Options Strategy

The following pictures show the sequence of a typical trade.  We sell the option Mon-Thu & wait for it to expire on Friday, hopefully with either a full profit or partial profit. It could also expire in the money with a loss. We place only 1 trade each week with an allocation of 1 option sold per $10,000 traded. The majority of the trades are entered on Monday morning or Monday afternoon about four days before the option expires.

The Weekend

Because we sell the option on a Monday-Thursday and it expires on Friday, we will always be flat over the weekend. This has the added bonus of reducing black swan even risk. If any political or economic market rattling event happens over the weekend, our accounts should not be affected given that we will not have any open positions.

Monday – Thursday: Trade Is Executed

Starting with Monday, there is a potential for a trade to be executed. We will sell an option (call or put) which is out of money anywhere from .25%-1%. We will also buy a deeper out of money option (call or put) as black-swan event protection. This second option limits our risk, however it is a very deep out of money option.

Friday: Option Expires At 4PM EST

After the trade is placed, we wait until Fridays expiration. The final settlement price is determined at approximately 4PM EST. The final trade result depends on where the settlement price is relative to the strike price of the option sold.

Closing Price Trade Outcome
Out of money Full Profit
In the money (< premium) Partial Profit
In the money (> premium) Loss

Since Going Live: Day Of Week Trade Placed

Since going live, the following graphics show the distribution of days in which trade was initiated. This is good data to consider, since the earlier in the week we sell the option, the more Options Premium we collect. Since we are selling out-of-money options, they are made up 100% of time value. The further from Friday the trade is initiated, the more premium we collect.

Monday

84%

Four Days Till Expiration

Tuesday

16%

Three Days Till Expiration

Wednesday

0%

Two Days Till Expiration

Thursday

0%

One Day Till Expiration

Last Update: 6/27/16

Past performance is not indicative of future performance.

Trading futures & options involves substantial risk of loss.

Since Going Live: Time In Market

This data shows the total number of days this system has traded live. It also demonstrates a balanced time in market percentage. When evaluating options trading systems, consider this when analyzing risk. This algorithm only places quality trades and does not hold over the weekend.

Days Traded Live

0

Time In Market

0%

Last Update: 6/27/16

Past performance is not indicative of future performance.

Trading futures & options involves substantial risk of loss. This weekly options trading system is not for everyone.  It should only be used with Risk Capital.

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