Index Spread Options Trading

Index Spread Options Trading - It's a Win Win !!!!!

2011-12-29T11:13:00.002-06:00

I am an active trader of option credit spreads on the RUT broad based stock indexe. I am very conservative and only enter into trades that have a very high probability of being profitable. I share all my trades with subscribers to my advisory service.

My purpose is to make it EASY and SAFE for subscribers build wealth using the power of options. I want to help subscribers avoid the painful mistakes most beginning traders (and many experienced traders) make. Subscribers who just follow my Trade Alerts can earn a very consistent monthly return. Once a new subscriber uses my service for a 60 day free trial period, they will find it to be the most easy and profitable way to build wealth they’ve ever discovered. That’s why I want all new subscribers to try it ABSOLUTELY FREE for 60 days. New subscribers immediately receive all my active trades. They can start investing right away, or just follow my trades "on paper" for 60 days. If they aren’t convinced this Trading Strategy is the safest, easiest way to build wealth, they can simply ask me to cancel their subscription, and they won't be charged a dime.

One final note: While I show subscribers how to make consistent monthly profits with options, I also teach something more important. And that is how to effectively manage money and risk so when a trade is at risk, losses are kept to an absolute minimum.

An option credit spread is a limited risk option trade involving the simultaneous purchase and sale of two differing option contracts on the same Index, i.e. the RUT. This produces an immediate cash credit in your trading account. A profit is realized in a credit spread position if the index moves in the direction anticipated, remains the same and even if under appropriate circumstances the index moves adversely to your position.

Benefits of My Service and Credit Spread Trading

My credit trades have a 90% probability of expiring worthless when filled.
1 Credit Spread Trade Alert each month. This credit spread trade can profit in any type of market.
The majority of time we just make our trade, collect our credit and wait for the next month. This is not a day trading system. There is no need to monitor the market and your active trades all day long in front of the computer screen. In fact it's really a very boring trading system.
Paper trading is the best way to learn this option strategy. It's all free with OX and my 60 day trial.
The RUT Index is not subject to the same wild swings as individual stocks.
With my Iron Condor trades you get double the credit but only have one margin side at risk.
You want your credit spread trades to expire worthless but you can always buy them back for way less than you sold them for.
Your trading capital is only used to support margin requirements. Most option brokers allow you to invest your trading capital and use it as collateral for spread trading. This way you can earn 2 returns with the same capital.

Please visit my website. You can see my actual performance results of all trades for the last 12 months and the current YTD return which is amazing. My website is over 25 pages and full of content that covers all aspects of this trading strategy.

Option Spread Trading

2011-12-29T11:10:00.000-06:00

Option trading all comes down to probability of profit. Statistically, option sellers always have a better chance of profiting. It's true that when you sell options your profit is limited, but your chances of walking away with that profit are high. The reverse is true for option buyers. Their potential profit is limitless, but the odds of achieving that profit are very small, especially with out-of-the-money options.

Why not put the odds of success on your side and learn how to become a smart option seller? Naked (uncovered) option selling entails unlimited risk and limited profit, but there is a strategy of option selling that has limited risk as well as limited profit. It's called a credit spread. In a credit spread, you sell an option and buy a cheaper option at the same time to limit your risk. Since you are selling a more expensive option than you are buying, you get to take an initial credit into your account. As long as you implement the trade as a spread, you will never be exposed to unlimited loss, as is the case with naked option selling.

Credit spreads come in two types -- the bear call spread and the bull put spread. A credit spread is always used with either all calls or all puts and within the same expiration month. A call credit spread consists of selling a more-expensive, lower-strike call, and buying a less-expensive, higher-strike call. A bull put spread consists of selling a more-expensive, higher-strike put and buying a less-expensive, lower-strike put. The best outcome of a credit spread is to have all the strikes expire worthless so you can keep the entire premium you collected at the beginning. Credit spreads should be initiated using the two closest months to expiration. This is when time decay starts to accelerate, and it gives the underlying security less chance to make a move against the position.

Credit spreads can be used with individual stocks, futures options, or indices such as the NDX, RUT, SPX Standard & Poor's 500, and so on. If you are playing the stock market, credit spreads are preferable with an index such as the SPX, NDX or RUT options because there's less chance of a gap move than there is with many individual stocks.

Credit spread trading is a simple, safe, and stress-free type of trade that does not require a great deal of monitoring. You just place the trade, collect the credit, and wait for the options premiums to decrease or expire worthless. And if the underlying security starts to move against your position, there's no need to worry; your loss is limited, no matter how far the security might move. Plus, you can always unwind the spread at a small loss before expiration occurs.

Options lose all of their time premium by expiration, which is referred to as time decay. Because they have no intrinsic value, out-of-the-money options expire worthless.

New Bull Put Trades expiring in March Posted to Members Page

2011-02-21T07:24:00.000-06:00

The market rose again in February and our second Bull Put trades of 2011 expired worthless. The markets are rising now because 1st quarter earnings are exceeding expectations. These positive earnings are bringing investors back into the market causing stock prices to rise. We must continue to trade on the PUT side while this bull market continues.

New Bull Put Trades expiring in February Posted to Members Page

2011-01-20T13:36:00.001-06:00

The market rose again in January and our first Bull Put trades of 2011 expired worthless. There is no indication that the markets will not continue to rise in February so we are going to be conservative again and trade another Bull Put spread.

New Bull Put Trades Expiring in Jan 2011 posted to the Members Page

2010-12-19T10:16:00.000-06:00

The market is rising again so the call side is too risky. We would have had to close out Bear Call trades a lot these past 4 months if Iron Condor trades were completed. The Bull Put trades are providing a decent monthly return so I am going to start off 2011 is another conservative Bull Put Trade. In 2010 these Bull Put trades generated a 33% annual return. My goal is to repeat this performance in 2011.

