In this video I am going to show you a weekly options trade entry secret on how to enter into a longer term option trade using weekly or nearer term options.
It’s one of my favorite option trade entry strategies that has limited risk and big profit potential.
Too often option traders enter into trades at the market price and just accept that as being the price they have to take when placing the trade.
Guys we don’t have to do that!
What if I told you we could take a 50/50 shot and make a huge profit quickly.
And the best thing if the coin flip doesn’t go our way, we get a do over.
In this video, I’m going to show you:
- One of my favorite option trade entry strategies that has limited risk and big profit potential
- How To Place this Option Trade (Showing a real example on the option trading platform)
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Hey guys, Darren here. We have a great strategy for you here today.
I promise that we will dig into many different detailed option trading tips and tricks, and dive much deeper into options in future videos. So please do subscribe if you haven’t already.
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Also, be sure to download the FREE options Workshop in the link below.
It talks about the two main benefits of trading options over buying stocks.
DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.
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What is a trade entry strategy that can produce quick profits with limited risk?
Guys, we are talking about using nearer term options to enter a longer term option trade.
What is a nearer term or weekly option?
By weekly, does it mean it’s a weak option or position?
Noooo….
So let’s start with explaining weekly options versus regular options.
So if you are ready….go ahead and hit that like button and lets begin!
Go to your Tastytrade account or whichever platform you are using. By the way, Tastytrade is one of the best and most intuitive for trading options. I’ll put a link down below. Right now you can get up to $3000 when you fund an account.
Open up your app and let’s go to a company we all know and love by punching in COIN on the trade tab.
Now the option chains with the W by them are weekly options. You can see the number of days to expiration in the center. Now the weekly options are not as heavily traded as the regular options. So the higher volume of the regular options means they are more liquid. Therefore, we give up less in the difference between the bid and the ask spread.
Normally the sweet spot is closest to 45 DTE. However, we are going to open up the 9 day June 16 chain. This is technically not a weekly option and it is a regular option. However, at 9 DTE I’m normally rolling or closing at this point, so I’m only going a little over a week out. I’m going to take a shot on this one.
We click on the bid to sell the 48 Put and the ask to buy the 43 Put. We then scroll down and sell the call vertical. This makes the trade an Iron Condor. We just did a video explaining the Iron Condor in detail last week, so I’ll link to that one below if you missed it. If you are new to trading it explains the Iron Condor in detailed simple terms.
After selling the Put Vertical credit spread, we click on the bid to sell the 59 and ask to buy the 64. This is now the Call credit spread that we are selling.
Switch to the Curve mode.
We see that we are going to collect $2.01 upfront upon placing this trade. As long as the stock stays above the 48 and below the 59 strike price we keep the entire $2.01. Our max loss is $2.99 since we are $5 wide and collecting the $2.01. You just subtract the credit from the width of the spreads to get the max loss.
The best thing is this is all going to happen in just 9 days!
You can see from the chart, that at times, COIN normally trades in a fairly tight range. We just had a big drop since there was crypto regulatory news and a lawsuit. I do really respect the CEO Brian Armstrong and it does seem to me that he has just been looking for regulatory approval from SEC and now they are going after him.
This is related to Bitcoin and crypto so you never know what the government is going to do. Or what some companies in this space will do. So that is why I’m using defined risk and trading an Iron Condor so that I can’t get hurt going too big.
I do believe that in the next 9 days it could stay within this range.
I can click on the far right and open up the trade chains that shows the $786 in profit that I have made in trading COIN over just the last 60 days.
Not too bad if I do say so myself…
Now the whole purpose of this video is to show a way that we can take a shot and make a profit or get a do-over.
Now I’m going to do a follow up video to this video that shows what happened and what I am going to do with this trade.
So be sure and click that bell button below and you will be notified when it is out next week.
This could be a disaster….
Since we only have 9 DTE, if I get a quick profit I’m likely going to close out and bank the winner.
If it breaks outside of the green profit range, I’ll just roll and re-adjust my strikes to the new range in the next regular option chain.
So it would be that July 21st option chain. That is currently at 44 DTE. I should be able to center the trade again and collect more premium when I roll.
So I either win now, or win later. At least that is the plan…..
Alright guys, if you are a beginner and this sounded confusing do not worry. It did for me as well originally. We will be continuing to cover the details in future videos and we’ll continue to learn and succeed together.
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I’ve put a link down below for the FREE Options Workshop. Be sure to grab that.
Remember to hit like and subscribe and leave a comment below with your thoughts on the video, what you are trading and what you would like to see in upcoming videos.
Thanks for watching. Please share this video with a friend and see you in the next one!