Introducing the Weekly Income Strategy from Capital 19

Generate consistent weekly returns by selling weekly option spreads on e-Mini S&P
500 futures

Income 19 - weekly income strategy

 

  • Bought to you experienced, Sydney based, investment advisers, Capital 19
  • Traded by proprietary traders on behalf of dozens of existing clients
  • Superior, proven trading results over four years

Average monthly return of 1.4% and +90% winning months since inception in 2012

  • Equivalent to 18% annual return
  • Maximum drawdown of 2.54%
  • Longest trough to peak duration is 2 only months
  • Excellent risk/reward characteristics make the Weekly Income Strategy a natural compliment to traditional equity investments

Capital 19 has been advising Australian investors on US investment strategy since 2007

  • User friendly and feature rich trading platform gives you better trade execution
  • Low commission structure means your investment works harder for you
  • There are no addition fees required to participate in the Weekly Income Strategy
  • Minimum starting for Weekly Income Strategy is only $10,000
  • Start with one contract and scale as your account size grows

The Weekly Income Strategy leverages several sources of trading edge to provide superior trading results

  • Selling expensive options provides a significant trading edge which compounds quickly when consistently replicated
  • Selling far-out-of-the-money put option credit spreads with a very high 95% plus chance of profit
  • Selling weekly expiring options provides rapid time decay with almost immediate profits accruing to the investor
  • Weekly options premium increases with market volatility providing a natural hedge against market volatility
  • A single position is continuously monitored by systems and traders to provide you with peace of mind
  • The e-Mini S&P 500 futures options are one of the most liquid contracts available with extended hours trading ensuring low trading costs and excellent execution

Income 19 Performance

Income 19 - Monthly Returns

For more information on the Weekly Income Strategy download the Weekly Income Strategy Portfolio Analysis report and contact the representatives at Capital 19.

To request more information about the Capital 19 Weekly Income Strategy, simply fill in the form below and a representative will be in touch shortly.

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Weekly Income Strategy Trade Log

Strategy, Trade Selections & Commentary by Luke Neal & Greg Rynehart of

    Capital 19

2nd June 2017 - Consecutive Winning Trades 74

It was very difficult getting our order in last week. It was only after many phone calls to market makers in Chicago that we were able to negotiate an acceptable risk level for the June 2nd expiry. Although for a very low premium of US$25.00 per contract.

We’re in much the same position as we were last week. US economic growth remains strong and lots of positive data has the major indices at all time highs.

Tonight we turn our attention to the June 9th expiry. With any luck we’ll get some volatility around the non-farm payrolls numbers leading into the open. However if the market rallies further we will look at the same trade or better for the June 14th expiry.

New Trade Details:

Market 2430
Expiry June 9th
Sold Put Strike 2350
Bought Put Strike 2220
Pts below 80
% below 3.3%

26th May 2017 -Update

A quick short note to update you on our latest trade recommendation.

Last night we were trying to trade the June 2nd expiry puts, but volatility was so low the premiums available verses risk did not meet our requirements and so we did not execute a trade.

We will have another look at the June 2nd expiry tonight but unless volatility picks up we are not expecting prices to improve.

If the June 2nd is still no good tonight, we will change expiry dates to Wednesday June 7th. This extra couple of trading days should be enough to make things worthwhile, and add a bigger margin for error in the process.

There is no need to reply today. We will assume you are happy to move to the June 7th expiry.

26th May 2017 - Consecutive Winning Trades 73

Well my joy of last week was short lived. All that volatility I was excited about lasted less than 12 hours. By the time the US market opened it had all but disappeared.

We are back to the same conditions we have seen all year. Stocks pushing higher every day and very few traders willing to pay us decent premium for our puts.

We have closed last weeks trade, banking US$37.50, which is still one of the highest income generating weeks of the year.

Monday next week is a US holiday. This shortens our trading days which means less risk, but we still need to be very careful in this low volatility environment.

