrade.
Over the years, we have gotten the feeling that many retail investors see options as simply being too risky to incorporate into their portfolios and think that they are financial products that should be left to financial professionals. This sense motivated us to start learning about what options truly were and the many ways that they could be used. Although we acknowledge that options have significant risk, we now believe that when taken seriously and properly understood, options trading can be utilized by retail investors and offers many benefits to a broad, diversified portfolio both in the short- and long-term that can smoothen volatility within the portfolio and augment returns over time. As we greatly enjoy staying actively involved in all of our positions (including those that we plan to hold long-term), we have recently started to incorporate options trading into our overall investment strategy.
Some particulars of our options strategy: we look for opportunities to utilize calls and puts over many time frames (both short-term expiry and long-term expiry options, including LEAPS – Long Term Equity AnticiPation Securities) with both in-the-money (ITM) and out-of-the-money (OTM) positions. Although our options experience to this point has been limited to buying options positions (using simple strategies, including single contracts, straddles, and strangles), we plan to begin selling options contracts as well in order to collect premium. We will expand this element of our strategy as our underlying positions grow, allowing us to sell more covered calls and cash-secured equity puts and, at the same time, explore uncovered premium selling strategies. We are big fans of tastytrade and are actively learning about how to develop a trading plan with the principles of implied volatility (IV) and IV rank in mind.
Please remember that we are beginning options investors and are learning with every trade, both good and bad, but we are excited about the opportunity to share our journey here at Two Investing. Thanks again for visiting the site!