How much do you charge?
Our services cost either $85/month for self-managed, or $115/month for autotrade. We charge a flat rate to your credit card each month. You may cancel at anytime. All of our products have either a free 30 day trial where no credit card is required, or a $5 first month special.
When was MCTO founded?
Monthly Cash Thru Options was founded in 2005. We initially focused on non-directional options trading strategies. Over the years we have expanded into directional strategies leveraging quantitative and algorithmic methodologies. MCTO Capital Management, a sister company, was established in 2018 to service high net worth and institutional clients through managed accounts.
What is the best way to diversify my portfolio?
Monthly Cash Thru Options LLC, which services the retail client, offers five actively managed strategies that can help an investor diversify a broad investment portfolio. A recommended approach is to take a portion of your total investable cash and allocate it to 2 or 3 MCTO strategies.
I already have a financial advisor. Why do I need your services?
We recommend that you continue to work with your registered investment advisor (RIA) and have them continue to manage a certain % of your total investable assets. Financial advisors offer value when it comes to macro-level planning of your assets along with tax, estate and wealth-transfer planning. However, most financial advisors are not well trained in actively managing money, and are usually slow to exit an investment when it starts to show fatigue or demonstrate valid exit triggers.
Because some RIAs understand that they are not well trained or experienced in active portfolio management, some will outsource the investment management task to 3rd party investment managers. This is a positive for the client. However, the negative is that the client will be paying higher fees because the RIA and 3rd party investment manager will be splitting the fees.
Other RIAs, the ones that manage the assets themselves, usually just “buy the market”, which is not optimum for the client. This means that most RIAs will allocate a certain % of the portfolio to a large-cap index, possibly some to a mid-cap or small-cap index, maybe buy some ETFs that represent specific industry sectors or emerging markets, and probably buy a bond ETF. Many times the chart of one of these investments, to the trained eye of an active portfolio manager, will say “don’t enter this ETF until it breaks above a certain level”; or, “get out of this position if it closes below this level”. Unfortunately, many RIAs don’t understand this and will still put you into these investments regardless of what the chart is saying to the trained technician. Moreover, they will be slow to get you out of an investment, if ever, when they should be selling and going to cash. Because most RIAs are not trained portfolio managers and don’t have strong technical skills, they will be slow to react to any sell signs that a stock, index or ETF may be exhibiting.
Overall, it’s recommended to keep a certain % of assets with an RIA to take advantage of the macro-level asset, tax, estate and wealth-transfer planning capabilities. Additionally, keep a certain % in cash or gold; and then allocate a portion of your assets to active strategies run by experienced portfolio managers. Because we are active managers that are expert technicians, who also monitor macro-level market-timing indicators, we know when certain investments are flashing “yellow” or “red”, and we know how to get out of positions quickly when sell-signals are triggered, which is key to capital preservation.
What type of analysis does your firm do to drive your strategies and convictions?
We do a robust analysis each week to help guide our investment thesis and trading.
At a macro-level, which helps us modulate our bullish and bearish exposure levels, we analyze approximately 80 charts weekly that represent macro-level technical, fundamental, breadth and sentiment data. This weekly analysis is summarized in The MCTO Letter, which is emailed to clients every Sunday evening.
At the micro-level, which provides specific entry and exit triggers for our trades, we analyze the technicals of hundreds of charts weekly of individual stocks and ETFs, and combine this with stock-level fundamental and factor-based quantitative analysis.
For more information on the analysis that we perform please go to Education -> Learning Center Macro & Technical Analysis
My investment advisor never pushed me to get out of stocks during the last downturn and I lost a lot of money. Are your portfolio managers different and more nimble?
Absolutely, we are nimble and we get out of positions quickly. We are active managers that follow specific entry and exit rules for all holdings and we follow these rules in strict form. If a market starts to become unhealthy, we will see it quickly and our rules will force us to close positions in an incremental and nimble fashion. If a chart starts to look unhealthy we’ll know it, because we are expert technicians, and most likely we’ll be out of that holding before our loss gets much greater than 5%. We also monitor the macros of the US economy, along with Europe and Asia, which provides us visibility into “storms” developing, where we are nimble in reducing exposure until the storm dissipates. With this said, taking losses is part of the business; the key is to keep the losses small and to protect our capital by following strict exit rules and by modulating our exposure levels from week to week.