New Bull Put Trades Expiring in December 2010 posted to the Members Page

2010-11-21T16:53:00.000-06:00

The market is still volatile dropping and rising on international news events. One new stock offering also allowed the markets to recover nicely last week. This time of the year is always fun to trade credit spread Put options because the markets rise in December. So I am continuing the trend with a new RUT Bull Put trade to finish the year.

New Bull Put Trades Expiring in November 2010 posted to the Members Page

2010-10-17T14:44:00.001-06:00

The market continues to rise month after month. Our RUT Bull Put trades have now expired worthless 5 months in a row. If we have completed Iron Condor trades our Bear Call trades would have been at risk and closed out early for a loss. By trading just one side we are still averaging a decent monthly return. When most CDs and fixed investments are earning just 3%-5% for a year we are earning 5% to 8% monthly. This translates to a very high annual return.

New BUll Put Trade Shoud Expire this Month

2010-09-08T05:21:00.001-06:00

9/7/2010 The markets continue to rise which makes our open trade less risky. With only 10 days left it is now very likely that our RUT and IWM RUT Bull Put trades will expire worthless.

New Trades Expiring in May

2010-04-18T08:22:00.002-06:00

Our RUT and IWM Bull Put trades expired last week earning 4.2%. The market rose nearly everyday after these trades was filled in March. If we would have completed Iron Condor trades the Bear Call sides would have been closed early for a loss. Iron Condor trading works when markets are not moving in one direction.

With the market continuing to rise due to better than expected 1st quarter earnings we are going to continue trading on the Bull Put side in May. If this market is headed to 12,000 the call side will continue to be risky. Our new trade will be filled if the markets dip on Monday or Tuesday.

MMarch RUT Iron Condor Trade Rolled

2010-03-23T20:18:00.001-06:00

After we had our roll trade filled the RUT index kept rising. If you were not able to get the roll trade processed and filled please send me an email. By rolling the Bear Call side of the Iron Condor trade we prevented the need to close the Bear Call trade for a loss. However we earned a zero return for the month. In April I am only trading the Bull Put side because the markets are continue to rise.

New RUT Iron Condor Trade Expiring in March

2010-02-28T10:59:00.000-06:00

We had our RUT Iron Condor trade filled last week. The RUT index moved up and down each trading day last week but ended the week at 628 only 3 points less for the entire week. This is a perfect market for trading Iron Condors and if it continues we will have a very nice 5% return this month.

February Trades Expired March 19th

2010-02-21T12:36:00.003-06:00

Fortunately our February IWM and RUT Bull Put trades expired worthless because both of these indexes had final closing prices on the 19th well above our short options and our exit strike prices. After dropping below our exit prices earlier in February the indexes recovered nicely. Many subscribers had their open trades closed automatically. Others who did not close their open trade were lucky this month once the IWM and RUT indexes started rising again. Subscription fees have been issued for this trading cycle.

Last Trades for 2009 Expired Wortless

2009-12-20T20:38:00.001-06:00

Our last trades for 2009 expired worthless last week earning a very respectable 7.5% and 8.7%

I am very pleased with our YTD returns for 2009 and want to repeat this performance in 2010. We had 2 losing months that were more than offset with some winning monthly returns in the 8% range. I am also excited that our returns for 2009 was achieved with only 14 trades for the entire year. This means our trading costs were very low and should not be impacting our annual return percentage very much.

New Trades Expiring in December

2009-11-29T10:14:00.000-06:00

We have one month remaining. I want to finished with a conservative RUT and IWM Iron Condor trade earning 7.5% and 8.7%. I suspect the markets to fluctuate up and down in December with good and bad economic reports and sales reports from the Retailers.

CBOE's Virtual Trading System

2009-11-08T09:40:00.001-06:00

Visit the link to access CBOE's virtual trading system. This system is free to use by anyone and no brokerage account is needed. Paper trading is the best way to learn how to execute, track and manage stock and option trades. For both new and experienced options traders this system allows you execute trades associated with all the option strategies. I am recommending to all my new subscribers that they use this system during their 60 free trial to paper trade all my credit spread trades.

Also, the system CBOE is using is OptionsXpress's actual virtual trading system which is one of the best available on the internet for paper trading option strategies.

http://www.cboe.com/tradtool/virtualtrade.aspx

New Iron Condor Trades Expiring in November

2009-11-08T09:36:00.002-06:00

We now fave filled RUT and IWM Iron Condor trades earning 8% and 17% for a 30 day period. These trades are very safe with 12 days to expiration. The markets were dropping early in the week but recovered nicely and finished up for the week. There is not a lot of financial news over the next 2 weeks so the markets should be less volatile which is perfect for our trading strategy.

New Bull Put Trades Expiring in November

2009-10-25T13:32:00.000-06:00

The market continues to rise every week so for now I am trading a RUT and IWM bull put spread. If the markets drop next week I will research a safe Bear call trade to complete an Iron Condor trade with a 7% to 15% total return. If you have the Bull put trade filled and then complete a Bear Call trade later on you will not need any more margin.

Option Credit Spreads - Limited Risk with Limited Profit

2009-10-25T13:31:00.001-06:00

Options lose all of their time premium by expiration, which is referred to as time decay. Because they have no intrinsic value, out-of-the-money options expire worthless.

October Bull Put Trades

2009-10-12T12:25:00.000-06:00

Our open Bull Put trade will safely expire worthless this week on Friday the 16th. I really like earning 6% and 4% for a 30 day period trading credit spreads. This is easy money as long as we do not have more market crashes like we experienced in 2008. I will be emailing and posting to the members page a new trade expiring in November this weekend.

September Bull Put Trades Expired Worthless

2009-09-22T09:05:00.000-06:00

All our Index and ETF September Bull Put trades expired worthless last week earning 8.1% and 5%. The markets rose every week after these trades were filled. I expect the markets to continue rising so we will continue trading Bull Put trades.

