1. RCS protection does offer protection but has no real impact on margin. when markets are down, so does the margin. Therefore, RCS requires a lot of reserves or, need to also do some kind of spread.
2. Better buy more protection puts than short.
3. When buying find a value at which we sole, even with a mall loss. Better to close. Should add a field for that in the excel. If I short for example strike 520, when I’m at spot 550, I must then for example say that I close at a loss when down to 535. I need to calculate best strike to do so. Ideally, the excel sheet should calculate it for me.
4. While doing a shot term RCS at high premium is interesting, it much less than doing one very long term.
For one, if the markets go down it’s harder and costlier to protect. It has an impact on margin, whereas for example the DEC 2022 is almost not impacted. Secondly, it looks like you can earn more, but it’s actually not the case. If spot is for example 530 and I short strike 500 term 3 months later, I may get let’s say 500 euro that I need to cover multiple times. Objective is to get out with 60% premium.
On the other hand if I short strike 400 for year 2022, it has almost no impact on margin, I can buy protection much longer and can better use thepeaks and bottoms to buy resell without stress. Moreover, if the market goes to let’s say 570, I can keep much more than 500 euro per option and for the same margin cost (if not less.)
Thirdly, I don’t need to handle daily RCS protections if it goes down.
-> Go a maximum for long term put RCS, that’s the best strategy for now!
When dealing with long term RCS, don’t keep to get à 60% earning, that doesn’t make sense. Go for 30%! Once the markets are long in green sell and then wait for the next big dip. No need to sell it all, but maybe 50% of the options, those that have the highest return.