Ok, here are my results from last week. Sorry for the delay, I had puking kids this weekend.
Last week I put up my basic criteria for trades. In case you missed it here it is again:
1. The short option strike price will be at least 1 Standard deviation from the underlying price of the index.
2. The spread size usually is $10.
3. The premium per contract is $0.40 minimum.
4. If the index is rising I will look to the put side, and conversely if the index is falling I will look to the call side for the spread to enter.
5. I will look at all the indices even if I find one spread that meets the above criteria.
Each trade below follows these criteria.
NDX 2425 Call $1.83 Cr
NDX 2450 Call $0.78 Dr This gives a $1.05 Net Credit for a 7.00% ROI
SPX 1300 Put $1.68 Cr
SPX 1290 Put $1.13 Dr This gives a $0.55 Net Credit for a 5.50% ROI
SPX 1315 Put $0.84 Cr
SPX 1305 Put $0.49 Dr This gives a $0.35 Net Credit for a 3.50% ROI
I realize the last spread does not get to 4.00% ROI, but following all my other guidelines this was the best I could get. Also the total committed capital gives me a 5.33% ROI so overall I am good.
I entered these trades last Wednesday after watching the market and charts. The trend in the NDX was declining while the SPX was slowly increasing. Using my contrarian view I entered the trades you see above.
QUESTIONS:
I have had a few questions left for me and I am seeing a pattern so here are some of those questions:
1. What trading platform do I use? I use Optionshouse. But any online broker will do. I use Optionshouse because the commissions are dirt cheap. If you like lots of tools or bunches of analytics Optionshouse is not for you (as you can probably tell buy now I do not get any endorsement $$ for mentioning my broker!!!) Their toolkit is limited to say the least. I like to do my own research and have other tools I can use. If you like tools then Think or Swim is the place for you. They have the biggest and to me the best tools. If you are a TD Ameritrade person … they are working on bridging the TOS platform to the TD platform so be patient.
2. Do you buy back your options before expiration? Not if I can help it. My goal is to let all my spreads expire worthless. Weeklies don’t often give the big movements to have the luxury of buying back the options before expiration.
3. Why do you use weekly options? I use weekly options because I can generate returns of 3-8% per week, making my trading capital work for me. Also I have fallen into a comfortable methodology of trading. This is key. I know other strategies and from time to time use them. But I make my bread and butter trading weekly vertical spreads. I know my analysis well, I have a good feel for how the weeklies operate and I am getting better at using the greeks on the weeklies. KNOW your strategy well and use it often and you will be on your way to successful trading.
4. How did you learn about weekly options? I learned of them in an Investtools seminar. Yes, I paid the outrageous amount for their master’s program. It is a good program and I learned tons on fundamental and technical analysis. Plus I learned a lot on the TOS platform. Good education program, but I think a bit overpriced. During a seminar the leader of the seminar said he was starting to use them and during each of the breaks I prodded him with questions. He even had to pawn me off on other presenters I was monopolizing his time. I started researching them after that and the rest as they say is history.
Well that is it for now. Any questions leave below or email at hashleycm@yahoo.com
TTFN
Ash
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