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Slow Burn Portfolio

The Slow Burn Portfolio is a simulated options trading strategy that focuses on selling cash-secured puts on high-quality stocks. This automated system demonstrates how systematic options selling can generate consistent income by following a disciplined approach to selecting and managing positions.

How the Simulation Works

The Slow Burn Portfolio operates on a systematic approach that selects and tracks put options based on quantitative scoring. Each trading day, the system evaluates thousands of put options and selects the top 10 opportunities based on its proprietary scoring algorithm.

Selection Process

The portfolio uses a sophisticated ranking system that evaluates put options across three key dimensions:

Implied Volatility (40% weight)

The system targets options with implied volatility near 50%. This "sweet spot" balances premium income with manageable risk. Options with IV too low don't provide sufficient premium, while extremely high IV often signals excessive risk.

Maximum Return Percentage (40% weight)

The algorithm seeks trades offering approximately 3% maximum return potential. This target provides attractive income generation while avoiding positions that may be priced for excessive risk.

Days to Expiration (20% weight)

The system prefers options with roughly 30 days to expiration (DTE). This timeframe optimizes the balance between time decay acceleration and sufficient time for profitable position management.

Filtering Criteria

Beyond the scoring system, the portfolio applies several filters to ensure quality selections:

  • Stock Price Range: Only considers stocks priced between $8 and $550 to avoid penny stocks and extremely expensive securities
  • Sector Exclusions: Automatically excludes sector ETFs and leveraged ETFs to focus on individual equity opportunities
  • Diversification: Limits to one position per underlying stock to ensure portfolio diversification
  • Position Limit: Caps the portfolio at 10 new positions per day
  • Earnings: The system avoids opening new positions that expire after the near term earnings date. The trade is still reported in the email so that investors are aware that it meets all other filter criteria, but it will not be opened in the simulation.

Position Management

The Slow Burn Portfolio employs systematic position management rules designed to lock in profits and limit losses:

Profit Taking

Positions are automatically closed when they reach 90% of maximum profit. This approach captures the majority of available gains while reducing the risk of last-minute adverse moves.

Loss Management

If a position moves against the portfolio by 180% of the original premium received, it's automatically closed to prevent unlimited losses. This stop-loss mechanism protects capital during adverse market conditions.

Expiration Handling

Positions held through expiration are marked as 100% profitable if they expire worthless, representing the full premium capture that cash-secured put sellers target.

Data and Reporting

The Slow Burn Portfolio tracks comprehensive performance data for analysis and educational purposes:

Trade-Level Data

  • Entry Details: Ticker symbol, strike price, expiration date, opening premium
  • Greeks: Delta and implied volatility at entry
  • Performance Metrics: Current mark, profit/loss percentage, holding period
  • Exit Information: Close date and reason for position closure

Portfolio Analytics

The system generates weekly summaries that include:

  • Number of positions opened and closed during the week
  • Breakdown of expired, early-closed profitable, and early-closed loss positions
  • Total and average profit/loss for closed positions
  • Count of currently active positions
  • Identification of best and worst performing trades

Educational Value

The Slow Burn Portfolio serves as a real-time educational tool that demonstrates:

  • Systematic Approach: How quantitative methods can remove emotion from options trading decisions
  • Risk Management: The importance of position sizing, stop-losses, and profit-taking rules
  • Market Behavior: How options pricing and time decay work in practice across various market conditions
  • Strategy Performance: Long-term results of disciplined options selling with proper risk management

By tracking every position transparently, users can observe how the strategy performs through different market cycles and learn from both successful and unsuccessful trades.

Important Disclaimers

The Slow Burn Portfolio is a simulation for educational purposes only. Past performance does not guarantee future results, and all options trading involves substantial risk of loss. The portfolio does not account for:

  • Real-world transaction costs and commissions
  • Bid-ask spreads and execution challenges
  • Assignment risk on short put positions
  • Tax implications of frequent trading
  • Margin requirements and capital allocation costs

Users should thoroughly understand options mechanics and risks before implementing any similar strategy with real capital. Consider consulting with a financial advisor to determine if options trading aligns with your investment objectives and risk tolerance.