John Richardson – Guns and Butter

Income vs Wealth Building

The Consistent Options Income trade that was published in 2008 was all about trying to create a high probability strategy that could turn accumulated wealth into a regular monthly income. However, I have had many inquiries over the years about how one could accumulate the wealth to begin with. The Guns & Butter trade is my answer to that question. It is how I attempt to accumulate and grow wealth. The perspective is longer term and the trading approach can put a lot more money to work. If you are looking to compliment your income trading approach or just want to put some money to work, this is a great strategy that should outperform the indexes over time. It is also very easy to manage monitoring as little as once per trading day.

Consistent Options Income Strategy

• Objective: Income
• Highest Probability
• Monthly Perspective

Guns & Butter Trade

• Objective: Wealth Building
• High Probability
• Longer Term Perspective
• Put More Capital to Work
• Low Maintenance
• Easy to Trade and Manage

Guns & Butter?

• In the world of Economists, the Guns & Butter Model attempts to describe the relationship between a nation’s spending on the military and it’s spending on civilian goods.
• A nation’s objective is to strike a balance that provides for a prosperous yet secure economy.
• In a Trader’s Economy, we want to strike a balance between holding financial assets (Guns) and selling premium (Butter) so as to provide a prosperous yet secure portfolio.
• Lock & Load…

Wax On, Wax Off

• We Need to Change the Way We Think About Our Position
• Unburden Ourselves From the Myths of Conventional Wisdom
• Control What We Can Control
• Accept the Real Risk at Trade Initiation
• The Market Rewards Risk Takers
• Manage the Short Options Around Our Assets in a More Efficient Manor
• There is a Better Way

What is the Guns & Butter Trade?

• Long and/or Short Stock Positions
• Options to Enhance Returns
• Sell Calls to Lower Cost of Long Stock Positions
• Sell Puts to Increase Selling Price of Short Stock Positions
• But How Do We Manage It More Efficiently?
• An Intelligent Options Adjustment Approach to Improve Returns
• Improved Performance Compared to Conventional Covered Strategies
• Avoid the Traps Set by the Covered Call Myths