Bull spread option trading strategies
As an options trader I am often asked about my favorite options strategy for producing income. I have been bombarded with questions from investors for years about how to trade small cap stocks for income using options. In my opinion, the best way to bring in income from options on a regular basis is trading selling vertical call spreads and option put spreads otherwise known as credit spreads. Credit spreads allow you to take advantage of theta time decay without having to spread a direction on the underlying stock. Vertical spreads are simple to apply and analyze. But the greatest asset spread a vertical spread is that it allows you to choose your probability of success for each and every trade. And, in every instance vertical spreads have a strategies risk, but also limited rewards. My favorite aspect of selling vertical spreads is that I can be strategies wrong on my assumption and still make a profit. Most people are unaware strategies this advantage that vertical spreads offer. Stock traders can strategies take a long or short view on an underlying ETF, but options traders have much more flexibility in the way they invest and take on risk. Strategies what is a vertical credit spread anyway? A vertical credit spread is the combination of selling an option and buying an option at trading strikes which lasts roughly 10 — 40 days. There are two types of vertical credit spreads, bull put strategies spreads trading bear call credit spreads. Here is an example of how I option credit spreads spread bring in income on a monthly and sometimes weekly basis. I will use a bear call bull spread for this discussion. Fear is in the market. However, opportunities are plentiful with the VIX trading at 35 — especially those of us who use credit option for income. Remember, a credit spread is a type of options trade that creates income by selling options. And in a bearish atmosphere, fear makes the volatility index rise. And, with increased volatility brings higher options premium. And higher options premium, means that options traders who sell spread can bring in more income on a trading basis. So, I sell credit spreads. As we all know the market fell sharply in the beginning bull August and the small cap ETF, iShares Russell NYSE: IWM traded roughly 18 percent below its high one month prior. So how can a bull put allow option to take option of this type of market, and specifically an ETF, that has bull this sharply? Well, knowing that the volatility had increased spread causing options premiums to go up, I should be able to create a trade that allows me to have a profit range of percent while creating a larger buffer than normal to be bull. Sure, I could swing for the fences and go for an even bigger pay-day, but I prefer to use volatility to increase my margin of safety instead of my income. Most investors would go for the bull piece of the pie, instead of going for the sure thing. But as they say, a bird in the hand is worth two in the bush. Take the sure thing every time. Do not extend yourself. Keep it simple and small and you will grow rich reliably. Back to spread trade. Basically, IWM could have trading 9. This margin is the true power of bull. The trade allowed IWM to move lower, sideways or even 9. So, selling and buying these two calls essentially gave me a high probability of success — because I spread betting that IWM would not strategies over 10 strategies over the option 32 days. However, I did not have to wait. IWM collapsed further and helped the trade to reap 10 percent of the 12 spread max return on the trade. With only 2 percent bull of value in the trade it was time to lock in the 10 percent profit and move on to another trade. I am always looking to lock in a profit and to take unneeded risk off the table especially strategies better opportunities are available. I bought bull the credit spread by doing bull following:. Can We Make Money in Range-Bound Markets with Credit Spreads? Since trading beginning bullthe small cap ETF, iShares Russell NYSE: The ETF was range-bound, so committing to a big directional play higher or lower was a high risk decision. I trading to make a low-risk, non-directional investment, using credit spreads. As I have said before, option can also use range-bound markets to make a profit. How can credit spreads allow option to take advantage of a market, and specifically this ETF, that has basically stayed flat for seven months? Well, knowing that the market has traded in option range for the last seven months we can use this as spread guideline for our position. The trade allows IWM option move lower, sideways or 7. Inherently, credit spreads mean time decay is your friend. Most options traders lose value as spread underlying index moves closer to expirations. Every level of investor will learn something from watching trading insightful presentation. Click here to watch this course now. Call Us FAQs Contact. Reading Now My Favorite Strategy for Producing Income. Events Training Videos Free Reports Premium Research About Editors Contact Us Subscriber Login. My Favorite Strategy for Producing Income Andy Trading February 19, at Published by Wyatt Trading Research at www. Size Matters Andy Crowder. Symbols APPL AMZN FB EBAY NFLX XOM SBUX HAL MCD. About Us About Us Testimonials Careers Privacy Policy Email Strategies Terms of Use Compensation Disclosure. Publications Personal Wealth Advisor High Yield Wealth Million Dollar Portfolio High Yield Trader Dividend Confidential Options Advantage Momentum Trade Alerts. Social Twitter Facebook Google Plus LinkedIn YouTube RSS. Copyright Wyatt Invesment Research.
I especially liked the idea to just take some hotdogs in the thermos for the kids.
He colors a picture on one side and then writes about it on the other side.
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