Here's the other part of this trade I didn't mention. If you're able to trade and not stuck in a job and/or broker that limits your ability to do this stuff, days like today are to be taken advantage of. I, for example, today sold those long ES contracts at the close for 776. I bought them at 765.50. I expect the market to pullback and most likely selloff in this 5th wave I've talked about. But not get greedy.
Just now, tonight, I bought back the ES contracts for 773. So, I just locked in another 3 points per contract. Remember, those March 650 calls I never covered.
When you are in a covered call, the idea is to use that trade for income. If you're able to trade it, do it. That means when you clearly see an extended run, sell the long position and hold the short. Try to manipulate it even for a small gain. Trust me, it adds up at the end of the year.
Now, what I didn't mention is that when you do this with ES contracts, you want to always go long the contract that expires FURTHER out than the call options. In this case, both the March ES and calls expire this week. So, I went long the June ES. The reason? The longer dates contracts will typically trade CHEAPER than the near term ones. Huh? The June ES is now trading about 2 points lower than the March. Why? I don't know.
By shorting the near term call options, you're locking in that spread between the longer dated ES and the options that are pricing on the near term expiration contract.
But as I mentioned in the last post, the trade now I think is to focus on the TNA. It trades 3x the % gain of the Russell 2000. The Russell 2000 will lead this next rally. The TNA could run to $30+. Looking at the June $10 calls, right now they're trading at $7.70 on the offer. But expect that to fall. Look for an entry around $5 or better.
