Combining my Strategic Trading Methodology for timing the direction of a stock price movement
with selective options for that stock,
using the extrinsic value decay
makes a super trading method with profit opportunities
that could reach up to 20% per month or even more.
Let me tell you a bit more about my Spread Trader and a Guarantee in options that changes everything.
There's Guaranteed Function of stock option pricing and that is Extrinsic Value Decay
I want to preface this information by saying there is in Fact an available Guarantee in the Options Pricing that could give traders
Extraordinary Profit Opportunities to profit short and long term.
I believe this is an great trading method that could fit into every traders portfolio. Please allow me to preface that as with any investment, whether it be gold,
real estate, stamps, antiques, anything at all there is always the chance of losing money so please, trade only with money you can afford to lose. With that said, let's move on...................
The Profit Methodology. First There is TIMING of the stocks price movement. This is Most Critical. See above.
Option Time Value as stated in Wikipedia: TIME VALUE WILL IN FACT DECAY TO ZERO at expiration, with a general rule that it will lose ⅓ of its value during the first half
of its life and ⅔ in the second half. As an option moves closer to expiry, moving its price requires an increasingly larger move in the price of the underlying security.
My trading friends. This is POWERFUL. There is a Guaranteed FACT that Time Value goes to $0.00 by expiration.
Therefore if I sell Time Value @ $100.00 per contract I know that Time Value and at expiration will be worth $0.00.
So what is the strategy ? How does this translate into money ?
The trading strategy is to sell an option that is Over- Priced and Out of the Money, and Most Important, the price
is predicted to continue in the desired direction through the options expiration date.
You keep the option credit which is credited right to your brokerage account, sit back, and wait for the option to expire to $0.00.
Timing is still the Most Important Factor. The price of a stock can do only 3 things. Go Up, Go Down, Stay the Same.
Two of the three directions are AUTOMATICALLY favorable to the desired price direction. That's 66.67% of being right automatically.
Add my Strategic Trading Methodology for the correct price movement
and the Odds of profit increase dramatically.
With a Put Spread,
1. If the stocks price goes up from the day the option spread is executed through expiration, you win.
2. If the stocks price stays the same from the day the option spread is executed through expiration, you win.
If the stocks price even goes down from the day the option spread is executed though the expiration date, you could still win
(as long as the price is above the short side strike).
Automatically 2 of the 3 price direction occurrences are to Your Advantage right off the bat which is 66.67% chance of winning and even if the stock price goes down from the day the trade (with put spreads) is executed, many times we still win. WHY? Because the
out of the money and over-priced which helps in the event price of the underlying security goes in the direction we don’t want it to.
Key Points of Credit Spreads
Credit spreads allow options traders to substantially limit risk by forgoing a limited amount of profit potential.
With a credit spread, this risk can be quantified—in most cases, you'll know exactly how much money you're risking.
Credit spreads are versatile. Most traders are able to find a combination of contracts to take a bullish or bearish position on a stock.