Stocks were all over the place this week, as most major averages closed the week lower. With major earnings on the way, and the election around the corner, I expect to see a significant rise in market volatility.
Remember, investors hate uncertainty because it creates volatility.
However, traders thrive off it.
That’s why I am focused on trades with a defined edge.
I believe a perfect storm is brewing, creating an opportunity for a savvy options trader like myself to take advantage of MISPRICED OPTIONS.
To find these trades I’ll be using my favorite indicator, fractal energy.
As well as share with you a recent trade I had in TSLA, an earnings play which took advantage of the options mispricing.
Which I’ll teach you how to spot.
Here’s a look at just some of the earnings that were reported last week
And for me, this is one of my best strategies taking advantage of market volatility and options mispricing.
Now, it’s important to remember to be careful around earnings and trading options with higher levels of implied volatility can be risky.
But if you have an indicator that is designed to profit during high volatility, then you have an edge against the other traders
For example, TESLA (TSLA) is expected to report earnings on 10/21/2020. Many traders like to understand what the financial ratios and car sales would be expected. The key for me would be to look at price action
For the most part, TSLA has been respecting the Bollinger Bands over the course of the year, and has let me know where the support levels are. In turn, I’ll know where buyers are likely to step in.
So with TSLA, I’m looking at the Fractals combined with Bollinger Bands to determine where the buyers will likely step in. When the price action mixed with these two indicators start to show that the buyers are back in this stock, I will start looking for a place to sell bull put spreads on this stock.
You see, I can use these areas and indicators to look for price action where I can take advantage of the increased levels of implied volatility.
To execute this trade, I would like to leverage the power of short credit spreads, or bull put spreads. This means I will sell a put spread to profit on the high volatility of these options.
Over the weekend, I want to show you a few stocks with earnings coming up that I might be trading in the weeks ahead, so make sure you look out for the e-letter
Want more than just the research? Only members will get the trade alert when I actually place the trade
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I’ve never heard of a trader who wanted to make less money
And that is what I aim to do for every trade I take
You see… I want to be the casino with the house odds in my favor
Which is why I turn to different credit spreads every time I trade
By using this strategy I return 90%+ on almost every trade
But before you run out and trade this strategy, you need to hear these two tips
Let me explain…
This strategy is an options strategy involving trades in both the underlying stock and options contracts.
So, what is the purpose of a Covered Call Strategy?
And as an income-generating focused trader, I am always in the hunt for the perfect covered call opportunity.
Creating a covered call is a straightforward process once you understand the basics of options, and it’s done in 3 basic steps.
The 3 Steps To Creating A Covered Call:
The risk of a covered call comes from holding the stock position, which could drop in price.
Your maximum loss comes from the stock going to zero, but that is the same risk any stock trader that is unhedged would have.
Maximum Loss Per Share = Stock Entry Price – Option Premium Received
Unfortunately, there is a trade off to generating income with this strategy. Your profits are capped to the price of the options contract you sold.
Maximum Profit = ( Strike Price – Stock Entry Price) + Option Premium Received
Here is a quick example of how I would use a Covered Call spread on my trading
You might think this is a short put at first glance, but it’s not.
The possible outcomes:
My ideal outcome is actually to let the stock fall or stay within a specific range.
If the stock does this you can keep your stock and generate a considerable amount of income just by selling out the calls.
And if you maintain a covered call trading strategy, you could sell out calls almost every month on a single stock and generate trading income by simply owning the stock.
The main goal of the covered call is to collect income via options premium by selling calls against a stock that you currently own.
If the stock moves in any direction but not greater than the strike price, you are able to collect the premium and maintain your stock position.
Traders should factor in commission on this trade, and if the commissions are greater than your option you are selling, you might want to consider selecting a different option to sell.
Ever want to generate income outside of your daily job but don’t know where to start?
It’s ok – not many people do.
I turned to trading when I had that exact same question and started to trade options to generate income.
But I did not start selling options blindly – I turned to Fractals to guide me
So what is Fractal Energy, anyways?
It’s one of the two indicators that I use for steady and consistent profits!
And when I sell options combined with these indicators, I stack the odds of a win in my favor!
I’m talking about 93% in gains on my last trade
You see, in my opinion… it’s the simple way to generate steady and consistent income
And if you want an income stream you need to put this into action for yourself
This is how it’s done…
One thing I like about trading options is how a trader can create almost any strategy they want.
But many strategies aren’t for me.
You see, I want the ‘house odds’ on my side.
And that’s why I trade credit spreads.
I call it Fractal Energy and I never trade without it.
To cut down the work that I have to do every day, I only focus on stocks that meet qualifications set by the Fractal Energy Indicator.
To understand price action you need an indicator that is built for the job
Now – what are fractals?
The power of fractals allows me to determine the strength of trends and how much “life” is in a stock’s movement.
There are 2 main components of Fractal Energy:
Those two different components create a single indicator that is able to determine the strength or weakness of a trend on any stock.
Here is how it looks
It can’t be more clear
Fractal Energy signaled three of the recent market pivots many other indicators failed to recognize.
Here’s how the RSI looked for the same period
Now according to the RSI indicator, it signaled 1 out of 3 pivots compared with Fractal Energy.
This is when I search for income strategies instead of taking bets in the market to put the odds of success in my favor like the casinos do.
In order to generate income, I need a strategy built for the job… and that’s why I turn to credit spreads.
The Credit Put Spread is a neutral to bullish options trading strategy.
It aims to capitalize on both sideways or upward price movement of the asset and theta (time) decay.
What does that mean exactly?
Selling options means that you receive the cash upfront …
That’s right, you get paid to take that trade!
And there are many income trading strategies that are available to choose from, but these are my four favorite ones to use
The four main income strategies:
Option sellers take advantage of two main components in the option pricing model, time decay and implied volatility.
And when you trade Out-of-the-Money (OTM) options they are primarily priced based on extrinsic value.
It’s the extrinsic value that is calculated by time until expiration and implied volatility.
This means that the closer to expiration you get, both the expiration and implied volatility decreases.
We can take advantage and be the house with odds in our favor on every trade
Don’t forget that an option buyer needs to be right about direction and time!
Remember traders, there are many ways to make money in this market and selling options is one of my absolute favorite go-to strategies.
Fractals are the cornerstone of Energy Trader
When it comes to placing a trade I need an edge before risking my hard earned money.
So that’s why I I utilize a strategy of selling options or spreads to focus on generating a steady flow of income for my trading business.
But what’s extremely important to remember is that there is a strategy for both going long and short stocks that are available to you.
And unlike buying stocks or options, credit strategies give an unique advantage to the trader… and that means you are paid upfront to place a trade!
Ready to sign up and test this out for yourself?