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.
What maximum dollar amount can I allocate to my autotrade account?
We will trade up to $125,000 in the autotrade accounts.
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.
How does the MCTO Team diversify their own portfolios?
Monthly Cash Thru Options LLC, which services the retail client that has $125k or less to invest, offers four strategies that can help an investor diversify an investment portfolio. These strategies can be either self-managed or autotraded.
Because we are not registered investment advisors (RIA), we are not licensed to provide investment advice.
For our own personal accounts, just as a general guide, we allocate our own portfolios as follows:
First, we decide what percent of our total investable cash we want to allocated to a single strategy, such as Small Cap Momentum, as an example. We follow a general rule of not investing more than 25% of our total investable cash into any single strategy.
For our own accounts, we tend to keep 25% of our total investable cash as liquid cash in our accounts.
Next, for our own portfolios, for each strategy that we are using, we allocate 4% to 5% of the strategy’s portfolio to each position.
For more guidance on how to allocate your portfolio to specific investment strategies it’s recommended to contact a registered investment advisor for their professional opinion.
I already have a financial advisor. Why do I need your services?
Registered investment advisors (RIA) offer value by offering myriad services while managing 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 portfolio management, thus they usually don’t follow strict exit rules and are slow to exit investments when they start to show fatigue or demonstrate valid exit triggers.
Because some RIAs understand that they are not well trained or experienced in 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 pay higher fees because the RIA and 3rd party investment manager will be splitting the fees.
For the RIAs that manage the assets themselves, they 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 or follow strict exit rules, they will be slow to react to any sell signs that a stock, index or ETF may be exhibiting.
With the above said, it’s best to continue to use an RIA and have them manage a certain % of your assets.
The MCTO team comprises experienced traders that are expert technicians, we monitor macro-level market-timing indicators to modulate exposure levels, we know when certain investments are flashing “yellow” or “red”, and we follow strict exit rules and know how to get out of positions quickly when sell-signals are triggered. All of this 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.
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.
The analysis that we perform weekly is available for FREE and can be downloaded here.
For additional information on the analysis that we perform please go to Education -> Learning Center Macro & Technical Analysis
My financial advisor never pushed me to get out of stocks during the last downturn and I lost a lot of money. Is your firm different?
Our traders are trained to be fast moving and to get out of positions quickly when our exit rules are triggered. We follow strict entry and exit rules for all holdings. If the market starts to become unhealthy, we will usually see it a week or two in advance through our stock holdings, and our exit rules will trigger us to close positions in incremental fashion. If a chart starts to look unhealthy we’ll know it, because we are expert technicians, and we’ll most likely be out of that position before our loss gets much greater than 7%, for an individual stock. We also monitor the macros of the US economy (major indexes, bonds, economic data, breadth) along with Europe and Asia, which provides us visibility into “storms” developing, where we are quick to reduce 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, financial advisors are not trained like active portfolio managers or market technicians, and they move slowly. When the market gets volatile, or if a position starts to roll over, they will usually just say, “let’s hold on because the market (or stock) will eventually come back”. Unfortunately, we know what happened in 2008 where most portfolios where cut in half, and some were down as much as 70%.
What differentiates MCTO’s strategies from other managed products?
Below is a summary of how we are different, specific to the Small & Mid Cap Growth, Sector Rotation and Contrarian Strategies:
1) Our strategies blend technical, fundamental and factor-based 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 as autotrade where it’s easy to setup an autotrade rule through a participating broker to get started.
5) We follow strict exit rules and don’t hold positions with the hope that they will bounce back. Case in point, our strategies went from 70% allocated down to 15% allocated in the 5 days prior to the Oct 10, 2018 correction. Our stock holdings started to trigger exits, so we were exiting trades rapidly over a 5 day period as dictated by our strict exit rules. This allowed us to mostly go to cash just prior to the correction and to lock in our gains.
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 a portfolio that holds ETFs like the SPY that tracks the broad S&P500 index will make money.
However, as we head into 2019 the market is going to become more difficult to navigate as the Federal Reserve continues to raise interest rates, and fiscal stimulus from the corporate tax cuts begin to wear off. Broad based indexes probably will under perform in 2019. The Fed’s interest rate hikes will most likely slow the US economy to sub 2% growth by late 2019. There is a moderate to high probability that the US economy will go into a recession in 2020, which will cut most portfolios by 40% to 50%. Be aware that the stock market is forward looking so stocks will start to have a higher frequency of volatile trading and strong corrections up to 9 months prior to a recession, so portfolios can get hurt many months prior to the start of the actual recession.
As we head into 2019 where the Fed continues to raise interest rates, it will be less optimum to “buy the market” by holding broad indexes and ETFs and better to focus on specific stocks within specific industries. That is, stock picking and nimble long/short strategies will most likely outperform the broad markets in 2019. Moreover, investors that follow strict exit rules will better control downside risk and protect capital. It’s never recommended to “just hold on because we think it’s going to come back”. We know what happened in 2008 where most accounts lost 50% of their value. Having strict exit rules and an understanding of where and how to execute the exits is imperative to locking in gains and preserving capital.
The MCTO traders pick stocks leveraging a proprietary 4- level scanner. Once we hold a position we follow strict exit rules, are quick to move to cash when the technicals trigger exits, and because we are long/short we can dynamically allocate more to bearish trades when the charts and indicators warrant it.
How much money do I need to get started with the MCTO strategies?
For the iron condor strategy for autotrading you can start with $6500. For the other MCTO strategies for autotrade the minimum is $10,000.
Is MCTO a Registered Investment Advisor?
MCTO is not a registered investment advisor (RIA). We are not registered or licensed to provide financial investment advice.
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.
What is a long/short strategy?
A long/short strategy 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 UP and DOWN markets. Several of the MCTO strategies are long/short.