New Trade Details:

Market 2404
Expiry June 2nd
Sold Put Strike 2325
Bought Put Strike 2195
Pts below 79
% below 3.3%

19th May 2017 - Consecutive Winning Trades 72

Yesterday was my happiest trading day for 8 months. I woke up to see the US stock market down 1.5%. This was the biggest single fall for 8 months.

If you are new to what we do here, you might be wondering why I was so happy when the rest of the world was losing.

The main reason was because this fall caused volatility to increase by almost 50% (It is coming off a very low number though so this isn’t as big as it sounds).

Volatility is our friend here. When events cause uncertainty or the market starts moving around more, we actually make MORE money and take less risk. We live and hope for these periods.

It is easy to let headlines worry you and pull out during these times. The correct course of action when selling options is to get excited and do MORE not less. When we enter a new trade tonight it is likely to be the best of the year so far.

We often get asked why we are so successful with this strategy. The reason is simple. We think differently. Instead of getting worried about volatility we embrace it.

I’ve always said that if you want to be the same as the average person, do what the average person does. If you want more than average, you have to approach things in a different way.

So, I congratulate all of you for embracing a different way of investing. For not being average and for thinking differently to the crowd. The rewards will come.

The market failed to follow through last night and volatility has dropped a touch. The higher volatility means we are still in our current trade. But, it is very close to our profit take level as we only have a day left until expiry. We will take profits later today, as time erodes, of US$32.50-$35.00 per contract and then look to enter a new trade, which as I stated earlier, should be the best yet of the year.

12th May 2017 - Consecutive Winning Trades 71

The market hardly moved this week and this morning our take profit order was filled. We locked in US$32.50 this time around.

Option traders talk a strange language. It is not unusual to hear them say things like “I rolled up my gamma today” or “I’m short vol”

With this strategy we are also “short vol”. It means we profit if volatility falls (there is a little more to it but that is the basic idea)

On Monday, the VIX, the index that measures implied volatility hit the lowest level since 1993. Since we are selling volatility this means the money we bring in each week is at the lowest point for 24 years.

This is why our weekly profits have been a touch lower than normal. Still, a profit is a profit and it all adds up.

The good thing about financial markets is nothing stays the same for long and one day volatility will start to rise again and our weekly income will go up with it.

We got a cracking trade on last week. A nice and safe 120 points away from market. We’ll see if we can do a similar thing this week

New Trade Details:

Market 2390
Expiry May 19th
Sold Put Strike 2290
Bought Put Strike 2160
Pts below 100
% below 4.2%

5th May 2017 - Consecutive Winning Trades 70

It is time to lock in another week of profits. This time for US$32.50 per contract.

The market came very close to our take profit level last night and we expect it will happen later today as time erosion does its work to option premiums.

Due to the low volatility we want to get into the new trade as soon as possible and we will look to enter positions in the May 12th expiry tonight.

Here’s what our Director, Matt Jones, wrote to us in relation to the strategy this morning:

‘I’ve just returned from a trip to the US and I can tell you the economy there is far stronger than the numbers appear. Every seat on every plane I got on was fully booked out, including business and first class. There are cranes across the horizon and it is very expensive to eat out. Clearly money is flowing and talking to some locals they tell me they can see inflation occurring rapidly. That can only lead to more interest rate rises as the Fed balances the books.

I wish I could say that should lead to more volatility and higher profits, but alas, I think we need some good old geo-political turmoil to get what we want, as I can’t see many shocks happening to the US.

If I am right the good news is our string of winners should continue on. They all add up and its nice to see our accounts continuing to grow every month.’

New Trade Details

Market 2385
Expiry May 12th
Sold Put Strike 2290
Bought Put Strike 2160
Pts below 95
% below 3.9%

27th April 2017 - Consecutive Winning Trades 69

We will be closing our position today for profits of US$40.00 per contract

After the first round of the French elections and positive earnings results, the market has continued to move higher. Trump’s tax reform plan has been outlined this morning in which tax on corporations will be cut to 15% and repatriation tax (tax on overseas earnings for businesses) will likely be even lower. All this is very positive for stocks but let’s hope for some selling tonight when we place our new trade.