August Trades Expired Worthless

2009-09-22T09:01:00.003-06:00

Fortunately the RUT Index final set was 576.88 so those subscribers who did not exit the call side of our Iron Condor trade were lucky and all their options expired worthless. But since the index did exceed our exit price of 570 earlier in the month many subscription exited the call side for a loss. By exiting early we eliminated any risk of being ITM (in the money) at expiration. Subscribers who also traded the 480/490 Bull Put were rewarded with an additional 5% return. Going forward when the market moves in one direction I will move up a spread trade to earn additional credits like we did this month with our Bull Put trades.

July IC Trades Expired Worthless on 7/17/2009

2009-07-20T14:58:00.000-06:00

Our open July Iron Condor Trades expired last week earning 3.3% and 8.1%. On top of the 5% to 8% returns we earned with our June and May RUT Iron Trades we have a very high return for 3 months that will rival anyone's 12 month return for all of 2009.

New Iron Condor Trades Expiring in July

2009-07-04T15:50:00.002-06:00

Our new Iron Condor trades were filled quickly on Monday June 22nd when the market dropped. I expect the market to keep going up and down for the next 4 weeks. Many companies will start reporting their 2nd qtr earnings. Some earnings will be good and some bad and some will be big surprises. This will cause the markets to see saw up and down.

April and May Iron Condor Trades Expired Worthless

2009-05-17T19:36:00.003-06:00

We have a very good 2 month trend with our RUT and IWM Iron Condor trades expiring worthless earning 4.2% and 8.1% in April and 8.1% and 8.7% in May. Our June RUT and IWM Iron Condor trades should continue this trend earning 7.5% and 9.3%. The markets are rising and falling each week but not changing much from month to month.

The RUT Index changed only 4 points during the May (479 to 475) option expiration cycle. The IWM Index did not change at all in May. This makes for a perfect market for trading Iron Condors.

New Iron Condor Trades Expiring in May

2009-04-19T15:01:00.000-06:00

Our April RUT Iron Condor trade expired worthless on 4/17/2009. This trade earned 4.1 % for just the 13 days the trade was open.

Our new Iron Condor for May will return 8.1% when filled this week. The markets have finally returned to a more neutral trading pattern making credit spread trading less risky.

New Iron Condor Trades Expiring in April

2009-04-05T17:24:00.001-06:00

Our new trades expires in just 13 days. The market continues to move widely up and down each week making it challenging to trade safely. I waited until there was only 2 weeks remaining to expiration to process a new trade. There is less time for the market to compromise our short options.

March Trades on Hold

2009-03-02T06:56:00.001-06:00

If you have not ordered this Iron Condor trade or Bull Put trade please hold off due to the continuing market sell off today. This market could be headed to 5,000 and less over the next few months. I will send a replacement trade later this week.

New Iron Condor Trades Expiring in March

2009-03-01T09:05:00.002-06:00

We are starting the new year with two successful trading months. I am very excited that our filled Iron Condor trades expire on Feb 20th. The return on these trades was 6.4% and 11.1%.

We have a new 5.3% and 11.1 RUT and IWM Iron Condor trade expiring in March. These trades should be filled this week. With just 19 days remaining to expiration this is an excellent return for just 3 weeks.

February Trades - Expired Worthless 2/20/09

2009-02-21T08:23:00.002-06:00

All trades expired worthless this week. We have started off 2009 with 2 winning months i a row. Our February RUT and IWM Iron Condor trades earned 6.4% and 11.1%. With the markets sinking again I will be trading the Call side of the market in March.

February Trades - Update 2/14/09

2009-02-14T11:06:00.000-06:00

It looks like we are starting the new year with two successful trading months. I am very excited that we have a filled Iron Condor trade that should easily expire next week on the 20th. The markets no longer have wild trading days of 500-700 point swings. Although the markets are trending down this month our bull put trade is very safe. A small slow steady decrease over a week or two will not cause our conservative bull put trades to be risk. Next weekend after Friday's expiration I will email and post to the members page a new trade expiring in March. If the markets continue to behave like they have been in 2009 we should have many more conservative Iron Condor trades that expiring in the months ahead.

February Trades - Update 2/2/09

2009-02-10T06:42:00.000-06:00

Our January Bear Call trade expired worthless earning 3.1%.

With only 10 days remaining to expiration our RUT and IWM Iron Condor open trades remain very safe. We are going to have a very respectable 6.4% and 11.1% returns this month. The markets are finally trading in a neutral pattern this month. This is a perfect pattern for credit spread trading.

Iron Condor Trade Should be Completed Next Week

2009-01-25T12:47:00.003-06:00

We have new orders for Bear Call trades this weekend. When these trades are filled we will complete our RUT Index and IWM ETF Iron Condor trades. These trades are returning 6.4% and 11.1%.

It's been many months since we successfully completed an Iron Condor trade. One big advantage of an Iron Condor Credit Spread trade is that option brokers only require margin for one side of the trade. This allows you to earn some very high rates of returns over a 30 day period.

February Trade Filled

2009-01-24T16:11:00.001-06:00

On the new President's first day in office the market rose more than 200 points. The markets are going to have lots of good news over the next 3 weeks so I feel very confident in trading the Bull side of the market this month. If the market retracts with 2 weeks remaining I will look for a safe RUT Bear Call trade in order to complete an Iron Condor.

January Trade Expired Worthless on 1/16/09

2009-01-17T08:48:00.001-06:00

Our January Bear Call trade expired worthless this week. A new tirade will be emailed and posted this weekend. Unfortunately Bull Put trades are to risky so we are not able to complete Iron Condor trades. The markets are continuing to drop each week so all we can safely do is keep trading the call side.I am still bearish and only want to trade the call side.

