You are enjoying two complimentary weeks of Master Trader’s new Weekly Options Trader!
It is designed for the active trader wanting to generate weekly income from high probability short-term option selling.
Because of the ease of the strategy and statistical “edge” that exists in selling options around Master Trader’s compelling chart patterns, these trades are available in all market environments – trending, choppy, or even a volatile mess.
Below is a daily chart of Lockheed Martin Corporation (LMT), $308.17.
Trade: Over $308.20, consider shorting Sep (9/1) $305/300 bull put spread (3 DTE) for a limit of $.80/share (closed at $.95/share).
Technical Setup: Bullish Wide Range Bar (+WRB) from consolidation on daily chart, strong uptrend weekly and monthly, and bullish sector.
Option Strategy: Bull Put Credit Spread (BPS). Defined risk strategy where you make maximum profit (net credit received) if the stock closes above the short put strike at expiration. We sell put strike price below support where the pattern suggests that the stock will not close under at expiry, and simultaneously purchase lower strike put than the one sold as a hedge and to reduce margin.
The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices less premium received). The break-even is the higher strike price less credit received (i.e., also your cost basis if assigned the stock).
Considered a mildly bullish strategy since we are not buying calls or stock and just calling a short-term bottom in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time entry with the technical pattern.
Max Gain: Credit received. Cost basis if assigned is higher strike minus Credit.
Return: 19% ROI in three days if expires worthless over $305 short strike price ($.80 Premium/$4.20 Max Loss).
Stop Loss: $305.48.
Below is a link to individual videos explaining in greater detail the definitions of the main option trading strategies used in the Master Trader Option Strategies Series for Investors and Active Traders to generate wealth and income.
Description of Master Trader Directional and Income Option Trades can be seen HERE
Adjustments and Comments on Weekly Option Trades
8/21/17: AAPL – Shorted Aug (8/25) $162.5/170 bear call spread for $.30/share. Expired worthless for full profit.
8/23/17: SPY – Shorted Sep (9/1) $246/248 bear call spread for $.60/share. Note: Mid-point to close is $.32/share, so almost to 50% of Max Profit. Move stop loss to $245.52 to protect gains.
8/28/17: UN – Over $59.42, consider shorting Sep (9/1) $57.5 naked puts for a limit of $.25/share (closed at $.20 x .35/share). Note: We incorrectly suggested this trade as a weekly trade; however, the quote was for a Sep monthly expiration, so trade invalid.
8/28/17: NOW – Sold Sep (9/1) $115 naked calls and Sep (9/1) $105 naked puts for $.60/share. Stop Loss: $105.98 on downside; $114.02 on upside, close losing position.
Sign up for the Master Trader Weekly Options Trader here.
Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director of Master Trader
Pristine’s Founder and Creator of the Pristine Method
Dan Gibby
Chief Options Strategist
Follow Greg on Twitter, YouTube, and StockTwits to get real-time updates and education:
Twitter: @GregCapra
Stocktwits: Greg_Capra
youtube.com/c/mastertrader (please subscribe to receive all the timely stock market updates)
NOTE: Master Trader will show opening and closing prices of all stock and option trades. We do not recommend proper share size for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk.
NOTE: Master Trader and its representatives might have existing positions in these and other trade recommendations before or after suggested herein. Additionally, we often manage them differently for internal purposes based on different risk parameters than noted herein.
