04-17-2023, 06:15 PM
(11-28-2022, 08:42 PM)NilesMike Wrote: So quiet in here that I thought I'd post today's trade. I put this on every 30ish days ( I like to use a down day). Ties up between $500-1,000 margin. Generates $50 income with the potential for the rare big hitter if it expires within the "bear trap"
/MES
Bought 3810P, Sold 3760P (50 point wide) Sold 3690P
Net credit $10.25 x /MES multiplier of 5 = 51.25
90% probability of expiring OTM but actually plays out much better.
EZ to manage as well.
Stole the trade idea, it's the 1-1-1
Good luck and happy holidays to all here.
I am surprised nobody had anything to say about this setup, maybe it wasn't broadly understood. A FB group that I'm in has been deploying this trade for better than 2 years, almost 3 years now, and other than fat fingers NO ONE HAS TAKEN A LOSS!
The premise is to buy a put debit spread, that's the bear trap.
Sell 1 or 2 puts well below the trap to collect an overall credit.
The trade that I just completed was +(1) 3930 PUT -(1) 3900 PUT -(2) 3590 PUT
Credit collected was $74 on April 4. On April 14 I closed the 2 lowest puts for $21, keeping $53 and having a free put debit spread in place in case the market ends up there.
This is THE ONLY option trade I do anymore. Why? Bear trap self hedges the trade, my naked position is 15% below the market when entered, the market avoids single name risk ( If S&P falls 15% in a month, how will your option trades look?) trades 23 X 5 for flexibility and capturing 2-3% per month like clockwork is nice.