Please enjoy for two weeks 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 Apple Inc. (AAPL), $157.50.
Trade: Under $156.72, consider shorting Aug (8/25) $162.5/170 bear call spread (5 Days to Expiration (DTE)) for mid-point (closed at $.33/share). Implied Volatility Rank of 91% (meaning it has the highest volatility during past year 91% of prior days, making it an ideal option selling candidate).
Technical Setup: Losing momentum, with weakening broader markets. On the chart above, take note of the distance between the recent highs. They have become closer together, which signals that momentum has slowed. This pattern suggests that prices are unlikely to make a new high in the next 5 days and as it relates to our options trade, we want the price of AAPL to be below the $162.50 strike price at expiration 5 days from today.
+Option Strategy: Bear Call Credit Spread (BCS). Defined risk strategy where you make the maximum profit (net credit received) if the stock closes below the short call strike at expiration. We sell call strike price above resistance where the pattern suggests that the stock will not close above at expiry, and simultaneously purchase higher strike call than the one sold as a hedge and to reduce the margin.
The return on investment (ROI) is the credit received divided by the maximum loss (i.e., the width of strike prices less premium received). The break-even is the short strike price plus credit received (i.e., also your cost basis if assigned the stock).
Considered a mildly bearish strategy since we are not buying puts (or shorting stock) and just calling a short-term top 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 on a Call Spread: The Credit received. Cost basis if assigned is lower strike plus the Credit.
Stop Loss: $162.62.
Description of Master Trader Directional and Income Option Trades can be seen HERE
Above 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.
NOTE: Please see Master Trader Guidelines for Trading the Open and Gaps in Member’s Area for rules on trade entry, gaps, etc.
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 options 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.