December Trade (Expired on the 19th)

2009-01-17T08:46:00.000-06:00

The market increased enough to cause our December trade to be compromised and closed when the RUT Index value touched 470. If you did not exit this trade your options expired worthless on the 19th. Trading credit spreads 30 days out is very tricky because this market continues to be very volatile. It's very hard to predict the direction of the market on any given day. Bad news occurs every day as firms announce layoffs and shutdowns. The credit markets are still very tight, even for folks wanting to re-finance or buy a home. Even though long term interest rates are at historic lows credit scores have to be very high in order to qualify. Subscription fees are being refunded next week. A new trade will be emailed and posted early next week.

December Trades - Update

2008-12-07T13:35:00.001-06:00

With only 12 days remaining to expiration it is very hard to predict the direction of this market. The trade we opened on 11/23 could quickly become un safe and have to be closed next week. The market is so volatile making it hard to know what direction and how much stock prices will move each trading day. The hedge funds are executing their orders at the end of each trading day causing huge swings in the last 60 minutes. All the news is very bad and every other business article includes a reference to the recession our country is experiencing. The debate is how long and how severe this recession will be.

November Trades Expired Worthless

2008-11-23T11:54:00.003-06:00

Our November RUT and IWM Bear Call Trades expired worthless this past Friday earning 3.1% and 5.8%. Our new Bear Call trades expires in 27 days on 12/19/2008 and will also earn 3.1% and 5.8%. If we can get this trade filled early next week before a major drop then we could have a very safe trade that expires worthless. I am only trading one index on the call side this month. Since all the indexes are moving in tandem now it only makes sense to trade one index.

November Trades

2008-10-26T20:45:00.000-06:00

The market is projected to continue dropping the remainder of 2008 and into 2009. The cost to short this market (buy put options) is very expensive. In the past we could buy put options for $10 and less each. Now the farthest away put options are $30. This months trade is a RUT Bear Call trade that expires in 27 days. If we can get this trade filled early next week before a major drop then we could have a very safe trade that expires. Also, I am only trading one index on the call side this month. Since all the indexes are moving in tandem now it only makes sense to trade one index. I have received many emails requesting fewer trades so now is a good time to start. Plus we will reduce our trading fees processing one spread trade, or one Iron Condor trade when they are safe, each month.

Bull Put Trades Expiring in October must be Closed

2008-10-05T20:58:00.001-06:00

With the markets in the US and now all over the world dropping we must close all our Bull Put spreads. Subscribers who had their trades closed automatically with a stop loss order are OK this weekend. Others have 2 options.

1) If you have the funds buy back the short option you sold on Monday and keep the long option open. The long options will grow in value as the market drops and can be sold for a profit that will more than cover the cost of buying back the short option.

2) Exit the entire bull put trade for a net loss. Unfortunately their are no save trades to roll to and the premiums on Bear Call trades are very low.

The only relief that will might stop the markets from dropping is an interest rate cut next week. Below is a text being included in many market updates this weekend:

Roberts and other market watchers say it's possible that the Fed, and perhaps other central banks, could cut interest rates this week — ahead of the central bank's scheduled meeting at month's end — if the credit markets don't show signs of life. With oil prices well off their midsummer highs and indicators pointing to a slower economy, the Fed's worries about inflation are less than they had been, making it easier to justify a rate cut.

We were in a Bear Market but now it is worse with bank failures and a major credit crisis. The Dow is expected to keep dropping for the remaining of the year reaching 9,000 or lower. The only safe option trades that can be completed are Bear Call Credit Spreads and the purchase of DIA and SPY put options. Iron Condor trades cannot be completed in a market like we are experiencing now. I will be refunding all subscription fees since we are realizing a net loss for a second month in a row.

Update on October Open Trades Expiring in 17 days

2008-09-28T20:59:00.000-06:00

The markets continue to be very volatile and challenging to trade. This month we have been trading a solar company stock that is very Bullish due to favorable legislation passed earlier this month. These Bull Put trades are retuning 8% to 9%. Next week we will complete an Iron Condor returning 15%. I rarely trade stocks but this month an excellent trading opportunity occurred that was hard to pass on. At least we are making a positive return while the market decides what direction to take. This financial crisis and how the US plans to stop the failure of more firms is keeping investors on edge.

September Trades Expired Friday 9/19/2008

2008-09-21T09:09:00.001-06:00

The past 2 weeks have been very challenging. With the market clasping quickly. We had to close all our NDX and QQQQ Bull Put credit spreads for a loss. Our QQQQ hedge was closed to early for $5 a contract instead of $15 a contract if sold during the last week of expiration. Subscription fees will be refunded next week.

New Trades Expiring in October will be emailed later today and earl next week.

Hedging

We are going to hedging (buying calls and puts) on both sides of our Iron Condors from now on. The best time to put on a hedge is when you get a tip off that the market is ready to get worse or better. This is not easy to do but is practiced buy a lot option traders. I like buying FOTM call and put options that cost $2-$3 per contract like we did this month. Subscribers who held off selling their qqqq to this week recovered a portion of their loss from selling the NDX Bull Put credit spreads. The key is to invest 10% to 30% of your collected credits in these FOTM call and put options. This is just like buying insurance.

Close Strategy

There were a few subscribers who brought back their short NDX put options first. When they sold their long options they were able to cover the cost of closing their short options and prevent a loss. This was one of the adjustment options I posted on the members page for the NDX 1725/1700 Bull Put trade. In order to implement this strategy you must have trading capital available to pay for the short options.

Update on Open Trades Expiring In September (19th)

2008-08-30T13:46:00.000-06:00

The markets were up and down again last week. The indexes we have open trades with are hovering and not causing any concerns. All our Bull Put trades have lots of distance and are very safe this weekend. We also have a hedge trade in place in case the market crashes. It would make sense to hedge the call side if the market starts moving up on a consistent basis. But this market continues to go up and down with the net effect of not changing very much. Our hedge on the Put side is very necessary because a market crash could occur at any time causing the market to drop 8%-12% in just a few days. This is also why we should have contingent stop loss orders in place to automatically close our Bull Put trades. We should be able to manually sell the Put options for a big profit after the market drops. The markets will never rise 8% to 12% over a few days but it could over a few weeks. At the beginning of an uptrend we would buy some call options if we have any Bear Call trades open.

