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Romell Roberts

How to get "confirmation" on an Options Trade

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Those of you that are profitable options traders, what's your process for selecting a winner? I understand the very basics of calls puts and greeks, but I'm having a hard time finding profitable options trades 

What do you look for with your fundamental and technical analysis?

Do you stick with a particular stock you're comfortable and familiar with?

How far out do you usually select the expiration date? and why?

 

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Posted (edited)

Anytime I am shorting options, I am doing an OTM credit spread about 45 days out behind a support or resistance on the daily.

This maximizes the theta decay from one day to the next increasing your rate of receiving  max profit.  You should cut it around 21 days if you are close to max profit or roll it forward to keep the decay rate high if it is still a good trade.

Since this is so many days out, I would only do daily chart entries or higher.  The profit from these takes a little time, but that is a huge edge from the theta decay.

Enter for mid-term trade ideas.  Was there an earnings overreaction?  If the price drops into a support level, initiate a spread with the strikes well below the bottom of that support, and as the Implied Volatility dries up you will immediately be in the money.

 

Edited by Bailey Nevener

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