There is one thing that all new options traders have in common…
Very few know about the importance of “the house odds”
And unfortunately for these new traders, it’s the house odds that drives options to be a highly lucrative instrument to trade on.
But of course, only if it’s used correctly!
Which means if you are looking to leverage this built-in edge, you need to learn the correct strategy to use!
I think it could be one of the most wanted strategies out there.
Who doesn’t like to know they get a steady paycheck every month just by trading options?
But you probably don’t believe me. I didn’t at first too…but I’m proving it’s all real, and highly lucrative – right here.
The kind of consistent cash that lets you easily pay down debts, obliterate most money worries and even secure yourself an early retirement.
It’s almost unfair once you know how to use this strategy.
Ready to learn how this strategy works and stop buying options forever?
Options Profit Planner For Steady Income
Remember, Options Profit Planner is a credit selling strategy instead of an options buying strategy.
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.
So what are these strategies?
- Credit Put Spreads
- Credit Call Spreads
- Credit Puts
- Covered Calls
What Is A Credit Spread Options Strategy?
A credit spread option strategy 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.
Let’s take a look at a sample trade on AAPL
Source: Thinkorswim
Where does this strategy shine?
Well, it really shines when you are getting implied volatility kicking up the markets.
Why is that? Because naturally the puts have more built-in benefits such as being higher premium than calls.
How do I place this trade?
It’s easy!
Simultaneously, I am buying an out of the money (OTM) put option and writing (selling) an OTM put option with a higher strike. 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 $711 or $7110, where I would collect $8.95 and pay $1.84 for downside protection.
The graph above does a good job of visualizing the trade.
The x-axis is the price of the AAPL on expiration. The y-axis is the profit based on the possible outcomes of the final AAPL price.
As a reminder, option pricing is the price of one share, but every contract is quoted in a multiple of 100 shares. So when the price of the option says $8.95 , it means that you will actually collect $895 per trade.
Only Fools Try To Guess The Market Direction
Meaning you don’t have to be 100% accurate with your timing or your market direction.
Even if AAPL drops from $114 to $110, you will actually still return a profit on this trade!
And you will generate returns all the way down to $105 where the breakeven on the trade is set.
Of course, I saved the best for last.
If the AAPL stays at or above $112.50, you will return 100% ROI compared to buying a stock, where you would only return 0% ROI for the same move.
So why do I like this style of trading so much?
Well, when you are collecting a premium or a credit, you only have to worry about an extreme move in the underlying stock instead of the day-to-day wiggles it does trading.
And this same strategy works on any stock, including the SPY!
In this example, I do not necessarily care if the price of the AAPL goes up, down, or sideways just a little bit. I just really care if the AAPL drops below it’s breakeven price where I will start to lose money.
I don’t need a crystal ball to tell me where the AAPL is going. I just need to make sure there are no major news events that could cause the stock to fall below my breakeven price that I set on my trade.
The Best Stocks To Trade Credit Spreads On
In this example I used the AAPL, which is one of the largest stocks in the markets.
But don’t think you need to trade only these stocks.
In fact, I trade many names you might never have heard of!
And I can place credit spread option trades on just any stock, but however, some are better than others.
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. For example, if you can buy an option for $1.00 but you can only write an option for $0.20 the math would not work out. 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
Trading Options And Collecting A Credit Is Key
Now do you see the power of trading a credit spread instead of a debit spread? I hope so!
There are many benefits of trading this type of strategy, like the ability to generate steady income, trading with the odds like a casino in your favor, and making money if the markets go up, down or sideways.
Personally, I find this strategy so liberating and stress-free to not have to constantly worry about the direction of the markets every time I want to trade.
And when trading credit spreads, you often can build a strategy where you can only lose in the case of a drastic or extremely large move in the underlying stock price.
So, are you ready to take the leap and start generating a second income for yourself in as little as 1 month?
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