Really Smart Doing Dumb Things
Brad Gwilliam still remembers the moment decades of work crystallized into a single sentence, spoken not in a boardroom, but in a Phoenix hospital room. A family friend’s son had just survived a serious cliff-jumping accident, and as his worried mother pleaded with him to stop taking risks, he looked at her and said, “Don’t worry, Mom. I’m really smart doing dumb things.” Gwilliam smiled, but the line stuck. It sounded exactly like many investors he’s built his career serving: successful people whose wealth is often tied to one stock or a small handful of them. Watts Gwilliam’s mission, he says, isn’t to scold those decisions; it’s to help clients keep participating in what they believe in, but with smarter guardrails.
Complex Challenges Igniting a Clear Mission
Early in his career at Merrill Lynch, Gwilliam received a call from an Intel employee abroad with a complex stock-option question involving Incentive Stock Option (ISO) exercise mechanics and potential Alternative Minimum Tax (AMT) exposure. The opportunity was initially dismissed internally, but Gwilliam kept digging—calling CPAs until he found an approach that worked. Working alongside Jeff and Dave Watts, who were also beginning to focus on corporate executives, the team leaned into what became a defining niche: helping clients manage concentrated stock risk. That early work ultimately led to being assigned the Intel stock option plan locally and laid the groundwork for Watts Gwilliam’s active, highly tailored options-overlay approach.
In 2004, Merrill Lynch informed Gwilliam and his partners that a costly trade error had occurred on an options transaction tied to one of their largest relationships. The issue wasn’t on their end, but they were told the size and complexity of the options activity had grown beyond what the firm could comfortably support. That conversation opened the door to something Gwilliam had long envisioned: independence. “I always wanted to have my own firm,” he reflects. Leaving Merrill wasn’t about dissatisfaction; it was about creating a boutique practice with the freedom to innovate and serve clients without constraints. Today, that vision thrives at Watts Gwilliam and Company, managing over $1 billion with a client-first approach.
Billion Dollar Boutique
“At one time, we were going to change our firm name, but one thing that stuck out to the clients when we surveyed them was that it felt like they had a trusted family member in the business,” Gwilliam said. So, instead of changing the name and adopting a more traditional wirehouse-style identity as the firm grew, Watts Gwilliam leaned into what made them distinctive in the first place. They ditched the suit and tie look, designed their conference room to feel more like a home than a boardroom, and built a team with a family-like culture, including welcoming the next generation into the firm. Over time, that focus has helped the firm maintain low employee turnover and remain boutique, despite its rapid asset growth in the last few years.
Company culture and client happiness set the tone for Watts Gwilliam, but the firm’s investment approach is rooted in deep experience with markets, volatility, and options. Going back to his childhood, Gwilliam recalls his grandfather had a seat on the Philadelphia Stock Exchange. Later, Gwilliam worked as a mutual fund wholesaler while finishing college. When he started at Merrill Lynch alongside David and Jeff, the team had a vision beyond their peers. Their entrepreneurial spirit drove them to find a niche in stock option plans, which eventually led to their covered call option overlay strategies and the formation of Watts Gwilliam as an independent firm.
SPY Optic Strategy
Around the time the company was founded in 2004, Watts Gwilliam began developing what would later become their SPY Optic Strategy – the precursor and basis for the Option Overlay Strategy. Unlike traditional rules-based, buy-write option overlay strategies, Watts Gwilliam’s approach is highly active, using technical analysis and proprietary signaling to time option sales and manage exposure. This allows them to dynamically adjust option positions in response to changing market conditions, maximizing premium capture while carefully managing risk and volatility.
The team was born as covered call writers, where clients typically owned a stock that they never wanted to sell. However, Gwilliam’s tactics are slightly different from many strategies. “We don’t sell options with the anticipation that we’re just going to sell the stock, cap it out, or get called away. We use charting and technicals to identify the best entry and exit times, leading to less risk of getting buried in short calls during bull markets.” The strategy is not fully automated; signals are generated algorithmically, but human discretion still plays a key role in execution.
