At Master Trader, we trade stocks, futures, and options using our objective approach, and which applies to all time frames.
Read the below analysis with a chart that explains in detail a recent 0 DTE Income trade for subscribers of our Weekly Options Trader.
The Advisory Swing and Options letter focus is long or short stocks using Master Trader Strategies (MTS). Call or put options are also used for when the options are liquid.
We purchase options and spreads as Directional trades to profit from our directional bias with a higher probability of profit and less capital requirement.
We also sell options and spreads as Income trades where we profit through time decay. We prefer selling short-term expiring options to collect our money more quickly and avoid gap risk.
Selling options/spreads that expire in hours is perfect for this!
Below is a recent Income Option Trade by selling a credit spread on option expiration day – one of our favorite strategies!
Master Trader Tip: Selling options on Gaps, earnings, Index ETFs, and FAANG and other high-volatility stocks is an excellent Income Strategy to collect $$ for predicting a short-term high or low for a few hours!
Below is a daily Chart Amazon.com Inc. (AMZN):
We have specific criteria for trading 0 DTE (i.e., 0 days to expiration) short option Income trades along with the daily and intra-day Setup.
In short, 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, as with AMZN.
To learn our 7-step process for trading gaps of anything that moves, please see Master Trader Advanced Gap Strategies
Notice the daily chart of AMZN had a nice +Gap and rally on 12/7 but stalled at resistance and was unable to trade above the day’s high. This was followed by multiple bars going sideways with lower highs and Topping Tails (TT).
The price action suggested a tradable short-term top, particularly for 0 DTE trades and the intra-day price action shown below.
Below is a 15-Min. Chart Amazon.com Inc. (AMZN):
On 10/10, AMZN had a bullish gap (along with the broader markets, not shown) as seen on this 15-Min. chart.
It gapped to resistance; however, it was not a pattern of interest for a 0 DTE trade until the close of the first 15-Min. candle.
It closed with a bearish Wide Range Bar (–WRB), negating the +Gap quickly, which is bearish, and confirming our bias of a short-term high suggested on the daily chart.
The multiple TTs on the daily chart (and the -WRB above) suggested that sellers were lurking above at resistance. AMZN was a compelling short under the low of that first candle for stock or bearish option strategies.
Once we observed the bearish price action, we then go through our Short Option/ Spread Checklist, shown here:
AMZN met our criteria and we recommended selling the $3560/3570 Call Spread for a credit of $.50/share.
Since one options contract represents 100 shares of the underlying, selling 10 contracts would generate $500 of premium being immediately deposited into your brokerage account.
That premium is pure profit if AMZN expires worthless below the short $3560 strike at expiration – a good bet using MTS (although we still close at pennies to avoid any post-market assignment risk, something taught in our option seminars).
We always choose out-of-the-money (OTM) short strikes to short since that is the bet we are taking: that for a few hours the short calls will not trade over resistance; and that short puts will not trade below support for bullish 0 DTE trades.
The pattern using MTS was a high-probability setup for a day trade short or the short call credit spread we did. The analysis is explained in nightly letter videos for subscribers.
What Puts the Options Trading Odds in Our Favor?
Selling options/spreads on stocks and ETFs on option expiration day is an excellent Income day trading strategy, particularly when stock or market volatility remains high.
We literally get Paid to call a top or bottom using MTS for a few hours after the market open!
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 half of the AMZN position at $.08/share into the rapid morning weakness, and closed half at $.02/share (to avoid any post-market risk as mentioned above), netting 90% of the Max Gain in a few hours, and eliminating any further risk in the position.
If you had sold 10 contracts, you would have made $450 (4.7% Return) – and AMZN could have still moved almost $70 against you after entry before hitting the short strike! That strategy doesn’t exist when trading stocks!
Get trades like these sent right to you and profit in the Markets!