In this guide, we want to introduce you to the concept of the “lazy” options portfolio. This type of investment is characterized as being low-maintenance and capitalizing on repeatable strategies that generate small, steady returns over time. The lazy portfolio is a good option for busy professionals, side hustlers, or long-term investors who want passive income and aren’t interested in committing all their time to watching the markets and actively trading.
This article on lazy options portfolios will cover everything you need to know to get started if you’re interested in this form of long-term investing. Learn about the best investment vehicles that could make up your lazy portfolio, some of the best risk management strategies to use while investing, automation tips, and some advice on how to stay consistent while investing along this longer time horizon.
What Is a “Lazy” Options Portfolio?
While the term “lazy options portfolio” sounds like it’s reckless or uninformed, it’s a simplified and passive approach to options investing that takes a buy-and-hold approach that comes with very infrequent adjustments. The lazy options portfolio is a long-term investment strategy where investors look to reach their financial goals by focusing on low-cost options strategies that are well diversified. The lazy portfolio requires minimal active management, letting the investors become profitable with time without having to constantly monitor their positions.
Benefits of the Lazy Options Portfolio
Many potential investors are drawn to the lazy options portfolio due to their steady returns and the fact that they don’t require an active hand. It’s a way to invest without it draining your time and mental energy. You can make money from investing and not have to constantly check your positions and rebalance.
- Lower Stress—Less active management with the lazy options portfolio allows people to invest and enjoy returns with limited active management. For many traders or investors, this leads to an investment experience where they aren’t plagued by the constant onslaught of an active trading environment.
- Reduced Screen Time—Using a lazy options portfolio allows investors to reduce the amount of time they dedicate to monitoring their positions. They can set up their investments and only monitor them occasionally by reviewing metrics like tracking key dates for options or delta and then rebalancing the portfolio when necessary.
- Steady Returns—Because the lazy options portfolio is full of a diversified set of low-cost options that require little management, investors can enjoy steady returns using passive, money-making strategies like covered calls, cash-secured puts, LEAPS contracts, and ETF-based options.
The philosophy behind this kind of options portfolio is rooted in simplicity, consistency, and automation. It’s a great choice for traders or investors who want a “set it and forget it” kind of options experience with very minimal adjustments. These are investments that are likely to thrive in the long term and require little active management—this approach lets people invest but not waste a lot of their time and resources.
Core Components of a Lazy Portfolio
What makes up a lazy portfolio? We’ll cover four excellent investment strategies and techniques that are the core components of a well-rounded lazy portfolio including cash-secured puts, LEAPS, covered calls, and ETF-based options contracts. These are low-maintenance investments that can produce steady income and don’t require much active management.
Cash-Secured Puts | This strategy involves the trader selling a put option while also setting aside enough cash to buy the underlying stock if the put is assigned. The cash-secured put has some great monthly income potential from the premiums that traders can get from initiating the sale. It’s a low-maintenance trade that works perfect for the lazy options portfolio. |
Covered Calls | These investments are good for generating additional income without selling the stocks you hold. Covered calls deliver an enhanced yield on existing stock positions. Investors can collect premiums on the stocks they are holding long-term which lets them collect some passive income. |
LEAPS + Short Calls (Poor Man’s Covered Call) | This one involves buying a longer-dated, ITM call option and selling a shorter-dated, OTM call option on the same underlying stock. It requires less capital than the traditional covered call, but it is still semi-passive which means that traders don’t have to monitor it constantly. If stock prices go up, the long call option will appreciate and possibly offset any losses from the shorter call option. |
ETF-Based Options | These contracts let investors buy or sell calls and put options on underlying exchange-traded funds. They are good for lazy option portfolios because they have lower expense ratios compared to actively managed funds. This can lead to better returns over time due to lower fees and the power of compounding. Plus, they’re diversified and lower volatility with a few good examples being SPY, QQQ, and DIA. |
It’s also worth mentioning that there are investment vehicles like risk-managed credit spreads for more advanced “lazy” setups. These strategies are where investors buy and sell options of the same asset class on the same underlying security. Risk-managed credit spreads are designed to generate income and limit potential losses, though they’re a more advanced form of investing that might be one level above a lazy portfolio.
