While we’re not necessarily big believers in trades through which you risk a lot to make a little ($5,000 to make $500 for example); there are many believers in such strategies (Warren Buffet is one through the puts he sold in 2008 and his insurance units, which are in essence a big premium collection program).  And we actually do believe there is a place for option strategies in sophisticated investor’s portfolios (somewhere on the magnitude of 10% of your total alternative investment allocation), as witnessed by our recommendation of programs such as FCI, Cervino, and HB Capital.

Anyone considering option strategies needs to understand that you are risking a lot to make a little on each trade, and Kingsview Capital, a program we have had on our expanded watchlist for some time, does a great job of illustrating just how a certain option strategy they employ (iron condors) works in the following infographic:

[Source: Kingsview]