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 (bullish bets) or Put (bearish bets) 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 (Theta).
In this lesson, we are going to show you a few compelling Setups on Climactic stocks that were being dumped in fear and panic.
Using MTS, we sold far out-of-the-money (OTM) puts as Income trades – all highly profitable.
Selling Puts during these situations with the Charts is ideal since Volatility spikes on the put options because of the fear rampant at the time, generating a huge credit (i.e., the maximum potential profit). It is akin to an insurance company selling you home insurance with a Cat 5 Hurricane approaching.
Click below to see a VIDEO Review of Bitcoin USD (BTC-USD)
and Other Stocks:
All of the Setups on the stocks for the puts we sold during this panic are called Climactic Buy Setups (CBS).
A CBS is when the underlying falls rapidly in a fluid manner, getting way extended from the 20-MA (blue line).
We then look for a bullish reversal using MTS to sell the far out-of-the-money (OTM) Puts.
When stocks and ETFs get extended like this, it leaves what we call a Price Void (i.e., there is insignificant price resistance to the left for longs).
Master Trader Tip: CBS’ created by fear and panic are an excellent time to sell Put options and spreads using MTS. Volatility skyrockets during these fearful times and we receive huge premiums for the options sold which quickly turn into Profits as the stock stabilizes/bounces, Time Decay, and Volatility contraction.
The VIDEO discusses the trade Setups, Puts sold, and management strategy.
Remember that one options contract represents 100 shares of the underlying, so selling 10 contracts on these trades would generate huge premium being immediately deposited into your brokerage account.
That premium is pure profit if the stock expires worthless above the Short Strike in each case at expiration – a good bet using MTS Analysis.
The CBS is a counter-trend trade, which means we are trading against the trend but only when prices have become extended from overhead price resistance.
We sold expensive out-of-the-money options in this trade — a “No-Brainer” trade.
However, we could have also made a short-term Directional Options trade with liquid options.
The CBS patterns using MTS were very high-probability Setups. The analysis is explained in nightly letter videos for subscribers.
Once in a trade, we are in trade management mode, particularly important when selling options.
Management updates are sent intra-day by text message to subscribers.