Be Option Smart: Selling Options Is Where the Money Is
75% to 80% of options expire worthless. When you SELL them the odds are in your favor, but there’s MORE! You can use COMBINATIONS of options to limit your losses in Vertical Credit Spreads. When you have a 75 to 98% chance of winning the trade AND limit your losses by using option combinations – then you become the RISK SELLER rather than the RISK TAKER. Let the gunslinger traders take the high odds trades, and you learn how to sell them options and keep their money. You act a the HOUSE CASINO, not the GAMBLER.
Of course there is always some risk but — if you are willing not to be greedy, you can place trades that are 80% and more in your favor to win. There are always option traders willing to take on a great amount of risk in return for the chance (no matter how small) to get rich quick. When you learn to use strategies like the Vertical Credit Spread, and learn how to apply it to stocks, ETF’s, and Index – you learn to let the options time-decay put money in your pocket – time after time.
It is frustrating to make trades and then depend on swift moves in prices to provide you profits; with option spreads you can make money even if the underlying to up, down, or neutral. Learn to place the trades that are in your favor from the start; the profits are smaller per trade, but the odds of you making profits can be highly in your favor with these strategies.
In the diagram to right, VERTICAL BULL CREDIT SPREAD, this trade yielded 9% in only two-and-a-half weeks (41/459). Had you sold five of these spreads, you’d have made $205 profit – not bad wages for a few mouse clicks (or screen taps).
I was a hedge consultant for corporations for over 25 years; we supervised option trades that allowed my clients to mitigate price risk – and in return they could lock in prices and often collect even more profit by selling option risks to speculators. For every high risk trade a speculator places, knowing the odds are against him/her – there is someone on the other side of those trades. Learn to sell options to speculators and how to use strategies like option spreads to fix your risks on each trade; you know the probability of making money before you place the trade. There is no such thing as ‘risk free’ trading – but with selected option strategies you can mitigate a lot of the risk and make regular monthly income.
Non-directional passive trading is a technique professional traders use all the time. Here’s a link to an illustration and explanation of a Vertical Credit Spread at the Options Information Council website: OIC – Credit Spread (there is a free graph and text on this strategy there at OIC).
If you are a beginner to advanced stock option trader, please see my book listing; it’s a PLAYBOOK of the 30 most popular stock option strategies of all time here: OptionsExposedPlayBook
The book is full of illustrations and easy-to-read text for option beginner-to-advanced. Thank you.