The stock market has been showing some interesting trends lately. The Dow Jones recently crossed the 35,000 mark, which is quite a milestone.
It took a while to get there, but now that it’s there, it looks like it wants to continue going higher.
Apple has also been making significant moves. It’s passed the $190 mark and when that happens, it’s likely to hit the $200 mark sooner than later.
It’s just one of those weird anomalies in the market.
Another anomaly in the market right now is the pricing of out-of-the-money options.
So we’re on the same page, let me briefly explain some terms:
- In-the-money options: These are call options where the strike price is below the current stock price.
- At-the-money options: These are options where the strike price matches the stock’s current price.
- Out-of-the-money options: These are call options that have a strike price higher than the stock’s current value.
What’s intriguing right now is the massive opportunities in selling options that are out-of-the-money.
And the high options prices are what’s driving this. Even when you venture deep out-of-the-money, there’s an opportunity to collect substantial premium.
As an example, let’s consider the AVGO trade I did this past Tuesday in my Weekly Options Profits program.
I like this example, because it shows just how far out-of-the-money you can go when selling an option.
This past Tuesday — just 2 days ago — AVGO was at 912.
I saw it going bearish, so I sold a deep-out-of-the-money call at 995 with an expiration of this Friday.
You read that right. Just 4 days to expiration. And the strike price was almost 10% above the stock price at the time!
As a hedge, I bought the 1000 call in case AVGO moved against me. (same expiration date)
But as with most of these trades, I didn’t have to worry.
With just 4 days to move all the way from 912 to 995, I had plenty of cushion.
And even so, I was able to collect a healthy premium.
All said and done, when I sold the 995 and bought the 1000, I was left with a 25¢ net credit.
That’s a 5% return for just 4 days in the market. (When the difference between the strikes is $5, a 25¢ credit. The math works out like this: .25 / 5 = .05 or 5% return)
Time will tell how this trade ultimately works out, but right now it’s a dream trade:
We collected a healthy 5% return up front and the stock hasn’t come anywhere near the strike price we sold.
And with just 24 hours left till expiration… it’s looking like it’ll be another win we add to our scoreboard.
But this isn’t the only trade you could have done. As I’ve been saying, there are a wealth of income opportunities if you know where to look.
I find that for most people, understanding and believing that turning the tables and becoming an options seller — becoming “the casino” so to speak — is the biggest hurdle.
So a few months ago I shared this exercise that you can do right at home absolutely free… without risking a single penny.
By trying that exercise right from the comfort of your desk, in a very short time you’ll be able to understand the power and consistency of opportunities that exist if you learn how to trade out-of-the-money options.
In fact, I do this strategy every single week and my flagship service has a win rate north of 97%.
If you want to discover the kind of trades I place — and how I’ve been pulling money from the markets week after week — check out this video I just recorded for you.
Trade well,
Jack Carter