New Trade Details

Market 2382
Expiry May 5th
Sold Put Strike 2295
Bought Put Strike 2165
Pts below 87
% below 3.6%

20th April 2017 - Consecutive Winning Trades 68

Once again we are very close to our profit target with only one session left until expiry. As the value erodes from our option we will take profits sometime today of US$25.00- $27.50 per contract

Markets have rallied again this week as fears around the Middle East and North Korea subside and US tax reform appears to be happening a lot more quickly than previously thought.

Volatility is still higher than it has been the last few months which means put premiums are significantly better. Even more selling would be welcomed but in this environment we’ll take what we can get, always considering safety before profits.

New Trade Details

Market 2353
Expiry April 28th
Sold Put Strike 2220
Bought Put Strike 2090
Pts below 133
% below 5.6%

14th April 2017 - Consecutive Winning Trades 67

With our contracts due to expire at the end of tonight’s session we are very close to our profit target. Profit will be US$27.50 per contract and will bring us up to our 67th consecutive winning trade.

The shorter week did effect the premiums available when opening our trade last Friday but the good news is we have seen the VIX move almost 20% higher this week. We expect to bring in a good premium while staying a long way below the market for this weeks trade.

New Trade Details

Market 2339
Expiry April 21st
Sold Put Strike 2240
Bought Put Strike 2110
Pts below 99
% below 4.2%

7th April 2017 - Consecutive Winning Trades 66

This week is much the same as last. We are close to our profit take but our options are still holding a little value. It means we won’t be able to close them out until tonight.

This week our profit will be US$27.50 per contract

Nothing much has happened in stock markets all year, except they have put in one of their strongest starts for several years. This has slowed recently and with earnings around the corner maybe we will finally get some volatility?

The coming week is shortened by Easter with only 4 trading sessions next week. Options will expire on Thursday and a shortened week means less time for things to go wrong and hence less risk.

Tonight we will take profits on our current open position and enter a new trade before the close for the weekend.

New Trade Details

Market 2354
Expiry April 13th
Sold Put Strike 2285
Bought Put Strike 2155
Pts below 69
% below 3.0%

30th March 2017 - Consecutive Winning Trades 65

The market hasn’t quite come down to our take profit level yet, but it is very close and it will probably happen at some point later today.

When this happens we will lock in another average profit of US$37.50 per contract and notch up our 65th winning trade in a row.

It is frustrating to see volatility has disappeared once again. We got excited last week when we saw the first 1% down move of the year. But it only lasted one day and then went straight back to no movement and hence no big option premiums to be found.

We are seeing lower than average daily trading volumes. It is as if traders are waiting for something to happen before committing. It also probably means there is a lot of money sitting on the sidelines, waiting for a dip and so when it comes, expect it to be small and over fast.

Whilst it is frustrating that we cannot generate large premiums in this environment, it does mean we get lots of winning trades, which when added together still means a decent return.

At the current profit run rate for 2017 we are looking at an annualised 14.6% return after all costs and FX implications.

With a high likelihood of reaching our profit target tonight we are looking to place a new trade prior to the close which will be as outlined below.

New Trade Details

Market 2357
Expiry April 7th
Sold Put Strike 2275
Bought Put Strike 2145
Pts below 82
% below 3.5%

24th March 2017 - Consecutive Winning Trades 64

The market has been kind to us this week. The selling we’ve been asking for has finally happened! A fall of over 1% early in the week, and further again last night, has given options premiums a much-awaited and healthy dose of volatility.

We still have a good 35 points up our sleeve on our current position so assuming the market doesn’t fall any more than that tonight we will lock in profits of USD $32.50 per contract

As soon as we are out of our current position we will turn our attention to next week’s trade which is already offering us better premium than we have seen in months.

