Short Credit Spreads & Quick Profits
At Master Trader, we trade stocks, futures, and options using our objective approach, and which applies to all time frames.
The Advisory Swing and Options Letter focuses on long or short stocks and options using Master Trader Strategies (MTS).
Call or put options are also used for when the options are liquid.
We sell options and spreads as Income trades where we profit through time decay and volatility contraction.
Click below to see a VIDEO Review of three Income trades we gave to subscribers of the Master Trader Weekly Options Traders:
It reviews how we entered and managed them with the charts and took quick profits in one day.
All three involved trading gaps.
Each morning we scan for compelling gaps with a Price Void (a Void means there is insignificant price resistance to the left for longs) and enter based on the intra-day pattern when it meets our bias.
Master Trader Tip: Gaps created by earnings reports are an excellent time to sell options. Volatility is higher during these times and we receive higher premiums for the options sold.
To learn our 7-step process for trading gaps of anything that moves, please see Master Trader Advanced Gap Strategies.
This gap could be traded intra-day for a day trade, but it was also an excellent gap setup for selling options for income.
Once we observed the bullish price action, and then go through our Short Option/Spread Checklist.
The premium received in each trade (one options contract represents 100 shares of the underlying) is pure profit if the stock expires worthless above the short strike at expiration – a good bet using MTS Gap Analysis.
The patterns using MTS were very high-probability setups. The analysis is explained in nightly letter videos for subscribers.
What Puts the Options Trading Odds in Our Favor?
We sell options/spreads around compelling patterns –- particularly on earnings or stocks in the news when volatility remains high – and literally “get paid” to determine where a stock will not go in a short time.
Once in a trade, we are in trade management mode, which is particularly important when selling options.
Management updates are sent intra-day by text message to subscribers.
We closed each of the short option trades into strength for a generous percent of the Max Gain in one day, and eliminating any further risk in the position.
All open and closed trades are documented in the subscriber member area. Intra-day, updates are texted to subscribers.
Nice trade!
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