My Options Account on June 4th

I'm having a great day in the market using my selected options strategies.  My account is up 5.91% on the day while the Dow is down 0.74%.  I'm not shorting or buying puts.  You make the more consistent money by selling options.  My main strategy is credit spreads.  The market can go up, down or stay the same and I'll make money in all situations.  Only way I lose is if my individual stocks move drastically in one week.  Any other situation I make money!  And I have certain guidelines to minimize any losses in the rare case that one of my stocks move a lot one way or the other.

One of my favorite stocks is Apple as you probably could tell from my previous examples.  I love to do weekly credit spreads on Apple, more specifically the put credit spread (mostly called a bull put credit spread).  On Monday Apple traded down to around $447 and at that point I decided to sell the $435 Put expiring on June 7th and I also bought the $430 Put expiring on June 7th.  I ended up doing 10 contracts of this strategy.  My average price that I sold the $435 Puts was 1.62 and the average price I bought the $430 puts was $.93.  I instantly made a premium of (1.62 - .93) * 100 * 10 = $690 on this position.  My buying power was reduced by $500 for each spread less the credit so 500*10-690 = $4,310.  As long as Apple's stock can stay above $435 by the close on Friday I will make a profit of $690 or 690/4310 = 16%.

When Apple started to go up on Monday I decided I would also sell call credit spreads to make some additional income.  I selected the 465 call to sell and the 470 call to buy expiring on Friday June 7th.  My average prices were $1.01 for the 465 call and .57 for the 470 call for a net credit of $.44 or $440 for my 10 contracts.  The percentage gain for both spreads combined will be $(690+440)/(5000-690-440) = 29.20% as long as Apple stays between $435 and $465 by close on Friday. 

Your maximum loss on one side of the spread would be $500 less your credit multiplied by the number of contracts.  So I do have a chance to lose up to $5000-690-440  = $3,870 if the stock goes over 470 or under 430.  In this situation we would have a maximum loss.  If the stock ends between 430-435 or 465-470 then we would either have a gain or loss depending on what we buy back the spread for.  This situation would most likely result in a loss. 

This strategy is called an Iron Condor.  This is a very risky strategy because Apple can move one way or the other pretty drastically within a week.  So if you are going to put something like this on you need to watch the stock daily and have an exit strategy.  Don't just do this blindly.  You need to have a good idea of how the stock has been acting lately and where you expect it to go over the next week (or month).  

For today, Apple is down 2.50 and is currently trading at $448.  I'm still looking good for my strategies and am up $323 on the spreads so far.  And its only Tuesday.  If I am nervous about where Apple will end up later in the week I can always buy back my spreads and pocket the $323 profit which would be a nice 8.3% gain in two days.  Not bad at all.  But I'm going to hold until tomorrow to see what happens.

I wouldn't recommend putting all your money into one stock or option strategy.  I have diversified my account over multiple stock options using credit spreads.  I love this strategy because as time goes by I make money from the depreciating options (time value decreases as it gets closer to expiration).

Jonny

Anyone looking for some ways to get started collecting option premium please Click Here! or to find undervalued options Click Here!