Automation Tools & Platforms
A huge feature of the lazy options portfolio is having some automated systems in place to semi-manage your portfolio, especially if you’re only checking on your investments each week or each month. Each broker app offers its own unique lineup of automation tools, but many of them carry similar products—you have to check from one broker to the next to see what’s available.
Broker Features to Automate Options Orders
Traders and investors who are looking to create a lazy portfolio and have the automated systems in place to run their business part of the time can find a lot of the tools they need at their online broker website or mobile app of choice.
GTC (Good Till Cancelled)
A type of order that investors can place to sell or buy a security that will stay active until the order is filled or until the investor cancels the order. A lot of these GTC orders are limited to 90 days—traders can keep the GTC order open for this length of time as per the online broker (on average).
Conditional Orders
Instructions to the broker app to execute a trade when certain conditions have been met. Trigger conditions would include volume, time, or price and then, once triggered, the conditional orders would transform into a standard order like markets, stops, or limits.
Portfolio Tracking
Software applications or services that are designed to monitor and manage your investments. Portfolio tracking tools allow investors to track performance and value. Notably, they offer automated management of multiple investment types like stock, bonds, and mutual funds. Traders can access portfolio tracking tools on platforms like Tastyworks, Thinkorswim, OptionStrat, and ThetaGang.
Rebalancing Tools
Options strategies that are used to adjust a portfolio to its original target risk and return criteria. Traders or investors can find rebalancing tools on trading platforms like Tastyworks, Thinkorswim, OptionStrat, and ThetaGang.
Alerts vs. Automation
Traders can set up alerts to be notified when their investments have reached certain price points, when there are significant events that would impact their investments like earnings reports, or when positions are nearing expiration. Trading alerts can be curated to each investor’s financial goals and trading criteria.
Using Google Sheets + API Plugins
A good way to monitor positions passively is to use these tools which set up a tracking system with specific headers, formatting, and data entry. Spreadsheets are a useful tool for tracking investments, job applications, and other tasks.
Sample Lazy Options Trading Schedule
How would a trading session work for someone who is taking the passive, long-term approach that comes from a lazy options portfolio? There are a few approaches that inventors can take including checking on their investments on a weekly or monthly basis. We’ll give you an idea with the example below of how someone with a lazy portfolio might manage their investments week-to-week or month-to-month.
Weekly or Monthly Routine
- Check Expiring Positions—The first step would be to check how close each of your positions is to their expiration date.
- Roll Forward Covered Calls or Puts—This move can let investors adjust their strategy without selling their underlying stock. Not only does rolling the covered call or put good for managing potential risks, but it can also help investors generate additional income and capture potential gains.
- Place Next Round of Trades—Once you’ve rolled the expiration dates on some positions to give them more time to become profitable or if you’ve closed out some positions to lock in a profit or minimize losses, you can begin looking at other positions to invest in—be sure that they align with your trading plan.
- Rebalance Allocation—If it’s needed, traders and investors might have to rebalance their positions to bring their portfolio back into alignment with their original target risk and return criteria.
Estimated Time Commitment: 30–60 minutes per week
It’s probably best to design a lazy portfolio that you check on a weekly basis because this timeframe can help you keep better on top of your investment. It’s possible to do this on a month-to-month timeframe, but we’d ultimately recommend the weekly plan. Traders can adjust their strategies based on market events and rebalance their portfolios much more effectively in this shorter timeframe. It takes around an hour of commitment each week or less!
Risk Management for the Passive Trader
Even though passive traders don’t have as much of an active hand in their trading and investing endeavors, it doesn’t mean that they can skip over risk management or proactive trading moves altogether. Check out the best ways to manage the risk associated with your investments but do so in a way that works with only occasional management of your positions.
Avoid Overleveraging
Passive traders will generally want to minimize risk by avoiding excessive debt and relying on the performance of the underlying asset. Most lazy portfolios are built on investments that are long-term and generate returns through appreciation and dividends, so there’s little chance that these kinds of investors will get to a place where they’re overleveraged.
