Option Strategies For The Bears

Strategies for different market conditions

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You can be the millionaire next door
Start with understanding the difference between selling and buying calls and puts

Begin with figuring out the direction of the market

Financial freedom means to be ability to retire at a young and vibrant age within the financial goals that you establish while you struggle working.

Financial freedom is established by tipping the balance in your favor in terms of making money, saving money, and losing money.  The earlier faster, and more successful you are with accomplishing making and saving money at the expense of losing money will get you to the target of financial freedom at an earlier age.  

We provide you tips and insights into the following:

You can be the millionaire next door
More advanced strategies simply combine the selling of calls and puts

Begin with figuring out the direction of the market

The selling and buying of calls and puts can be combined to develop more advanced strategies to be used in different market conditions.  Some market conditions that need to be considered include:

  • The condition of the underlying stock
  • Implied volatility
  • Expirations
  • Political climate
Based on these conditions, start combining the calls and puts with the following variables
 
Create credit spreads to be bullish or bearish while collecting premium
Create debit spreads to be bullish or bearish but with a defined debit
Widen spreads to increase premium but but with increased risk
ITM options to increase intrinsic value and faster return on investment
OTM options to increase probability of profit but slower return on investment.
Use the potential of assignment to purchase stocks 

 

You can be the millionaire next door
Choose a strategy based on your trading mindset?

Speculative | Protective | Monthly Income

As with any investment, you must first understand what your goals are.  Armed with the option trading tools you have and will learn here, you can create a strategy that can meet your trading goals.  

If you are speculative, you can buy and sell calls or buy and sell option you must first decide your tolerance for risk.  

BUYING calls and puts are speculative strategies with undefined risk.  But with undefined risks, you also have unlimited reward.  

If you are less risk tolerance for risk, you might adopt credit spread strategies where the trade is still directional but the risk is limited and the profit is also limited.  

If you are not speculative but simply want to protect the assets that you already own, you may want to adopt one of the hedging strategies that allow you to either lose less money or make some money if you are guessing the market is bearish.  An example of this strategy would be a protective put or even a bear call credit spread.

Finally, if your mindset is to find an options strategy that might net you monthly but safe income, you might opt for covered calls.

Live for now or pay later

Compound interest

The power of investing young for compound interest

Know where you are going in order to navigate your path and speed

Importance of eliminating interest charges

Buying a call – unlimited risk

Buying a call debit spread – defined risk

Selling a put debit spread – defined risk

Synthetic calls

Diagonal or calendar spreads

 

You can be the millionaire next door
Choose a strategy based on your trading mindset?

Speculative | Protective | Monthly Income

As with any investment, you must first understand what your goals are.  Armed with the option trading tools you have and will learn here, you can create a strategy that can meet your trading goals.  

If you are speculative, you can buy and sell calls or buy and sell option you must first decide your tolerance for risk.  

BUYING calls and puts are speculative strategies with undefined risk.  But with undefined risks, you also have unlimited reward.  

If you are less risk tolerance for risk, you might adopt credit spread strategies where the trade is still directional but the risk is limited and the profit is also limited.  

If you are not speculative but simply want to protect the assets that you already own, you may want to adopt one of the hedging strategies that allow you to either lose less money or make some money if you are guessing the market is bearish.  An example of this strategy would be a protective put or even a bear call credit spread.

Finally, if your mindset is to find an options strategy that might net you monthly but safe income, you might opt for covered calls.

Buy a call

Buy the stock

Synthetic long call

Diagonal Spread

Call Ratio Spread

High IV Strategyies:

 

Selling a naked call

Selling a bear call credit spread

——–

Low IV Strategies 

 

Buy a Put

Put Diagonal Spread

Put Ratio Spread

Low IV Strategies 

 

Buy a Put

Put Diagonal Spread

Put Ratio Spread

 

When you are bearish on a stock, and you see low implied volatility prevalent in the market, the best options strategies in our opinion is a put calendar spread. This is because you can play the stock directionally lower and have the ability to make money if implied volatility rises. 

We prefer to use put calendar spreads over debit put spreads in this instance because the rise in implied volatility can also improve the profit margin of a calendar spread more than that of a debit put spread.

