How to Exit an Options Trade for Profit

//How to Exit an Options Trade for Profit

How to Exit an Options Trade for Profit

You’ll notice a common theme over my past few updates: How to profit in a volatile market.

The theme continues in my latest video. In this video I trade Amazon (AMZN) in real-time, to show investors that trade opportunities can still be found, even when the markets are selling off.

Video – How to take advantage of market volatility with options

In my video, I show how to trade options credit spreads – with the goal of grabbing profit in a short period of time. This is in contrast to having to try to guess the direction of the markets or a particular stock. Trading based on trying to determine a stock’s next big move can be costly and low probability. The high volatility and downward moves we have seen recently have made buying puts more expensive.

In this particular case, it’s been well-documented that Amazon has recently experienced large moves in price. I favored an options credit spread strategy that would help me take advantage of the current downward swing, and collect the premium decay in the call option that I sold. The idea is to place the trade at strikes that are out of the money. ( Far from where price is currently )

Click on the video to see how I entered the trade collecting $0.55 cents per contract of credit – which means I had the potential to make a maximum of $55 per contract if I held the trade until it expired, and the price of Amazon was below the strike of the call option that I sold. After I entered the trade, Amazon stock moved lower, which worked in my favor. I bought the spread back before expiration for $0.25 resulting in a $30 profit (per contract) … in less than one hour. By trading the call credit spread, I was able to make money as long as the stock price stayed below the strike of the call option that I sold. This strategy can work very effectively and quickly in down markets, especially for large stocks such as Amazon.

Free Webinar Recording – Trading SPY Options Every Week

If you want to learn more about short trading strategies, check out my latest webinar: Trading SPY Options Every Week

2018-10-30T11:37:19+00:00