Avoid Chasing Yield
Due to the long-term nature of the lazy options portfolio, investors will want to avoid chasing yield or taking on increased risk in the hope of achieving higher returns. This type of investment relies on playing the long game and building your portfolio incrementally over time.
Diversification Across Tickers and Strategies
Not only is it critical for long-term investors to place their money in multiple sectors of the economy and different asset classes, but it’s also important to diversify the strategies they use. Use LEAPS together with short calls for a lower capital commitment or use the traditional covered call if you have the money to do so. Check out cash-secured puts and EFT-based options as well.
Position Sizing and Capital Preservation
As is the case with any other kind of investment portfolio, it’s key for investors to use a conservative position size on each trade, with no more than 1-2% of their total capital allocated to each position. If you were to incur losses on your trades, there isn’t too much money at risk and you can move forward without being crippled financially. Small position size paired with diversified investments is the secret recipe to capital preservation.
Importance of Setting Alerts for Major Moves
Even though the lazy portfolio doesn’t need to be constantly monitored, it does need to be checked up on from time to time. This is where alerts and notifications come in, helping investors to know when the time is appropriate to make adjustments to their positions. These alerts can be set up to be present for significant events like gap downs or earnings announcements.
Example Portfolio Setup (Starter Template)
For this example portfolio, we’ll assume a starting capital total of $10,000 and show you which investments you should have as well as how much capital should be allocated to each sector of the portfolio.
- 40% in cash-secured puts on stable blue-chip stocks
- 30% in covered calls on ETFs like SPY or QQQ
- 20% in LEAPS with short calls (PMCC)
- 10% reserved for flexibility or reinvestment
Tips for Staying Consistent (Without Overthinking)
Consistency is the key ingredient to making a lazy options portfolio work. To keep consistent in your approach to investing in this passive manner, we’ve prepared a few tips to implement good practices into your investment routine. Many of these principles can apply to other forms of trading.
- Don’t Overtrade—Although using a lazy portfolio isn’t exciting and glamorous due to its predictable and steady trading style, it can keep investors away from overtrading that comes as a result of boredom for a lot of options traders. Sticking with a well-rounded array of money-making investments that build wealth over time can keep traders from taking on unnecessary risks or useless trades that don’t add anything of value.
- Set Rules and Stick to Them—Because you’ll only be managing your positions occasionally, it’s important to set up the rules and criteria for your portfolio ahead of time and stick with that approach until you need to change up your strategy or direction. Nail down a strike price, the premium threshold, and the expiration date you’d like to use. Adjust as needed.
- Use Templates—These refer to the pre-defined frameworks for trading strategies that work in a similar fashion to the pre-set settings in a software program. Using templates can provide long-term investors with a lazy portfolio with structure and consistency while they come up with a sound trading plan. They can be customized and reused later for different market conditions or underlying assets. Templates are excellent for helping traders stick with their plans and avoiding impulsive decisions.
- Have a Simple Tracking System—Long-term, passive investors can have a spreadsheet where they track all of the trading activity in their lazy portfolio or they can use an app to record how their trading endeavors have been going. It’s similar to keeping a trading journal where you monitor your progress and make necessary adjustments to improve.
Passive Doesn’t Mean Powerless
Although the name makes it sound like you’re unlikely to make money, the lazy options portfolio values the investor’s time and mental energy, focusing on some high-probability trades that bring in small profits over time with minimal effort and monitoring. The benefits of a lazy options portfolio ultimately lie in simplicity, automation, and time freedom. Consistent returns are possible without active trading!
We’d encourage you to explore more strategies or try a lazy setup using our favorite brokers who offer the tools you need to get started:
Try our Options Strategy Builder to map your ideal lazy portfolio setup in 60 seconds! You can enjoy consistent returns using the lazy portfolio and you don’t have to spend all day monitoring the market and staring at a screen, draining your mental energy. Passive doesn’t mean powerless—you’re simply trading smarter!