 

 

_______________

 

High IV Strategies:

 

Selling a naked call

Selling a bear call credit spread

——–

 

Do you expect a big, small, or neutral move?

Do you expect a big, small, or neutral move?

Do you expect a big, small, or neutral move?

Put credit spread 

Put diagonal spread

Covered calls

Protective puts

Bear call spreads

You can be the millionaire next door
What Strategy To Choose

Speculative | Protective | Monthly Income

As with any investment, you must first understand what your goals are.  Armed with the option trading tools you have and will learn here, you can create a strategy that can meet your trading goals.  

If you are speculative, you can buy and sell calls or buy and sell option you must first decide your tolerance for risk.  

BUYING calls and puts are speculative strategies with undefined risk.  But with undefined risks, you also have unlimited reward.  

If you are less risk tolerance for risk, you might adopt credit spread strategies where the trade is still directional but the risk is limited and the profit is also limited.  

If you are not speculative but simply want to protect the assets that you already own, you may want to adopt one of the hedging strategies that allow you to either lose less money or make some money if you are guessing the market is bearish.  An example of this strategy would be a protective put or even a bear call credit spread.

Finally, if your mindset is to find an options strategy that might net you monthly but safe income, you might opt for covered calls.

Live for now or pay later

Compound interest

The power of investing young for compound interest

Know where you are going in order to navigate your path and speed

Importance of eliminating interest charges

Buying a call – unlimited risk

Buying a call debit spread – defined risk

Selling a put debit spread – defined risk

Synthetic calls

Diagonal or calendar spreads

 

You can be the millionaire next door
Choose a strategy based on directional market assumptions?

Speculative vs Protective vs Safe Income

Speculative 

Earnings Plays

Making safe monthly income

Protect the stocks that you own

Live for now or pay later

Compound interest

The power of investing young for compound interest

Know where you are going in order to navigate your path and speed

Importance of eliminating interest charges

Bullish Option
Strategies

Bull Call Options

Bull Call Spreads

Selling Put Options

Bull Put Spreads

Covered Calls

Married Put Options

The Collar

Synthetic Long Stocks

Bearish Option Strategies

Buying Put Options

Bear Put Spreads

Selling Call Options

Bear Call Spreads

Covered Put Writing

Synthetic Short Stocks

 

Neutral Option Strategies

Selling Strangles

Selling Straddles

Selling Iron Condors

Selling Iron Butterflies

Buying Butterflies

Buying Strangles

Buying Straddles

Buying Iron Condors

Buying Iron Butterflies

 

Situational Strategies

Favorites

Covered Calls

Put Credit Spreads

Call Credit Spreads

Selling Call Straddles

Selling Put Strangles

Selling Iron Condors

Selling Iron Butterflies

 

For Income

Covered Calls

Diagonal ( Calendar ) Spreads

 

Earnings and Binary Events

20 Days Prior

Day Before

Day After

Afternoon Before

 

High Volatility

Credit Options

Low or Neutral Volatility

Debit Options

 

Bull Option Strategies

Bull Call Options

Same risk profile as a short put

Bull Call Spreads

Same risk profile as a short put

 

 

Selling Put Options

Same risk profile as a short put

 

 

Bull Put Spreads

Same risk profile as a short put

 

 

Covered Calls

Same risk profile as a short put

 

 

Bull Option Strategies

Married ( Protective ) Puts Options

Same risk profile as a short put

The Collar

Same risk profile as a short put

 

 

Synthetic Long Stocks

Same risk profile as a short put

 

 

Bearish Option Strategies

Put Options

Same risk profile as a short put

Bear Put Spreads

Same risk profile as a short put

 

 

Selling Call Options

Same risk profile as a short put

 

 

Bearish Option Strategies

Bear Call Spreads

Same risk profile as a short put

 

 

Covered Put Writing

Same risk profile as a short put

Synthetic Short Stocks

Same risk profile as a short put

 

 

Neutral Option Strategies

Selling Strangles

Same risk profile as a short put

 

 

Selling Straddles

Same risk profile as a short put

Selling Iron Condors

Same risk profile as a short put

 

 

Neutral Option Strategies

Selling Iron Butterflies

Same risk profile as a short put

 

 

Buying Butterflies

Same risk profile as a short put

Buying Strangles

Same risk profile as a short put

 

 

Neutral Option Strategies

Buying Straddles

Same risk profile as a short put

 

 

Buying Iron Condors

Same risk profile as a short put

Buying Iron Butterflies

Same risk profile as a short put

 

 

Leesburg | Loudoun | Virginia
Options Learning Basics?