We are doing very well collecting multiple credits on the NDX index this expiration period. I really like this index because these 100 companies are making profits and not losing billions due to the credit and mortgage crisis.

Update on Open Trades Expiring In September (19th)

2008-08-28T07:15:00.001-06:00

Our replacement NDX Bear Call trade filled this week so now we have a completed NDX Iron Condor trade filled earning 7.3%. These markets are still volatile and very sensitive to news and oil prices but moves in both directions so the net effect is neutral. A neutral effect is perfect for credit spread and Iron Condor trading. Our hedge trade has not changed in value this week but is in place to grow in value in case the market crashes. If the market does not crash but drops 3% or more in September we might be able to sell this Put option the week of expiration to break even or earn a profit.

Trading Capital Allocations

2008-08-24T12:14:00.002-06:00

This is a hypothetical example of allocations that conservative options traders might consider:

1) Total Investments: $1,000,000 (IRA’s, Mutual Funds, 401K’s)

2) 10% Amount Allocated to Credit Spread Trading: $100,000

3) 65% of my Credit Spread Trading Account Allocated to new trades each month: $65,000

4) 35% of my Credit Spread Trading Account Account kept in reserve for possible adjustments: $35,000

September NDX and RUT Trades - Allocation of $65,000:

77% to NDX 25 point Bull Put Trade (20 contracts): $50,000 (77% of 65,000)
23% to RUT 10 point Iron Condor Trade (15 contracts: $15,000 (23% of 65,000)

I place all my new orders on the Saturday following expiration Friday. So I would have placed and order for 20 NDX 25 point contracts and 15 RUT 10 point contracts.

The percentages above are averages but very close to my actual experience. Some months when I feel the markets are trading in a more neutral pattern I will use 80-90% of Credit Spread account for new trades. I also use 10% of my collected credits to hedge my trades. I like buying QQQQ or SPY short term puts and calls for $1 to $2 per contact for insurance in case the market crashes or increases by 10% quickly.

Weekend Trade Alert Update - September Trades

2008-08-22T21:24:00.001-06:00

The markets moved widely again this week. Our open trades are very safe this weekend even after these big moves up and down.

The good news is now we have a hedge trade in place. Today we had our QQQQ put orders filled when the markets rose. These $2 contracts will be worth $5 to $10 each if the market drops and our stop loss prices are reached. If the market does not crash due to a black swan event these $2 options would expire worthless. Over a 12 month period these hedge trades will expire 6 times (months) and be sold for a profit 6 times. But in the event of a big crash they will increase in value very fast and be sold quickly for a windfall profit that should more than offset any losses incurred closing any open Bull Put trades.

All August Trades Expired Last Weekl

2008-08-16T13:21:00.001-06:00

All our Index Bull Put trades expired worthless on Friday the 15th. We earned 4.3% this month on all these trades. So far for all of 2008 (8 months) our total return for all 32 trades is 22.8%. My goal is to finish the year with a total return of 40%. This can be achieved if we earn an average of 4.3% in each of the next 4 months (Sept, Oct, Nov Dec).

Our 2 ETF Iron Condor trades expired worthless on Friday the 15th. I will be refunding all paid subscription fees received during this trading cycle (7/19 to 8/15) next week. We had to close the rollover ETF Bear Call trade for a loss which was not offset by the credits received on the 2 Iron Condor trades.

The weekend I will be emailing and posting to the members page new trades expiring in September.

Subscriber Limit Reached - Fee Increasing To Limit Growth

2008-08-09T16:41:00.003-06:00

The Index and ETF Subscriber bases are limited and these limits will be reached later this month. The subscription fee is being increased later this month to $95 to limit this growth. Existing subscribers will always pay the lower fee they subscribed to. I limit the number of members due to the fact that too many subscribers trying to execute the same trade at the same time creates heavy volatility in the option price. I also want to keep the subscriber base at this level to insure I achieve these important goals:

1- Providing the best customer service possible.
2- Making each subscriber feel like the only subscriber.
3- Helping subscribers attain the goal of financial freedom.

Update on Open Trades Expiring In August (15th)

2008-07-29T19:06:00.002-06:00

Index 7/29/08 Update: We have 3 Bull Put Trades filled with 18 days remaining to expiration on August 15th. I hope to complete Iron Condors later this week. The new Bear Call trades would not require any additional margin so our returns would double.

ETF 7/29/08 Update: We have 3 ETF Iron Condor trades expiring in August returning 5.3%, 5.8% and 5.8% each. The trades are safer and have more distance than my past trades.The markets are still very volatile and prone to wild 200+ daily swings. Most news continues to be negative and the price of oil continues to move the markets up and down.

All July Trades Expired This Weekl

2008-07-19T20:11:00.003-06:00

All July trades expired worthless on Friday the 19th. The Index trades earned 4.9% and the ETF Option Trades earned 5.5%. These trades were very challenging. The markets dropped fast in May and again in June. Then they recovered and dropped again. Trading Iron Condor’s in a Bear Market is not easy but achievable if the trades are conservative. We successfully rolled 2 Bull Put trades to new Bear Call trades that expired worthless. We also rolled 1 ETF Bear Call trade to August for just $1 per contract which is very low. I really like rolling ETF trades because the cost is minimal and you can keep rolling until the options expire worthless.

My August trades will be very conservative with lots of distance. When this Bear Market is over trading Iron Condors will be much easier and more profitable.

