Last week the broader markets traded in a narrow, choppy range, making directional trades more difficult.
Would you like to learn a strategy with an overwhelming likelihood of success -- even in choppy markets -- which involves selling options using our technical analysis of short-term reversal areas?
At Master Trader, we use an objective, rule-based approach to trading stocks, futures, cryptocurrencies, options – and, yes, in trading options.
Our Advisory Swing and Options Letter focuses on identifying high-probability long and short trades in stocks and options using Master Trader Strategies (MTS).
We buy call and put options as Directional trades when they are liquid as they provide us with leverage and limited risk.
One of our favorite income strategies is selling options and credit spreads around technical turning points. We profit from time decay, the underlying stock or ETF moving away from the reversal area, and volatility contraction.
Read about the Weekly Options Trader letter which sells options/spreads for weekly Income that expire in 10 days or less around Master Trader technical turning points, CLICK HERE.
Last week we had 100% success rate (10 for 10) in trades recommended in this letter (a slow, choppy, week which closed on a strong note), sporting a 93% success rate since May 1st.
Here are the cumulative summary results:
A Strategy to Profit by Predicting Turning Points in All Market Environment!
Let's review one of the 10 trades recommended last week to show you the simplicity of this strategy to generate weekly income using Master Trader Strategies (MTS).
Master Trader M-Top Reversals Are Great Patterns to Sell Calls/Spreads as Income Trades
Setup: Simply, APP broke out in late May and set up a continuation pattern in early June.
We then look at the option table to see how far away we get under support to sell a naked put or put spread (provided the options are liquid). We assess the premium received for the chart bias, days to expiration (DTE), and likelihood of it staying above the short strike by expiration, which is required for us to make maximum profit (i.e., the credit received).
APP was a bullish pattern so the odds of it staying above the $365 short strike seemed like a no-brainer.
We recommended buying a further out-of-the-money put to limit risk, and this is called a bull put credit spread. We sold the spread for $1.60/share.
Selling one contract would generate $160 being immediately deposited into your account; $1,600 for selling a 10-lot.
The premium received is not revenue as some options snake oil salespersons might lead you to believe. You have an obligation to purchase APP at the $365 strike price on or before expiration if the put buyer wants you to – which s/he won’t as long as it stays above $365.
As stated above, we profit from time decay, the underlying stock or ETF moving away from the reversal area, and volatility contraction. With our technical advantage, the odds are stacked on our side – as you can see with our results.
After entry, we are always in management mode, trailing pivot lows and monitoring price action with bar-by-bar analysis.
Profit: As you can see, the trade made $260 profit (15.5% return) in an easy-to-manage 2-day swing trade. Had you sold 10 put contracts (representing 1000 shares of the underlying) and followed our trade management, you would have made $1,300 profit (or the full $1,600 premium received if did nothing and let it expire worthless, which it did).
We sell options and spreads as Income trades where we profit through time decay and volatility contraction. To learn this Strategy, CLICK HERE
Conclusion
Master Trader Strategies (MTS): Learn our proven methods for high-probability trades in all market conditions!
We sell options/spreads around technical turning points and literally “get paid” to determine where a stock will not go in a short time.
Traders should add this strategy to their trading arsenal since the odds of profit – particularly after market mini-crashes -- are overwhelming high when they set up, like now.
Directional Swing and Options Trades daily in the Advisory Swing and Options Trader Letter.
Master these strategies and achieve consistent trading education and success.
Money Management for Trading and Investing
Proper money management for investing and Trading starts with position-sizing based on the amount of money you are willing to risk on a signal trade.