Learning Options

The basic foundation introduction

Keep in my my most important lessons even though you might not understand them yet.  Read all the pages keeping these lessons in mind.

Most important lessons I have learned

  • Trading options or even stock market investment in general is a form of gambling.  The house ( in this case the options market ) is rigged against you through the option premium prices.  The market makers have already manipulated your odds of winning against the house by increasing or decreasing the price of the stock option.  You can win this game, but you will have to thoroughly understand the rules of the market and how to play your hand in different situations.  In blackjack terms, you will need to know when to ask for hit, pass, or fold if you have a two kings.

  • Understand that the extrinsic value of an underlying stock, which is determined by time and volatility, must work out of a stock before you actually make any form of profit.  Therefore, if you have chosen the right direction and the underlying stock price has moved in your favor, you option will still be negative until all of the extrinsic value of the stock has worked out of the contract value.  Read more

     

  • Know that you do not have to take a contract all the way to expiration. In fact, you should close out most contracts between after making about a 30 to 50% profit.  Read more

     

  • Don’t even think about starting options without understanding management strategies for if your contract appears to be going against you.  This strategy might be as simple, albeit gut-wrenching, to close the contract early for a loss.  Remember that all contracts can be adjusted ( managed ) to save you from a maximum loss in your account.  Read more

     

  • Credit spreads are the easiest option strategies to manage.  Debit and naked options are the most difficult to manage.  Narrow spreads are safer ( although less lucrative ) than wide spreads.  Read more

     

  • Understanding how to read charts, in particular, understanding how to identify support and resistance levels, has been the most important step in creating a safe and successful trade. Read More

Intro Paragraph

Building Blocks are combinations of buying and selling of calls and puts

  • Calls and Puts
  • Buy or Sell
  • Credit and Debit Spreads
  • Strangles and Straddles
  • Condors and Butterflies
  • Flies and Lizards
Be able to draw out the profit and loss graph for each
Note that these building blocks can be combined

 Situational Awareness

  • Volatility – Vega
  • Time Decay – Theta
  • Extrinsic and Intrinsic Value
  • Expiration Calendar
  • Earnings Calendar
  • Dividends Calendar

Earnings Season

20 days before earnings

The day before earnings

The day after earnings

Increasing volatility 

Decreasing volatility

 

In order to make a successful trade, you need to identify the direction and strength that you think a stock will move.  At the same time, you identify your safety nets ( resistance and support ).

What are you trying to learn from the indicators

  • Moving Averages
  • Momentum
  • Direction
  • Support and Resistance
 Situational Awareness

  • MACD
  • Bollinger Bands
  • Keltner Channels
  • RSI’s
  • Fibonacci Retracements
  • TT Squeeze

Intro Paragraph

Checklist considerations

  • Identify environmental conditions ( volatility, politics, stock specific )
  • Identify a strategy for the condition ( bullish, bearish, neutral )
  • Identify your underlying stock or ETF
  • Neutralize extrinsic conditions ( earnings, expiration calendar, dividends )
  • Determine strike price ( ITM, OTM, ATM )
  • Determine and a date for your your option expiration
  • Calculate Max Profit, Max Risk, and Break Evens
  • Identify a management plan if the stock moves against you
  • Identify an exit target
More list form

  • Environmental conditions ( volatility, politics, stock specific )
  • Strategy for the condition ( bullish, bearish, neutral )
  • Choose a stock or ETF
  • Note extrinsic conditions ( earnings, expiration calendar, dividends )
  • Strike price ( ITM, OTM, ATM )
  • Expiration date
  • Calculate Max Profit, Max Risk, and Break Evens
  • Management plan if the stock moves against you
  • Exit target

 

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