Paper Trading Credit Spread Option Trades to Learn

2008-07-14T20:28:00.002-06:00

Paper trading using one of the many virtual trading systems provided by option brokers including CBOE, is so important if you have never traded options. This is especially important trading credit spreads, like Bull Puts and Bear Calls and ultimately Iron Condors. These are special strategy trades that must that must be fully understood before trading with your own funds. You must practice entering, closing and adjusting Bull Put and Bear Call spread trades. You must fully understand an Iron Condor trade and the requirements for making sure your broker only applies margin to one side of this 4 legged trade. And most important you must practice closing these spreads and rolling to new spreads when trades go against you.

To get started you should establish a virtual trading account with your broker or just use CBOE’s free system. You must practice all types of credit spread trades like:

Entering new trades using the current bid.

Entering new trades using limits that are higher than the bids, like ½ of the bid/ask or midpoint. Then shave 5-10 cents off this midpoint.

Enter stop loss orders to close profitable spread trades for 10 cents or less freeing up margin for new trades.

Practice adjusting Bull Put and Bear Call credit spreads. You should close and roll to new credit spread trades to collect another credit. This is the most important one to practice and master before committing your own funds.

The 4 types of trades above should be practiced many times over for a period of 2 to 3 months. Never enter into one of these specialty options trades using your own funds until you completely understand all the risks. You must have an exit plan and know exactly what to do when a trade goes against you.

Once of the huge advantages you have with option spreads is that you can breakeven when a spread trade has to be closed. This is accomplished by adjusting, or rolling, to a new spread trade to collect a new credit. Sometimes this new credit offsets, or exceeds, the debit you incurred closing your original spread. This is a key risk management procedure that you can master paper trading. Once you complete a few of these rolling trades you will really get excited about trading credit spreads and be able to protect your monthly cash flow so that you are always adding net credits to your account.

New subscribers to my advisory service can play Flash Movie files that illustrate how each of these trades are processed. They also can paper trade for as long as they want. I will extend the free trial of a new subscriber an additional 60 days if they want to keep paper trading.

OptionsHouse - A Very Good Options Broker

2008-07-14T20:21:00.002-06:00

A new option's broker,OptionsHouse, continues to have the lowest commissions of all the option brokers. They are charging only $9.95 for each leg of a trade and nothing for each contact. If you trade 10 contracts, 20 contracts or 100 contracts per leg your total commissions is only $9.95 and nothing more. A credit spread trade is two option legs and costs only $19.90 no matter how many contracts are traded. This is a significant savings if you are trading 5 or more contracts. When you are paying only $19.90 per credit spread trade, or $39.80 per completed Iron Condor trade, you can achieve a decent 3% and better monthly return. I am very pleased that this broker has come along because I want my subscribers to earn a maximum net profit on each trade.

I have set up my trading account with this new broker and have started creating Flash movies to illustrate how to order, protect and close Bull Put and Bear Call credit spread trades on the stock indexes.

Trading Career

2008-06-22T19:58:00.001-06:00

Trading as a career attracts most investors. At some point, a trader who is profitable will think that this may be the time to become a full time trader. Trading promises a life that is filled with freedom. If you can trade well, you can live and work anywhere in the world without the need to report to anyone, the need to manage anyone, and the ability to break away from routine. You have no boss, no customer, and no working schedule.

A good way to start is to begin devising a plan to pay off all your debts and to save enough money to live for at least 12 months without any income. The sooner you can clear your debts, the faster you will achieve financial independence. It will be challenging to begin a trading career when monthly bills and debt repayment are a constant lingering in your mind.

Successful traders make plenty of money from the market but are extremely careful with their money. Managing your personal finances well is the first crucial step as it provides you the necessary skill to manage your trading account in the same manner. A successful trader will always approach the market with a clear rational mind for maximum gains while minimizing risk and losses.

All June Trades Expired This Weekl

2008-06-20T21:35:00.002-06:00

Index and ETF 6/20/2008 Update: All open trades expired worthless today. This is the 5th month in a row that all the Index and ETF trades expired worthless. I want this trend to continue so that we have a decent 30% or better return for the year.

What are the disadvantages of this option trading strategy?

2008-06-15T19:56:00.002-06:00

Because I only place two to four trades a month and a majority of them I leave untouched until expiration, my style is a little boring. But that’s what I like………steady……..boring…….income…….month-after-month. The other issue most traders have is the concept itself. It’s not commonly taught to the public and that’s why you don’t hear too many main street investors using it. It’s been used by professionals for years to generate income but not by the retail investors/traders. Once your account grows like mine, you won’t mind the boredom.

Market Conditions - Are they really important?

2008-06-15T19:51:00.002-06:00

The beauty of credit spreads is that they work in a bullish, bearish, and sideways markets. It’s amazing that sometimes even when the trade is wrong, we still can be profitable. That’s because we leave ourselves lots of cushion in our trades. Keep in mind that past performance does not guarantee future results, but how else would you evaluate any trading system? Remember, the professionals are option sellers not buyers. That’s why close to 80% of all options expire worthless. My subscribers are the sellers looking for that high percentage trade and income month-after-month.

Update on Open Trades Expiring In June (20th)

2008-06-15T16:27:00.001-06:00

Index and ETF 6/15/2008 Update: The markets recovered nicely last week and now the filled June trades should safely expire in 5 days on the 20th. I have posted and emailed new new trades expiring in July this weekend.

Update on Open Trades Expiring In June (20th)

2008-06-08T09:02:00.001-06:00

INDEX 6/8/2008 Update: The 3 filled June Bull Put trades continue to be very safe with only 13 days remaining to expiration. We were able to complete one Iron Condor trade last week when the RUT Bear Call trade was filled. This Iron Condor has a return of 6.4%. Even though the Dow dropped 400 points one day last week the Bull Put trades are still safe with lots of distance remaining. I am researching new trades expiring in July later this week after the market settles down from the bad economic news and record oil and gas prices last week.

