One of my favorite strategies is selling premium. Whether the market is stagnant or volatile there are always opportunities to take care of time decay. Selling premium also provides insurance for other more speculative plays and can help bring in constant cash flow into one’s account. Starting next week, every week I am going to put out around 3 premium selling trades for the following week. Most likely I will sell index options on Friday (1 week before expiration) and then expiration week find individual stocks to sell premium. The target will be to make around 10-20% on each trade; so if the spread has a $1 width then I would aim to find spreads to sell for $.10-$.20. The trades will either be playing for a range or will be directional. Given that each trade will only have one week until expiration, time decay will be on our side, and given how far OTM the trades will be I expect most of the trades to be profitable. Given that the options will be OTM it will give us time throughout the trade to re-evaluate should the trade no longer offer a good chance of probability.
The reason the trades will be coming out on Friday is to take advantage of time decay over the weekend. Many time OTM options fall over 50% just by weekend time decay alone. These premium selling trades will be for Diamond + members exclusively. They will be posted on my private twitter and there will be a blog post every Friday to go over each trade.
While not every one of these trades will work out, by doing 3 per week, my plan is to keep stops on the positions at around $.50-$.75 which means that only 2/3 have to work out to be successful on the week. Given that each trade will only have a 10-20% chance of closing ITM (based on the deltas) I like the odds a lot. The way I trade these premium selling trades is by putting in small amounts of money, over time the profits will add up and there is no reason to bet big on one particular trade.
I am very excited to add this new strategy for Diamond + members as it is one of my favorites to put on in all market climates. If you would like to learn about other Diamond+ services please click this link. http://www.optionmillionaires.com/introduction-new-diamond-plus-service/. The private twitter for Diamond + is @GanikTrades. If you do not have a twitter, this will not be a problem, as the trades will be up on the Blog shortly after I place them with detailed explanations of each one.