June 27, 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 … [Read more...]

Trading Opportunities Ahead

Admittedly I haven't placed many trades over the past several weeks. Some may say that the more you trade the better. Increasing your sample size is the key to success. Trade small, trade often. In some cases, yes, but if you are only trading a limited amount of highly liquid ETFs I'm not so sure it makes sense. Wait for the set-up to come to you...don't force trades. And yes, while no one knows the destiny of the next move, why not allow pot odds to be on your side. But my "cash is a position" complacency is coming to an end this week. In my free weekend report I stated that I would be placing several new trades early this week for the December expiration cycle. Well, the time has come. Tomorrow I will be placing several credit … [Read more...]

Selling Junk to Speculators

I, along with many of you, am in the business of selling out-of-the-money credit spreads with a high-probability of success. Essentially, I sell junk to speculators. Take the following iron condor in Apple. An iron condor strategy is a non-directional options strategy that profits when the option on the underlying stock or ETF of your choice expires within your chosen range at expiration. The basic premise of the strategy is easier to understand in the chart below. But the key part, and the real advantage of this trade… You choose the price range of the trade. Increasing the range will decrease your potential profits, but will increase your likelihood of success. Recently, due to the increase in implied volatility in … [Read more...]