04-20-2023, 10:04 PM
(04-19-2023, 01:15 PM)Kerim Wrote:(04-17-2023, 06:15 PM)NilesMike Wrote:(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.
I'm intrigued, but don't honestly understand the trade. Can you spell it out like I'm nine years old? Or point me to a lay-person explanation?
Underlying from smallest to largest (all S&P based) /MES (Micro Emini futures), /ES (Emini futures), SPX
Go to option chain with about 40-45 DTE
Buy a PUT around 150 points below the current price (current example = 4000)
Sell a PUT 30 points lower.
Cost of this trade is around $5.75-7.00
Go lower and find the PUT priced @ $10.00 (currently 3690) sell 2 of those for $10.00@
Net credit around $13-14.00
What I do is either let entire trade expire and keep the credit or close the naked puts when I have >70% of the credit in the bag, leaving the "free" debit spread on in case market falls to that level. Sometimes there is a chance that market drops and one can close the entire trade for more than 100% of the credit initially received.
The trade is a combo of bullish (naked puts) and bearish with Put debit spread. The only time it gets antsy if there is a pretty big drop right after entering trade. Otherwise it is extraordinarily quiet.
Lance has a pretty good video for starters. https://www.youtube.com/watch?v=kRXwdrzXeDo