August 19, 2017

Sell in May and Go Away? Sell Credit Spreads

The seasonal winds are upon us. And as a seller of various options strategies I couldn’t be happier. The seasonally-weak period, better known as “Sell in May and Go Away”, is the perfect time to use various options selling strategies. My preferred strategies, particularly for smaller accounts, are credit spreads, specifically vertical spreads and iron condors.

Trading has been rather slow over the past month so I expect to see significantly more trading opportunities ahead. In fact, I will most likely place a few trades over the coming days. Stay tuned.

Right now I’m keeping my eye on Real Estate (IYR) , Utilities (XLU) and Silver (SLV). But it’s the S&P 500 (SPY) that I’m most interested in at the moment. Even though SPY hasn’t quite reached an overbought state, I’m still inclined to sell a few bear call spreads on the ETF. Trading near highs with strong seasonal weakness ahead gives me the confidence an out-of-the-money bear call spread would work well. A June SPY 195/197 bear call spread looks interesting. The trade has a 88.07% probability of success with a return of 17.7% over the next 50 days.

Of course, I would love to see another advance by SPY  tomorrow. An increase would push SPY into a short-term overbought state, increasing the chances for a reversion to the mean. More importantly, it would allow me to most likely sell a bear call spread at a higher strike. Subscribers, as always, I’ll keep you abreast of any trades, etc. Stay tuned.

If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days.

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