About the SkyLine
The SkyLine Trade is the most conservative trade setup of our courses. It is the longest dated and the furthest away from the current market. It is designed to be a net-zero-cost hedge, and can be traded to provide 1-2% per month in income while also hedging the other trades in your portfolio. The name is taken from the resulting structures, which looks just like a city skyline.
- Average Trade Cycle: variable depending on trade goals
- Profit Target: 2%
- Required Capital: $5,000
- Win/Loss Ratio: 28:0
- Annual Expectancy: 24%
Why trade the SkyLine?
By trading this strategy and paying attention to what is going on under the hood, you should learn:
- How to construct broken-wing spreads to achieve a target entry price
- How to completely de-risk a broken-wing condor or butterfly while retaining additional profit potential
- How to layer tranches to create more dynamic and opportunistic composite risk graphs
Do you trade this in your own account?
Yes. We take all of our own trades using live money in our own personal account. We also place these trades and others in a pooled account using other people’s money.
I’m a beginner at options – can I trade this?
If you understand how to build a butterfly spread and vertical spreads, you will be able to construct the orders and place the trades. It’s a 99% mechanical system, so psychology is more of a factor than understanding the orders. That said, if you are just starting out in options, you will likely not understand WHY we’re making the adjustments we are making, and the advantages of this trade over some others. But as you begin trading the plan, things should start clicking. We also offer mentoring/coaching to help you speed up the learning curve.
Why is it called “The SkyLine?”
The de-risked graph on a multiple-layered position resembles that of a city skyline, hence the name.
How much capital do I need to trade the SkyLine?
The capital requirement is $5,000 per lot. If you are layering tranches, you could do equally layered tranches without ever using more than $5,000. If you are doing unequal layering, you would need more than $5,000 for the first layer.
What’s the average trade cycle?
The actual risk to de-risk period is 18 days on average. In the course we show how to layer on additional tranches, each of which partially hedged by the tranche before, so again it boils down to how each trader chooses to go about trading the plan. If one were to create a 5 structure trade, the full cycle would be ~18 days *5. For just a single structure, it would be ~18 days.
Is this an income strategy or a hedge?
It really depends on how one decides to trade it. In the course, we show how to take the trade and adjust out the risk while keeping approximately half the profit. In that respect, it’s a bit of both. Alternately, the trader could simply close the trade and keep the full profit.
How often does the trade “take heat?”
According to expectancy theory, the typical risk cycle on the trade, and the deltas of the strike selection, the trade should enter “downside management” about 5% of the time, or once in 20 trades. We found that number to be a bit closer to 1 in 5.
Do I need to monitor the market intraday?
No, this is a “check once per day” trade. We use EOD for our adjusting, but one could just as easily use the open or lunchtime to make trade adjustments.
Does the listed expectancy value include any compounding?
No, the listed expectancy is based on a fixed investment amount per trade without using compounding.
We’re happy to answer any questions you may have. Click here to send us an e-mail.