Rethinking Portfolio Management

M1 Capital Management is a Bloomfield Hills, MI based money management firm, founded by former principals of thinkorswim Advisors. We specialize in risk reduced tactical investing, blending alternative and traditional strategies.

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Option Strategies

Option Overlay Platform

Our Option Overlay Platform is a defined risk, passively managed option investment strategy that is designed to generate income against the core portfolio assets. We attempt to deliver an "alpha" strategy that adds to the returns and dividend streams of the core investment portfolio by implementing a premium-selling option strategy based on time, probability of success, and implied volatility. It is important to understand that our option platform is NOT an active trading strategy. The goal is to generate income from the premium erosion of the short option positions, NOT from speculation regarding future option prices.


To generate income in client portfolios by "selling option premium" against the core assets in the portfolio.

The term, selling option premium, essentially means selling call and put options, or potentially both, depending on the client's objectives, to attempt to generate income against the long assets held in the portfolio.

Primary Drivers

  • Time
  • Probability of success
  • Implied option volatility
  • Implementation of a market neutral strategy without regard to market direction or market timing.

Success Factors

  • Our expertise: We believe the best way to build and successfully implement our option overlay platform over time is to rely on the time erosion component of an option contract, which is that the time value of an option goes to zero at expiration. The time value of the option contract, or extrinsic value, is the primary way M1 Capital attempts to generate income against the securities held in the long portfolio.
  • Risk and Opportunity Costs: The easiest way to understand the risk/return profile, or opportunity costs, is that our option overlay strategies can limit the upside gains on securities where an option strategy is applied. For some portfolios the strategy also takes on the risk of acquiring assets at lower price levels, which, if acquired would have the same risk/reward characteristics as any long position that falls in price.
  • Portfolio Rebalancing: The option overlay strategies are very similar to portfolio rebalancing with an income stream built in. We believe that adding this strategy to our Tactical Asset Allocation model sets M1 Capital apart from our competitors.
  • Generating Alpha: In our opinion, the option overlay strategies offer clients the best way to add "alpha" to their portfolio, so returns are not completely dependent on rising asset prices. In cycles where the long securities move in a range bound manner, the income stream generated from the short option positions may serve to add alpha to the investment portfolio over time.

At M1 Capital, we believe very strongly that our option overlay strategies are an excellent trade off of risk and return for a long term investment model that seeks to generate income against the long portfolio holdings. Also, for some clients, the option overlay strategies provide a logical way to potentially purchase assets at lower, pre-determined price levels based on their risk/return objectives. At M1 Capital, providing our clients with transparency and a complete understanding of the risk/return characteristics of the option overlay platform is essential to us. We attempt to achieve transparency by supporting our clients with in depth consultation and education to make sure the option overlay strategies fit the risk/return objectives of our clients.