Ideally we see even more selling tonight which will set us up for an even better trade than the one outlined below

New Trade Details

Market 2340
Expiry March 31st
Sold Put Strike 2240
Bought Put Strike 2110
Pts below 100
% below 4.3%

16th March 2017 - Consecutive Winning Trades 63

The market has moved higher once again this week and we are close to being out of our trade for profits of USD $30.00-$32.50 per contract. It will probably happen some time tonight and then we will look at placing another one.

The US raised interest rates by 0.25% as expected last night and indicated another 2 rises are on the cards for this year. That news sent the AUD up as the market was pricing in 3 or more increases.

We’ve been having a particularly hard time generating good premium this year. No surprise if you look at what has been happening with volatility.

The VIX is currently at 12, well below the 10-year average of 21 and significantly down from the Brexit spike to 25 and the high of 40 when global markets last sold off. Volatility is at a 5 year low and bumping along the bottom.

But we have some events coming up that will hopefully see an increase in volatility.

The surprising support for Geert Wilders in the Netherlands could upset its election for a Prime Minster this week. UK Prime Minister Theresa May will kick off the UK’s exit from the Euro zone this week as she looks to sign Article 50 and we have seen a 16% rise in stock prices since the election.

Surely something has to give at some point and we can go back to bringing in a higher premium.

If anyone knows what I can do to cause a 50 point sell-off tonight, please let me know. Maybe I’ll go out and buy a lot of stocks. That usually does it.

Our new trade for tonight (or maybe tomorrow if the market moves lower tonight) will look like this.

New Trade Details

Market 2380
Expiry March 24th
Sold Put Strike 2290
Bought Put Strike 2160
Pts below 90
% below 3.8%

10th March 2017 - Consecutive Winning Trades 62

We will be closing our current position tonight for profits of USD $32.50-$35.00 per contract.

This will be a long note today as I want to explain how options work, but if you would rather not go through it all, just skip to the bottom for the new trade recommendation.

Tonight the Bureau of Labor Statistics will release the Non-Farm Payrolls number for February. This is the equivalent of their unemployment report and is usually the single biggest announcement of the month. It normally occurs on the first Friday of the month and one hour before the market opens.

Option traders know this event will occur tonight and exactly when it will occur. They also know it has a chance to move markets. For this reason the option market makers build in a lot of premium into options to try and cover this potential move. It means options are expensive right now.

That is usually a good thing for option sellers like us. Except we already have an open trade and cannot place a new trade until this one is closed. Because all options are affected by this, our present options are still carrying a lot of value. That means we can’t buy them back yet as they are too expensive.

Once the report is announced at 12.30pm Sydney time, the market will react immediately and all this built in premium will disappear. Our options will become almost worthless and we will close them out for profits of USD $32.50-$35.00 per contract. Then we can look at opening a new trade.

The problem is, right now it is very hard to know what that new trade will be, as we know there will be a big change in prices after the figure is announced.

But we can use our experience to get a good idea.

Based on what option prices did this week, we expect premiums for next Friday will be low. We might be in one of those positions where it is not worth taking a trade. But, it is also possible the market falls on the announcement which should lead to a good opportunity.

Our plan is as follows.

If we can sell an option with expiry next Friday that is 70 points or more away from the current market and also generate usual cash flow we will do so. If we cannot do this then we will not place a new trade.

In the event we do not get a trade on, we will look for a new one on Monday and send an update.

Weekly options were only introduced in 2011 and only had Friday expiry. In 2016 they introduced Wednesday expiry and from April 3rd we will have Monday expiry.
This is wonderful for us. It now means we have a good range of expirations to consider and helps offset the low volatility risk we have been experiencing.

This is truly great news and the answer to the problem of low volatility.

Our plan for Monday would be to look at the Wednesday 22nd expiry and trade that.

But, with any luck the market will fall after the announcement and we will be able to get on our usual trade. If not we will look at where things stand on Monday and suggest a new trade.