On the contrary, Registered Investment Advisors (RIAs) are not classified as active portfolio managers or expert technicians, and they move slowly. When times get tough, they will usually just say, “let’s hold on because the market will eventually come back”. Unfortunately, we know what happened in 2008 and 2009 where most portfolios where cut in half, and some were down as much as 70%. With this said, we believe that you should continue to work with your RIA if you already have one as they can offer you many services, but we don’t recommend to have them manage 100% of your investable assets.
What % of my total investable cash should I allocate to a single strategy?
It’s recommended to allocate a maximum of 30% of one’s total investable cash into any single strategy. It’s best to diversify a total portfolio across 3 or 4 strategies to limit downside risk.
What differentiates MCTO’s strategies to other managed products?
Below is a summary of how we are different:
1) Our strategies blend technical, fundamental and quantitative analysis.
2) Most of our strategies are long/short where we allocate a certain percent of the portfolio to short hedged trades.
3) We dynamically modulate our bullish and bearish exposure through robust, macro-level technical, fundamental and sentiment analysis.
4) These strategies are available through autotrading where it’s easy to setup an autotrade rule through a participating broker to get started.
Actively managed strategies with this level of sophistication are usually out of reach for the retail investor.
What is factor-based quantitative analysis?
Factor-based, quantitative predictive analysis (QA) is a technique that seeks to understand and predict behavior by using mathematical and statistical modeling. In the financial services industry, QA is used to analyze investment opportunities to provide predictions of when to purchase or sell securities, and the potential magnitude of a move. The input factors, or independent variables, that are fed into a quantitative model include financial ratios such as price-earnings ratio (P/E), earnings growth, revenue growth, cash flow, among others.
I just buy the S&P500 index ETF (SPY) and other index ETFs and have done well. Why do I need actively managed strategies?
When the market is in a confirmed, long-term UP trend it’s okay to allocate a certain % of one’s portfolio to an ETF like the SPY that tracks the S&P500 index. However, it’s strongly encouraged to have a basic understanding of technical analysis to help you set exit levels to protect your capital. For example, where you will sell half of your position if a certain level is breached; and where you will sell the other half if a second level is breached. This type of exit methodology is required to control downside risk and capital preservation. It’s never recommended to “just hold on because we know it’s going to come back”. We know what happened in 2008 and 2009 where most accounts lost 40% to 60% of their value.
As of September, 2018, stocks are expensive, priced for perfection and this is something we need to monitor closely. It’s okay to allocate a certain % of one’s total investable cash and allocate it to a broad-based index ETF like the SPY, because the broad market is still in a confirmed, long-term up-trend; as long as you have an exit strategy based on predetermined levels. However, it’s also wise to allocate a certain % to actively managed strategies that are managed by a nimble portfolio manager, who follows strict exit rules and will quickly move to cash when the stocks and indicators tell him or her to.
How much money do I need to get started with the MCTO strategies?
For the iron condor strategy you can start with $6500. For the other MCTO strategies the minimum is $10,000.
When a strategy is Long/Short what does this mean?
A long/short strategy, such as Directional Alpha, actively opens bullish and bearish trades, usually at the same time. Sometimes this type of strategy is called a market neutral strategy since it can make money in both directions.
What brokers do you work with and how much do they charge?
We work with the following brokers that support autotrading:
Interactive Brokers, through Global Autotrading
E*Trade, through Global Autotrading
Since 2014 the commissions that brokers charge for options and stock trading has narrowed as the industry became much more competitive. For option trading, most brokers charge between 50 and 75 cents per contract plus a flat ticket charge of $4.95 per option leg. As an example, for an option spread that has two options legs, the broker’s commission would be a ticket charge of $9.90 plus 70 cents per contract.