Most of the ETFs I follow for the High-Probability, Mean-Reversion indicator have pushed into an overbought to very overbought state. But, what is most interesting is the extreme overbought readings over the shortest of time frames I follow. For instance, readings in IWM and SPY are in the high 90′s…an extreme we don’t often see in the benchmark ETFs.
As a result, we are finding more and more opportunities for bear call spreads. The only downside is the low implied volatility., but one way to combat low volatility, particularly if you are expecting a quick fade of the current trend is to take use a bear call spread with a lower probability of success, say in the 60-70 range. This will allow you to bring in more premium and if a move to the downside happens to occur quickly, you can often take profits off the table equal to that of a far out-of-the-money bear call spread. This is the type of trade I discuss in great detail for my High-Probability, Mean-Reversion strategy. The other wonderful aspect of using this type of strategy is that your risk is defined at all times. So, knowing that your probability is a little lower than the typical 85%, you can adjust your risk accordingly.
If you haven’t emailed me about the upcoming release of my options strategy services, you can do so at crowderoptions(at)gmail.com. I still have a few spots available.