I was doing something today that I do every month for income and realized I never explained it here. Afterall, this board is for making money and I try to help everyone when I can.
You want a near sure thing month in and month out?
Here's the deal - First, you need:
1)Be able to trade e-mini futures
2)Have probably at least $20k. $15k will do.
3)Make sure your broker allows you to trade e-mini future options and allows you to short them.
What you're doing is a covered call with these. What makes them great for income is the spread. Emini futures - specifically the S&P 'ES' have options that trade two times a month - the typical 3rd Friday of each month like everyone else and the last day of each month. What you want to do is wait until the 3rd Monday (like today) and then do this trade. There are two ways to do it -
1)if you're a trader and have the skill and ability, then you wait for that 10 EMA to cross the 10 SMA UNDER to give you a short setup. To carry a future overnight, it will cost you about $3k of tied up capital roughly. When you get that short setup, pull up the option chain in your broker's option chain window and look for the ES call that expires that week and go between 70 and 100 points IN THE MONEY. You should have a large bid/ask spread.
Sell short the call, but put in a limit order with at least a 3 point spread over the current price of the contract. That will most likely be 3 to 4 points over the bid price of the option.
Give it a few minutes and most likely you'll get filled if you wait it out. Then, do the math and make sure that the price you'll pay for the ES is at least 3 to 4 points under your net basis in that short call.
It really is a trade to establish unlike normal covered calls. You have to 'game' it a little.
The trade I did this morning for my March 'paycheck' was when the ES was moving north, but peetering out, I pulled up the March 650 call for it which was bid at 115 and offered for 121. The ES was at 766. So, 766 - 650 = 116. I was gunning for 10. So, 10 x 1 point = 10 points. Each point in ES land = $50. 10 x $50 = $500. So, had I just tried to sell that right there and then I would have locked in a $500 profit for the week. But the spread was $115/$121. I put in an offer for $119. As the ES looked to be inching up, but not spiking, the spread didn't change, but they filled me. It works like that everytime.
So, I was naked short the March 650 calls at $119. Now, I needed to get those ES contracts as cheap as possible. At the time they were trading between 767 and 768. 119 + 650 = 769. So, anything under 769 makes money. I use this for income. So, the more the better. The 10 EMA crossed the SMA and sure enough started to move down.
Not being greedy, I bought the 10 ES at 765.50 eventhough it was clear it was going down more (and did it!). So, my basis of 769 - the 765.60 I paid for the ES nets me a profit of 3.5 points per contract x 10 contracts. $50 x 3.5 = $175 per contract x 10 = $1750.
Get it? It's very simple, very consistent. You just have to understand the trading aspect of timing it.
I use Interactive Brokers. I don't think there's a better, cheaper broker out there.
AI