I am creating new flash movies this month to illustrate how to select and order credit spread trades using OptionsHouse. These movies will be playable from the members flash movie page. This broker is very popular now and continues to add new features. Their fees are the lowest of all the options brokers and my trades are getting filled quickly when the markets cooperate.

ETF 6/8/2008 Update: The 3 filled June Iron Condor ETF trades continue to be very safe with only 13 days remaining to expiration. Even though the Dow dropped 400 points one day last week the Bull Put trades are still safe with lots of distance remaining. I am researching new ETF trades expiring in July later this week after the market settles down from the bad economic news and record oil and gas prices last week.

Update on Open Trades Expiring In June (20th)

2008-06-01T09:30:00.000-06:00

INDEX Update: The 3 filled June Bull Put trades are safe with only 20 days remaining to expiration. This weekend 2 new June Bear Call trades have been emailed and posted to the members page. When these trades are filled we will have 2 Iron Condor trades completed earning 6.4% and 8.7% each. These are the returns I expect to when completing Iron Condor trades.

ETF Update: The 3 filled June Iron Condor ETF trades very safe with only 20 days remaining to expiration. I am very pleased with the 9.9% return on the SPY Iron Condor trade this month. I am researching new ETF trades expiring in July next weekend.

Option Credit Spreads - Limited Risk with Limited Profit

2008-05-26T21:31:00.001-06:00

Options lose all of their time premium by expiration, which is referred to as time decay. Because they have no intrinsic value, out-of-the-money options expire worthless.

Update on Open Trades Expiring In June (20th)

2008-05-25T12:47:00.003-06:00

INDEX Update: The 3 filled Bull Put trades are safe even though the markets were down last week. If the markets continue to trend in this one direction we will close these trades early and open new trades. These are the first half of 3 Iron Condor trades I want to complete next week. indexspreadoptionstrading.com

ETF Update: The new trades expiring in June are very safe and have a very high probability of expiring on June 20th. The June SPY Iron Condor trade is earning 9.9% which is the highest returning trade so far this year. etfoptiontrades.com

Selecting Strikes for My Option Trades

2008-05-18T19:49:00.002-06:00

I select strikes using two tools:

1. Technical Analysis
2. Probabilities

1. TA- In the case of bull put spreads, I look for support points and lows within the past 52 weeks and start with strikes outside of the range.
2. I use powerful models for probability calculations and look for strikes that have a 90% or better chance of expiring worthless.

My goal here is to simply collect premium month to month. Using FOTM put and call spreads is a way I can do it without predicting the market for the month. In any given month, the market can move higher, sideways, or significantly lower and I still have a profit. In my view I am trading without concern over market direction except for a major crash lower. During a crash my contingent stop loss orders would be triggered and my Bull Put spread trades in trouble automatically closed.

All May Trades Expired Last Weekl

2008-05-18T09:14:00.000-06:00

The 2 RUT Bull Put trades and our NDX Iron Condor expired worthless last week. This month we earned 8.7% on the NDX trade. The markets appear to be settling down to a more normal trading pattern of slowly rising. This pattern is perfect for Iron Condor trading when the trades are safe with a lot of distance.

New trades expiring in June will be emailed and posted this weekend. We had one June DIA Bull Put trade filled last week.

Update on Open Trades Expiring This Week (May 16th)

2008-05-13T20:55:00.001-06:00

The 2 May RUT Bull Put trades and our May NDX Iron Condor are safe and will expire this week. The 8.7% return on our NDX Iron Condor is the highest return on a trade this year. I will try and repeat this performance with the June trades I will be posting and emailing this weekend.

Benefits of Index Spread Trading

2008-05-09T19:56:00.001-06:00

Benefits of Index Spread Trading

1) Credit spread trading is a simple, safe, and stress-free type of trade that does not require a great deal of monitoring. You just place the trade, collect the credit, and wait for the options premiums to decrease or expire worthless. Minimum time is required to process and track these credit spread trades.

2) You receive the proceeds of each credit spread trade immediately when your order is filled and you keep these proceeds no matter what happens.

3) The credit spread has two primary advantages as an income generating strategy. First, the position benefits from time decay. Since options decay in value with the passage of time, the value of the credit spread will in turn decay over time. By writing a credit spread, you are selling a decaying asset and receiving a credit or a premium up front. If the underlying market remains stable until expiration, the spread expires worthless, allowing you to keep the premium received. In a sense, you profit from the passage of time.

4) The credit spread also allows you to benefit from market movement. If one writes a bullish credit spread using puts, the value of the spread would rapidly decline as the market moves higher. The converse is true for bearish call spreads. With this flexibility you can inject an element of trend following into your trading program to increase your odds of success.

5) Gains on stock index spread trades are considered ITC Section 1256 contracts. This means any gains made in these trades are taxed under a 60/40 rule. This rule states that gains are treated as 60% long-term capital gain income and 40% short-term capital gain income (ordinary income) regardless of how long the investment was held. So when we hold a index spread trade for 30 days (our average holding period), 60% of the profit made from that trade is treated as long-term capital gain income and taxed at 15% or 5%.

6) Trading capital is only used to support margin requirements when trading credit spreads. Most option brokers allow you to invest your trading capital elsewhere to be used as collateral for spread trading. Trading capital can be invested in closed-end funds that pay dividends monthly and are diversified across munis, preferreds, REITs, corporate bonds, floating rate loans, convertible bonds and other fixed instruments. Between the dividend yield and capital appreciation you can earn 7%-10% annually. Most brokers allow you to margin 100% of cash amounts, 90-95% of t-bill amounts and 50% of the stock amounts like closed-end funds.

Update on Open Trades Expiring In May (16th)

2008-05-09T19:46:00.002-06:00

All open May trades will be expiring next week on the 16th. The markets have really settled down and now seem to heading back down. News around the world is not good and the price of oil and gas are increasing at an alarming rate.