Please remember, if we cannot get 70 points away from the market we will not take the suggested trade and will wait until Monday to reconsider.

New Trade Details

Market 2366
Expiry March 17th
Sold Put Strike 2295
Bought Put Strike 2165
Pts below 71
% below 3.0%

2th March 2017 - Consecutive Winning Trades 61

US stock market action continues to make life hard for us. It seems everyone wants to buy stocks right now and the market moved higher over the past week once again.

It means that tonight we will lock in profits of US$32.50 per contract for our 61st consecutive winning trade. We want to jump in quickly after this happens to maximise our time value in case the market decides to move even higher.

It is hard to imagine this market rally has too far left to move. Last night’s action was particularly strong on the back of President Trump’s speech which was full of emotional words and big promises like “massive tax cuts” but very lacking in substance. One commentator was quoted as saying Trump asks America to “wait a bit longer”

I just can’t see this market moving too much higher without some details of exactly what “Massive Tax Cuts” means, and we won’t get that for 4 months or more.

With such positive investor sentiment (a contrarian indicator) we need to continue with our cautious approach but look forward to the day when sentiment does shift as that should increase our weekly income.

For now, we continue to work as usual but keep our fingers crossed for some selling.

New Trade Details

Market 2393
Expiry March 10th
Sold Put Strike 2310
Bought Put Strike 2180
Pts below 83
% below 3.5%

24th February 2017 - Consecutive Winning Trades 60

We closed our position last night for profits of US$32.50 per contract.

It’s been a pretty uneventful week since we placed our last trade. Markets were closed on Monday for the Presidents Day bank holiday, and since Tuesday the S&P 500 has moved just slightly higher.

We will aim to get into the new trade as soon as possible tonight to take advantage of time value.

New Trade Details:

Market 2363
Expiry March 3rd
Sold Put Strike 2275
Bought Put Strike 2145
Pts below 88
% below 3.8%

17th February 2017 - Consecutive Winning Trades 59

Markets have been surprisingly strong this week, notching up a 7 session winning streak. This consistent buying reduces volatility and makes it hard for us to generate decent premium when selling options.

Today we will be closing out our position in the Feb 17th expiry puts for a gain of US$25 per contract. A little lower than usual due to the reduced volatility.

But the good news is volatility has increased in the last two sessions so we are going into tonight hoping for a better outcome on our next trade.
New Trade Details

Market 2343
Expiry February 24th
Sold Put Strike 2250
Bought Put Strike 2120
Pts below 93
% below 4.0%

10th February 2017 - Consecutive Winning Trades 58

Today we will be locking in our 58th consecutive winning trade. This time for a profit of US$30 per contract.

The Trump rally continues in stocks and last night they notched up yet another record high. The S&P500 is now over 2300.

There were a few quotes from Confucius floating around the office the other day and we realised he must have been an option trader. For example

“A man who moves a mountain begins by carrying away small stones”

This is exactly what we do here. Even though our weekly profits are small, by the end of the year, we have created a mountain.

He also said:

“Our greatest glory is not in never falling, but in rising every time we fall”

Whilst it has been over a year since our last loss, we will have one again at some point in the future. But we have a process to deal with it. We have had falls in the past and we have risen to new highs after them every single time. I see no reason why next time should be any different.

We will do our best to get you the best combination of low risk and high return strikes we can each trade. It is hard in this low volatility environment. But not impossible.
New Trade Details

Market 2304
Expiry February 17th
Sold Put Strike 2225
Bought Put Strike 2095
Pts below 79
% below 3.4%

3th February 2017 - Consecutive Winning Trades 57

We started to get excited on Monday and Tuesday when we saw some selling but it did not last. At least we have seen volatility move off its lows for now.

As I write this we are not yet out of our current position but we will be soon. This will bank another profit, our 56th in a row. This time it will be US$32.50

The market has now completed 79 days without a 1% down day. That is the longest streak since 2006 and the fifth longest in history. Surely this cannot continue much longer.

