Thursday, February 09, 2017 5:16:09 PM
A few things I forgot to mention with Method 1. I said sell calls but meant to say sell call spreads. Also, I said swing trade 30-day calls of the same contract but actually I've been swing trading QQQ as the other side.
It would easiest to demonstrate:
Method 1 Example
Step 1 - Let's say 2nd week of Sept you sell 200 contracts of the SPY 240/245 1-year LEAP call spreads. You receive $22,000 in cash for the premium.
Step 2 - 1st week of Nov the LEAP open position profit is $8,800. You could just cash that in by closing the LEAP contracts. Or wait to see if the market moves up.
Step 3 - If the market moves up then you start swing trading by buying and selling 30-day out calls. You would buy and sell every other day around the 0.50 cent level. By 2nd week of January the LEAP call spreads are showing a ($12,000) loss but the QQQ swing trading is showing a cash profit of $177,000.
I'll post an image of my TradeStation Robot Trading app which is a version of AIM customized for options. In this case the calls were 60 days out but you could swap a new set of calls in every 30 days. Also, the last buy point on this chart would be placed using the next months option. The chart is huge so click on Robo Chart to take you to Google Sites. It should display in a new window.
Robo Chart
It would easiest to demonstrate:
Method 1 Example
Step 1 - Let's say 2nd week of Sept you sell 200 contracts of the SPY 240/245 1-year LEAP call spreads. You receive $22,000 in cash for the premium.
Step 2 - 1st week of Nov the LEAP open position profit is $8,800. You could just cash that in by closing the LEAP contracts. Or wait to see if the market moves up.
Step 3 - If the market moves up then you start swing trading by buying and selling 30-day out calls. You would buy and sell every other day around the 0.50 cent level. By 2nd week of January the LEAP call spreads are showing a ($12,000) loss but the QQQ swing trading is showing a cash profit of $177,000.
I'll post an image of my TradeStation Robot Trading app which is a version of AIM customized for options. In this case the calls were 60 days out but you could swap a new set of calls in every 30 days. Also, the last buy point on this chart would be placed using the next months option. The chart is huge so click on Robo Chart to take you to Google Sites. It should display in a new window.
Robo Chart
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