How should options strategies be allocated within a portfolio?

ProfitVision LAB's recommended asset-allocation framework: (1) Core holdings (40–50%): ETFs or broad indexes, providing market beta; (2) Options strategies (30–40%): income strategies such as Bull Put Spreads / PMCC, generating monthly cash flow; (3) Cash and hedges (10–20%): retained liquidity to add positions during sharp market pullbacks. Adjust the ratios to your personal risk tolerance.

How do options strategies help reduce overall portfolio risk?

The defensive role of options strategies: (1) Selling puts lets you wait for entry below your desired buy price while collecting time value; (2) Covered calls / PMCC continuously lower your cost basis while you hold shares; (3) Setting a clear position cap (≤5% Risk Unit per trade) ensures no single loss threatens the survival of the overall account.

How do you size positions to match your own risk tolerance?

Use the '5% Risk Unit' method: the maximum loss per trade should be ≤5% of total capital. For example, with $50,000 in total capital, the maximum loss per trade should be ≤$2,500. For a Bull Put Spread with a $5 strike-width, if the maximum loss is $500 per contract, you can open at most 5 contracts ($2,500 ÷ $500). Enforce this strictly, and never enlarge a position just because you're bullish on a particular name.

When I Started Choosing Core Assets With Alpha, Not With a Feeling

Trading System SOP Asset Allocation Framework Asset Allocation · Alpha Stock Selection · Long-Term Holding

When I Started Choosing Core Assets With Alpha, Not With a Feeling

2026.02.02 | Shiba the Disciplined, Ben

Personal Memo

This article isn't about sharing performance, and it isn't trying to convince anyone of anything. It's just a memo I'm leaving for my future self — the real danger was never market volatility, it's forgetting why I made a certain choice once conditions change.

What Is My Real Goal, Actually?

For the overall account's NAV to grow upward steadily and bearably over a long period. It's not about maximizing any single return — it's about satisfying these three conditions at the same time:

Volatility can't be so high that it makes me change strategy

A sharp drop can't force me to sell other assets

Long-term compounding can't be repeatedly wrecked by drawdowns

Why Reexamine VOO / VOOG / VONG / SPMO?

I used to intuitively assume: a momentum strategy (SPMO) should be the core with the highest growth efficiency; high-dividend assets are "conservative"; growth ETFs are just a supplement.

But once I pulled the lens back from "a single asset" to "the overall account NAV," these intuitions started to crack. What I needed wasn't which name "feels stronger" — it's which one is genuinely stable and efficient within the overall account framework.

What "Factual Metrics" Did I Use to Reevaluate?

Setting intuition aside, I switched to four quantifiable factual metrics to systematically reexamine every candidate core asset:

Volatility

Which one makes the account's equity curve least smooth? Higher volatility means more pressure toward irrational decisions.

Long-Term Performance (CAGR)

Which one genuinely earns more across a complete cycle? Not a bull-market spike — a complete cycle.

Recovery Ability After a Sharp Drop

Which one recovers steadily after a drawdown? How smooth that recovery curve is determines the holding experience.

Alpha (Risk Efficiency)

Which one leaves the most net return for the "same amount of risk" taken on? The Sharpe Ratio is the key here.

The Conclusion the Data Gave Me (Not a Feeling)

Evaluating each of the four candidate core assets against the four factual metrics gives the following results:

SPMO

WARNING — NOT SUITED AS A CORE

Highest volatility, deepest max drawdown, least stable recovery, and a lower Sharpe Ratio. It runs fast in certain phases, but it drags down the quality of decisions across the overall account. It can only be a "style tilt," not a core.

VOOG

WATCH — A TACTICAL TOOL

Growth concentrated in mega-caps, strong bull-market punch, but volatility and drawdown expand right along with it. Suited for a tactical bet, not suited to carrying the job of stable overall-account growth.

VOO

BENCHMARK — THE MARKET ITSELF

Stable and predictable, but with no stylistic efficiency gain. It's the baseline for every evaluation, not the best solution.

VONG

RECOMMENDED — FIRST CHOICE FOR A CORE ASSET

Lower volatility than VOOG/SPMO, long-term annualized return that's nearly as good, a smooth recovery after sharp drops, and the best Sharpe Ratio and drawdown-adjusted return. It leaves the most net profit for the same amount of risk.

The One Fact I Finally Accepted

"The alpha that's actually valuable isn't the one that runs the fastest — it's the one that lets the account keep slowly growing even when I do nothing."

Conclusion: SPMO gets a small style-tilt allocation, not a core role. VONG becomes the long-term core, taking over the capital-carrying role once held by high-dividend assets.

This isn't a change of belief — it's starting to choose with a "system" instead of "expectation."

Core Asset Selection Criteria (Alpha Version)

Defining Alpha

The ability to leave the most net profit for the overall account NAV under the same amount of risk. Not a short-term excess return, and not a thematic windfall.

Four Thresholds

Volatility Threshold

Annualized volatility must not be significantly higher than the market (VOO), and must not amplify the overall account's VaR

Long-Term Performance Threshold

CAGR across a complete bull-bear cycle (8–10 years), must not rely solely on a single bull-market phase

Drawdown and Recovery Threshold

Maximum drawdown must not be significantly worse than the market, and the recovery curve must be smooth

Alpha (Risk Efficiency) Threshold

The Sharpe Ratio needs to be better than, or at least not worse than, the market

Role Grading

Core Asset Clears all four gates, eligible for long-term regular investment

Style-Tilt Asset Only wins on some metrics — treat its role as tactical, not permanent

Any asset that requires me to "talk myself into" continuing to hold it doesn't qualify to be a core.

A Note to My Future Self, for When I Waver

"The job of a core asset isn't to let me beat the market — it's to let me stay in the market long enough."

This isn't a feeling. This is a system.

When I Started Choosing Core Assets With Alpha, Not With a Feeling

When I Started Choosing Core Assets With Alpha, Not With a Feeling

What Is My Real Goal, Actually?

Why Reexamine VOO / VOOG / VONG / SPMO?

What "Factual Metrics" Did I Use to Reevaluate?

The Conclusion the Data Gave Me (Not a Feeling)

The One Fact I Finally Accepted

Core Asset Selection Criteria (Alpha Version)

📚 Further Reading