Underscoring their edge, Gwilliam said, “We cannot change the nature of how a covered call works, but we definitely position our clients for more upside, and our numbers and performance back it up.” While the SPY Optic strategy appears straightforward—owning the S&P and selling options against it—its distinction from competitors lies in the precision of timing and strike selection, where expertise makes all the difference. Further adding that they have “consistently outperformed the CBOE BuyWrite Index (BXM) over most time periods.”
The Fund
Watts Gwilliam’s Option Overlay Strategy – available through the Galaxy Plus Hedge Fund LLC – Watts Gwilliam Option Overlay Fund (110) – is a sister strategy to the SPY Optic. The fund seeks to provide investors with exposure to the S&P, layering in single-name covered calls to monetize higher volatility, while adding strategic put buying, when necessary, on the index as the primary hedging tool.
The approach is fundamentally a covered call strategy, but with a tactical twist. The program seeks S&P-like exposure by investing in a diversified portfolio of highly liquid S&P constituents and ETFs, then enhances risk management through an options overlay, including covered calls (primarily on individual stocks), index options, and timely put buying. Put buying, the primary hedge tool, is not maintained constantly, but used strategically to “smooth the ride,” not eliminate equity risk. In essence, the fund still owns the market, but Gwilliam adds, “Rather than selling options against an index, we sell options against the underlying components, especially those with the best optionality, where we have a history and a track record of selling these strategies against.” To avoid writing options across all 500 holdings of the S&P, the team sells index options against any remaining exposure not overlaid with single-name calls.
A Smoother Ride
Option-income products tied to single stocks have grown in popularity, and many of them follow rules-based call-writing approaches that systematically trade away upside in exchange for yield. Watts Gwilliam’s approach is more tactical—focused on strike selection and timing—with the objective of staying meaningfully invested in equities while working to reduce the magnitude of major drawdowns. As Gwilliam puts it, “I don’t want them to own the BXM—I want to beat it.”
Their actively managed overlay strategy can deliver positive cash flow on many of the same underlying holdings as the single-stock ETF option overlays. The advantage is clear: during an approximately six-week period when a major tech stock nearly doubled, Watts Gwilliam not only preserved upside but also generated additional income through tactical call writing—providing clients with premium yield on top of the stock’s performance.
Risk Management that Supports Long-Term Success
“Win more by losing less” is not necessarily a novel concept, but one that requires discipline, experience, and a specialized approach when seeking to perform well in positive markets while aiming to improve relative outcomes in modest and down markets. A key part of this philosophy is managing drawdowns and seeking to reduce the depth and duration of losses during market corrections. By actively managing risk through option overlays and strategic hedging, Watts Gwilliam aims to preserve capital when volatility spikes, striving to create a smoother path for long-term compounding and helping clients stay invested with confidence.
Many of Watts Gwilliam’s clients, particularly early-on, come from stock option plans and other concentrated stock situations, or have portfolios heavily weighted toward a handful of high-performing S&P 500 names. In recent years, some clients have expressed concern about unusual market behavior, with a few describing it as ‘bubble-ish.’ Gwilliam emphasizes the importance of risk management through option overlay strategies, particularly when portfolios are dominated by a small number of stocks.
To avoid over-reliance on the S&P delivering returns year after year, Gwilliam meets each client in the wealth management practice with a unique approach to address their needs. Some investors might be diversified across multiple asset classes, some might just own the S&P, and others only own a select handful of the S&P. To best address overallocation, Gwilliam says, “If you’re going to ride a motorcycle, let’s put a helmet on. If you’re going to drive a race car, let’s put a seatbelt on.” The goal is to help clients be ‘smart doing dumb things’—maintaining participation in the market’s leading companies, but in a more risk-managed way.
Guardrails Built From Experience
From Gwilliam’s early experiences solving complex stock option challenges to the firm’s evolution into a billion-dollar boutique, their mission has remained constant: deliver client-focused, actively managed strategies that enhance participation while managing downside risk. Their option overlay approach, refined over decades, is designed to seek a smoother return path, maintain meaningful upside participation, and generate option premium—helping clients pursue long-term goals with greater confidence. In a market environment that often feels unpredictable, Watts Gwilliam continues to bring discipline and a personal touch that reflects the trusted family ethos at the center of their culture. Ultimately, they help investors do what they’ve always done—just more prudently and with guardrails built from experience.