Have you experienced any Stock Option Channel and checked on Stocks Alerter apps? Why?Most small options traders tend to bet on speculative strategies where the underlying is required. However, the fact that the particular security, index, currency, or commodity does not move enough added to the fall in value that options suffer over time, and end up in losing stocks most of the time.
The plan
If our goal is to earn money consistently monthly, a plan is essential. And if you are a beginner, it would be good to write your plan and give it to an experienced trader at Stock Option Channel to analyze it and suggest improvements.
Generally, the best way to guide a plan is based on a portfolio of several positions. Maybe 5 or 6. Most should be long theta income trades (where the passage of time is in our favor). To begin with, with $5,000 at our disposal, we can put up 5 or 6 positions a month with one or two contracts each.
Stocks Alerter to rescue as always
It is also important to diversify between indices, futures, and sectors. And we have to work on very liquid underlying. The narrowness of the buy and sell spreads and the ability to enter and exit positions with total fluidity are essential factors for us to be profitable in the long term.
Highly volatile underlying are also not recommended for stock trading positions. They are too risky, although they can sometimes give incredible profits by selling expensive options due to their high temporary premium component and then repurchasing them much cheaper after a few days.
Nor should we implement any such strategy on corporate options in earnings month.
A Concept of ‘Income Trades’
The Income Trade is a delta-neutral strategy (has no directional preference). The trader does not need the market to move in any direction to make money. The advantage is Stock Option Channel earns a premium over time since the options lose value for each day that passes. An interesting tidbit is that 80% of options expire out of the money and are worthless. They expire with a zero price.
In essence, it is very similar to the lottery. It is clear that someone will win, with a lot of luck, but all the others who have bought loose. What is clear is that he who organizes the lottery always wins. Who would you rather be? He who buys the lottery or he who sells it?
This is where our great advantage in updating Stocks Alerter lies. Although the underlying does not do exactly what we want, we can continue to earn and make money.
We have an extensive margin of error on our expectations.
Something does not happen when one buys or sells a future or shares. Here, we need the underlying to do what we want; if it does not, we lose. And really, the mathematical odds are always 50% minus the ‘slippage’ (our cost of transactions, commissions, and the disadvantage of the spread in the purchase and sale). Either it goes up or down, or there is no more significant margin of error.
Of the many strategies for this type of trading, we will focus on the iron condor. This position consists of selling an out-of-the-money call spread above, and an out-of-the-money put spread below. It is a strategy where the odds of winning are very high.
The small trader’s advantage in selling options
As we have mentioned before, when we buy options, we start with a disadvantage because we buy something that, little by little, loses its value (due to the passage of time). If the underlying does not move sufficiently in favor, we lose. In selling options, the value mustn’t move enough against us to win. We repeat, our margin of error is much more significant.
How much do I invest?
You should never put all your eggs in one basket. That is, investing all the money or savings in a single instrument is unnecessary. It is necessary to select several tools, but it must be done through a plan in which we consider: the term, level of tolerance to risk (which can be low, medium, or high), and age.
We can make a plan for each financial goal and probably decide to put different amounts of investment in stocks even if we are conservative investors (low risk), moderate (medium risk), or aggressive (high risk).
The Stock Option Channel is a great alternative to make your savings grow over time. So don’t let it go, especially for medium and long-term goals (more than five years).
