Our resident options experts, James Cordier and Michael Gross, answer readers’ questions.

Q: I’ve heard that by selling options with different expiration months, I can set up my portfolio to produce greater premium. Is this true?

A: ‘Staggering’ short options is a popular strategy with both income and total return investors. You might hear some comparing this strategy to building a bond or CD ‘ladder’, in which you have paper maturing in every month of the year. The strategies might be similar, although your option premium ladder will carry more risk and have the potential for higher returns. It is an important part of structuring your portfolio and can play a big role in its consistent performance.
Staggering or ‘layering’ your options is selling groups of options with different expiration months so that you have a certain amount of options expiring every month.
For instance, an investor wanting to stagger his portfolio might take the following approach.
Option premium ladder using staggering

Month 1 – Sell options 90 days out
Month 2 – Sell options 90 days out
Month 3 – Sell options 90 days out

Excerpted from an article originally published in the Nov/Dec 2011 issue of YourTradingEdge magazine. All rights reserved. © Copyright 2011, Your Media Edge Pty Ltd.
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