High Premiums as the stock is highly volatile. Sounds pretty good to me—more free time and more money! If you trade too large with a small account, don't make the assumption that making or having more money in your account is magically going to make you a better trader. All the red circles here, these are spikes in implied volatility. If you do have technical expertise to time the markets, you can consider legging in and out of positions to maximize your returns. You want to be like them. Now we have to focus on the right strategy.
Options Trading Strategies for consistent monthly Income Posted on March 29, by admin I bet most of you when introduced to Options trading, imagined of creating a fortune through it in no time.
Day trading here I come
No one knows the future—if anyone did they would be even richer than Mr. So the insurance buying from big hedge funds is often precautionary and overdone. From the price managers are paying for these put options, in addition to some other factors, we can gauge what investors are expecting the market to move.
This measure is often referred to as volatility. The VIX , aka the fear index, is a measure of the volatility of the stock market as a whole. So what does this have to do with you? You can sell it to them. Just like the car insurance companies sell it to you. As I mentioned, through supply and demand options pricing can get out of whack. Here is how you take advantage of that. Implied volatility is way overdone. You sell a put option contract and collect some premium just like an insurance company would.
How does this work? This options contact expires within the next 30 days. In our analogy this is the equivalent of what happens when you crash your car and the insurance company pays to settle the claim.
Just like car insurers have a model to estimate how many people will place claims in a year you can estimate how many times you will lose a particular put selling trade. There are lots of strategies you can use to leverage the concepts I highlighted in this post. I do not suggest blindly copying what I do.
I suggest exploring different ideas and find the strategy that suits you best. Earlier I talked about selling put options on the SPY and collecting a premium—most likely selling to those sucker hedge funds: There is one downside to this approach.
The losses can be pretty big. Think about it this way: Selling a naked put option can be the same way. The more the market tanks the more you pay out.
Did you know insurance companies buy something called reinsurance? Your insurance company has an insurance company of its own. Your insurance company buys insurance to cap its losses. So if you total your car and your insurance company buys you a new car, its insurance company might be paying half of that bill.
So why not buy a form of reinsurance on your put option? To insure a naked put position I often buy a put option my own reinsurance further out of the money. This trade is called a put credit spread. By placing a put credit spread I am limiting my maximum loss, but I am also limiting my profit. I have to take out of my profits the cost of the put option I purchased.
I limit my losses by buying protective puts. My rule of thumb is this: Often this strategy works out to 2 trades a week. I have never seen a day trading strategy that does this well year after year. Though yes, day trading might beat this strategy for a few years. I had one very simple goal in this post: Most people do not succeed at day trading long term.
You can get wrapped up in the idea of big percentage gains month after month. But take a moment to do one simple exercise. Put all the gains you think you will make month after month day trading into a spreadsheet. Now look at the Forbes richest people list. Did any of them get rich day trading? If it was easy someone would have figured it out by now. This type of options trading only became possible for the retail investor in the last 5 to 10 years. I am not saying probability-based options trading will make you a billionaire.
What I am saying is the odds of long-term success are much more in your favor. I will add that there is a time and place for day trading. Day trading should be for a very small amount of your capital and mainly used to stay engaged in the market and have a little fun.
Join our newsletter today for free. You won't regret it! Day trading here I come People all over the internet claim to make riches day trading. Do you really want to be like this guy? How the most successful options traders trade As I said, some of the best options traders use probability and statistics to form a trading strategy.
Conclusion I had one very simple goal in this post: Here are some must reads. Like what you read? And I use it over various timeframes 2 , 3 and 5. This gives me a more accurate picture as to just how overbought or oversold SPY is during the short-term. A reading above 80 means the asset is overbought, below 20 means the asset is oversold. Just like my other high-probability strategies I will only make trades that make sense. As always, I allow trades to come to me and not force a trade just for the sake of making a trade.
I know this may sound obvious, but other services offer trades because they promise a specific number of trades on a weekly or monthly basis. In our case, we would use a bear call spread. A bear call spread works best when the market moves lower, but also works in a flat to slightly higher market. Remember, most of the traders using weeklys are speculators aiming for the fences. They want to take a small investment and make exponential returns.
If I lower my probability of success I can bring in even more premium, thereby increasing my return. It truly depends on how much risk you are willing to take. Take the Apr14 strike.
It has a probability of success Prob. And easily within the reach of regular investors. You can learn all about this safe, simple strategy — and the next three trades shaping up right now — by clicking this link here.
Slay your own dragon — Go here now.
Iron Condor vs Iron Butterfly
Learn To Trade Options To Make Monthly Income Learn to trade options in such a way that you make money irrespective of Nifty direction. It does not matter where Nifty goes - up or down or stays there - you will still make money. It takes 10 minutes to trade in a day. Details of the course is here. Click here to know the course fees. Generate Consistent Income Trading Options In this video, I'll lay out the complete framework for our system which can help you learn how to generate consistent income trading options. And the reality is that to become profitable you have to do just five things . Options trading is NOT monthly income generator. The fact that selling options brings credit to your account doesn’t mean that the credit is guaranteed to stay there. The fact that selling options brings credit to your account doesn’t mean that the credit is guaranteed to stay there.