Buying options is always a betting-mans strategy… and not one that I feel comfortable with when it comes to maintaining a steady income to provide for my family. Which is why I turned to my four favorite credit strategies to generate the income I demand each month. These credit strategies are specifically designed to target the moment of a stock based off of its Fractal Energy and technical indicators.
A credit spread option is when a trader takes two or more options and together, sells the total premium they produce to generate income. Now I know this may sound confusing, but let me explain the concept of how to write an options contract. Instead of buying puts or calls, you will actually want to trade 2 more more contracts for a net credit.
So, if you were to take a bullish bet on the markets, you could either buy a call, or sell a put spread. Since the higher strike is closer to being in the money ITM it sells for more money. Combining these trades I collect a credit of 3. Since you are simultaneously buying and selling two Out of the Money OTM contracts, this might sound strange at first.
The graph above does a good job of visualizing the trade. The x-axis is the price of the SPY on expiration. The y-axis is the profit based on the possible outcomes of the final SPY price. As a reminder, option pricing is the price of one share, but every contract is quoted in a multiple of shares.
Additional site navigation
One built in feature of trading a credit strategy like the one above is that you can make money in an up, down, or sideways market. Of course, I saved the best for last.
Well, when you are collecting a premium or a credit, you only have to worry about an extreme move in the underlying stock. In this example, I do not necessarily care if the price of the SPY goes up, down, or sideways just a little bit. We can place credit spread option trades on just any stock, but however, some are better than others. And when selecting an underlying stock, you want to make sure there is plenty of volume in the options markets, plus make sure they have great fundamentals in order to trade only healthy stocks. Just click here if you are not sure how to find what stocks have a great fundamental outlook.
Volume, often related to liquidity, is key to this type of trading. The main reason is without liquidity the gap between the bid and the asking price can be rather large. You really want the bid and ask prices to be very close together.
There are many reasons to select options contracts, if you are unsure just use this material to guide you in your selection process. Now I know the list above is short, but I need to only focus on a select few stocks in order to place trades, and let the fundamental screener take care of the rest of it. Now do you see the power of trading a credit spread instead of a debit spread?
Buy It Now. Add to cart.
The Options Trading Primer: Using Rules-Based Option Trades to Earn a Steady Income
Sold by thisand95 3 About this product Product Information Learn by stepping from options basics to advanced option strategies in this learn-by-doing tutorial and handy options strategy reference. The series of hands-on options trading activities explain how each of thirty-one option strategies work. Each activity guides readers through trade analysis, setup, entry, trade management, and possible outcomes. And each includes clarifying illustrations. Simply knowing how an option strategy works is not enough to enter a complex and often unpredictable market, because behind every option trade is an underlying stock, ETF, financial index, or future.
Like all successful option traders, you must understand the underlying market environment, chart analysis, trading tools, essential trading rules, and risk management techniques. There's also equipment, connectivity, online trading platforms, backup, watch lists, and price charts to consider. This book covers all of these topics and much more. Hence, it is "the only options book you'll ever need. Show More Show Less.
- closed end fund trading strategies.
- Option Income Strategies!
- Verify your identity;
- options and futures stocks?
- forex bengali translation.
- [WEBINAR] How to Earn a Steady Income with Spread Trading.
- forex margin?
No ratings or reviews yet No ratings or reviews yet. Be the first to write a review.
Best option strategy for steady income teacup strategy forex
Best Selling in Nonfiction See all. EUR Unmasked by Andy Ngo , Hardcover 5. Options as a Strategic Investment by Lawrence G.