Next week does look quite good at this point. Our trade tonight will look like this. As always, please confirm if you want us to place it for you.

New Trade Details:

Market 2275
Expiry February 10th
Sold Put Strike 2175
Bought Put Strike 2045
Pts below 100
% below 4.6%

25th January 2017 - Consecutive Winning Trades 55

We are not yet out of our trade in the Jan 27th expiry puts, but the way the market has moved this week, and with more than 100 points buffer, we probably will be tomorrow. That will result in profits of $30.00.

Then, while everyone is recovering from excess sausages and beer, we will get into a new trade on Thursday night to maximise our time advantage.

We have noticed that Thursdays seem to offer much better pricing than Fridays. We don’t know why this is, just that it is. We have also noticed that option pricing is changing and the premium for our bought puts is going up and up. Which is slightly annoying

There are a couple of things we can do about this and if it becomes a real problem we will adjust the strategy in future. For now, we will proceed as normal.

This new trade will likely occur on Thursday, however, if the market has a big fall, we won’t enter until Friday. It should look something like this:

New Trade Details:

Market 2275
Expiry February 3rd
Sold Put Strike 2185
Bought Put Strike 2055
Pts below 90
% below 4.0%

20th January 2017 - Consecutive Winning Trades 54

We were quick enough to make a move on Wednesday night and got about 1/3 of our contracts filled. We will close out tonight for profits of US$25.00 per contract

Options prices are looking much healthier for next week. The selling we’ve seen over the last two sessions has led to the VIX moving up 8.9% to 13.04

Let’s hope we get even more selling heading into tonight’s session.

New Trade Details

Market 2257
Expiry January 27th
Sold Put Strike 2150
Bought Put Strike 2020
Pts below 94

14th January 2017

Apologies to everyone for we were unable to find a trade last night that satisfied our risk/reward characteristics.

We have therefore not entered a new position in the Jan 20th expiry puts.

This is unprecedented in the four and a half years we have been trading this strategy. Never before have we been unable to place a trade. But volatility has never been this low before either.

We do not think the market is presently offering us just reward for risking our capital.

There are options available we could have sold, but that would have placed us too close to the market, which we deem too risky. The market will probably rise further now and next week we could look back and say “see, it would have been fine”. But we like to play with the deck stacked in our favour and right now it isn’t.

We could also look at trading a longer dated option but we don’t like to do that either as a key part of this strategy is keeping the time in market as short as possible.

The secret to trading options is knowing when not to trade. Sometimes it just isn’t worth it.

For now we will sit back and wait to see what unfolds. Things will look different next week.

5th January 2017 - Consecutive Winning Trades 53

US Stock markets have been very positive so far in 2017. Which is slightly disappointing.

We saw some selling last week and started to get excited. Volatility was building and we thought we could be in for a nice period of increased profits.

But that has changed this week and stocks are making new highs and volatility is falling once more.

We will go back to hoping and praying for some nice volatility.

Still, it does mean we get to kick off the new year with a win. We will be locking in profits of US$30.00 during the course of today or tonight and then placing the following new trade for next week’s expiry.

New Trade Details

Market 2264
Expiry January 13th
Sold Put Strike 2180
Bought Put Strike 2050
Pts below 84
% below 3.7%

Continue…

To request more information about the Capital 19 Weekly Income Strategy, simply fill in the form below and a representative will be in touch shortly.

Name:
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Enquiry:
 

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The information presented above has been supplied in good faith and should not be considered advisory.  No responsibility will be taken for errors or omissions contained within this message or financial losses as a result of using this information.  Securities and derivatives investing can result in losses and is not appropriate for all persons. The investor needs to consider the appropriateness regarding their personal needs, objectives and financial circumstances.  In providing this correspondence, we did not take into account the investment objectives, financial situation and particular needs of any person. We will not be liable for any loss or damage arising from users of this information trading or investing in any financial market.