Hey traders,
Yesterday, I talked about expecting a little “dip and rip” in the markets coming up — where we might see a short dip before stocks rip higher again.
But let me tell you something… even when I expect a bullish move, I’m not going all-in with risky, speculative options trades. That’s just not how I play the game.
Instead, I stick to what works — higher-probability income trades like covered calls, credit spreads, and naked puts.
Let me break down why these strategies are my go-to for trading dips, rips, and everything in between.
Covered Calls: Bring in Income While Lowering Risk
Covered calls are one of my favorite plays for a simple reason: they give you a way to profit even if you’re wrong about the stock going up.
If you own a stock and sell a call option on it, you get paid a premium upfront. If the stock goes up and the option gets exercised, you’ll sell your shares at a profit.
But if the stock doesn’t move much or even drops a little? You still keep that premium, and it lowers your overall cost basis.
That’s the key here — even when the market’s not doing exactly what you thought it would, you’re still bringing in income and lowering your cost on the stock. It’s a win-win.
Naked Puts: A Smarter Way to Buy Stocks
Naked puts are another solid option for taking advantage of a potential dip.
When you sell a naked put, you’re basically saying, “I’ll buy this stock if it drops to a certain price.”
The beauty here is that you get paid upfront to make that promise, and if the stock doesn’t drop to that price, you just keep the premium and don’t have to buy the stock.
If the stock does drop, you get “put” the stock, but at the lower price you promised to buy it at — plus, remember, you already collected a cash payment upfront, so it’s like a double discount.
In other words, you’re effectively getting paid to buy the stock at a discount.
So, whether the stock drops or not, you win.
Credit Spreads: Flexibility With Lower Risk
Credit spreads are great because they give you three ways to win: the stock can move up, stay flat, or even drop a little, and you can still profit.
With a credit spread, you’re selling one option and buying another, creating a limited-risk play that can still bring in solid income.
And the best part? The stock doesn’t have to move much for you to win. As long as it doesn’t drop significantly, you’re likely to collect that premium.
Long Story Short: Why I Sell Options Instead of Buying Them
The bottom line is this: When you sell options instead of buying them, you’re becoming the house.
Think about it — in a casino, the odds are always in favor of the house (the options seller), not the gamblers (the options buyer).
So when you sell options, you’re flipping the odds in your favor. You don’t have to be perfect or make a huge move to win. You’re just stacking the deck in your favor.
That’s why I stick with income plays like the ones I described above — they let me trade the market in a high-probability way.
So as you’re looking at this potential “dip and rip,” keep in mind that there’s a way to trade it without risking the farm.
Stick with the strategies that give you the best odds and the safest path to consistent profits.
Trade well,
Jack Carter
P.S. Company insiders from Nvidia to Amazon to Meta and even JP Morgan are selling their stock at a shocking rate. But one trader’s not worried. He’s got a smart plan to harness all that extra volatility!