All Open April Trades Expired on the 18th

2008-04-06T10:22:00.001-06:00

The 3 April trades opened in March expired on the 18th. The March roll trades expired in the money due to the increase in the market indexes. Refunds (3 months) are being remitted to subscribers who had these roll trades exercised.

All March Trades Expired on Thursday the 20th!!!!!

2008-03-21T17:45:00.001-06:00

All 3 Iron Condor trades and our SPX Bear Call trade expired worthless. Even though the markets rose and fell by 200-400 points during the holding period our trades remained safe and have now expired. I am very happy with the 5.8% monthly performance.

I am researching and will be emailing & posting new trades expiring in April this weekend. I also have the Bear Call RUT, NDX and SPX roll trades to monitor and possibly roll again if the markets continue to rise.

Update on Open Trades Expiring In March (21st)

2008-03-20T05:57:00.002-06:00

All 3 Iron Condor trades are expiring worthless today. They were executed 3 to 4 weeks ago before the markets started going up and down 200-400 points. These Iron Condor trades are earning 7% this month. This is been one of the highest returning months ever. New trades expiring in April will be emailed and posted on the Members page this weekend.

Update on Open Trades Expiring In March (21st)

2008-03-08T19:03:00.000-06:00

The markets are bearish again like in January and could continue dropping. Last week we exited the RUT Bull Put trade and recovered the cost to close this trade by rolling to a new RUT Bear Call trade expiring in April. We have eliminated any risk of a loss if the RUT Index continues to drop. We will exit the NDX and IWM Bull Put trades the same way next week if these indexes continue to drop. We will not incur any losses this month.

The SPX Bull Put was never filled last week for .30 cents and is now canceled. With the markets continuing to drop all new Bull Put trades are very risky.

Update on Open Trades Expiring In March (21st)

2008-03-02T18:37:00.000-06:00

With 3 completed Iron Trades filled already this month I want to complete the SPX Iron Condor next week. The SPX Bull Put trade, I am ordering and posting to the Members page this weekend, has an 85% probability of expiring worthless in 19 days. When filled this SPX Iron Condor trade will return 6.4%. The high volatility of the indexes has caused the option premiums to rise to levels I have not experienced in a long time. This is why our completed Iron Condor trades have such high returns. Whenever we can realize a return higher than 5% we are having an exceptional month.

Update on Open Trades Expiring In March (21st)

2008-02-27T22:17:00.000-06:00

I am excited that I have 2 orders placed for 2 very safe Bull Put trades. When these orders are filled this week we will have 2 more Iron Condor trades completed with returns of 7.1% and 6.9%. We already have the IWM Iron Condor trade completed and this trade has a 7.5% return.

Update on Open Trades Expiring In March (21st)

2008-02-24T11:52:00.007-06:00

All filled and open Bear Call trades are safe and should be expiring on the 21st. I have initiated 2 new trade orders this weekend.

Website and Advisory Service

2008-02-18T15:09:00.000-06:00

I began this website and advisory service after years of trading credit spreads in my own accounts. Since I am now a full-time trader, I would be entering these same trades regardless of this website. But after years of my own success, I decided to try to help others obtain financial freedom on their own while hopefully educating them along the way. There are a number of other sites that kick out tons of recommendations every month but never actually enter the trades themselves. That’s why I offer a FREE 60 day trial and even post my track record for you to see the difference in my site.

My Advisory Service is Unique in 3 Ways !

2008-02-18T15:08:00.000-06:00

1) You can try my service for 60 days, or 2 full months, before paying any subscription fees. I suggest you paper trade all the trade alerts I email and post to the members page during this trial. If you have any questions about how to process these trades I want you to send me an email. I will do my best to help you including sending you a flash movie with audio instructions illustrating the type of trade or trades being questioned.

2) And if you feel you need a little more time to try my service just send me an email and I will extend your trial an additional 60 days or however long it takes. I want every new subscriber to know exactly what they are doing before they start trading credit spreads and Iron Condors live with their own funds.

3) I reimburse all subscription fees when I have a losing month. This will be a rare occurrence because all my trades are implemented with very strict risk management strategies.

Update on Open Trades Expiring In March (21st)

2008-02-17T22:14:00.001-06:00

With the markets projected to be down next week we are only trading Bear Call trades to be safe. If we can get these trades all filled, and the markets starts dropping, these trades will be very safe. The next step will be to open Bull Put trades in the next 2 weeks to double our return. When the markets return to a more neutral trading pattern we will be able to open all 4 legs of an Iron Condor trade like we did the majority of months in 2007 and 2006.

All February Trades Expired Worthless Last Weekl

2008-02-17T22:09:00.002-06:00

I am very pleased that the conservative trades this month all expired. These were very safe trades which is why the monthly return was 4.1% ($158/$3,842). This market is still very volatile so earning 4% is OK in my play book. My goal is 5% a month which I can achieve when completing at least 2 Iron Condor trades in a month. This month we had one Iron Condor trade completed.

Auto Trading will be Offered Soon !!!!!

2008-02-10T18:29:00.000-06:00

OptionsHouse has been my choice for auto trading but with the market meltdown last month I had to change my priorities. Later this month I will again be focus on auto trading. I just added the OptionsHouse link to my Getting Started page this weekend and a have a meeting with this broker next week. The majority of new subscribers are setting up accounts with this broker. This is why I am including a screen print of all my OptionsHouse orders on the members page. This is the best way I know of to illustrate new trades. Auto trading will be a reality soon.

My Trading and Risk Management Philosophy:

2008-02-09T21:01:00.000-06:00

I select strikes using two tools:

1. Technical Analysis
2. Probabilities

1. TA- In the case of bull put spreads, I look for support points and lows within the past 52 weeks and start with strikes outside of the range.

2. I use simple models for probability calculations and look for strikes with around 90% or better chance of expiring worthless.

My goal here is to simply collect premium month to month. Using OTM put and call spreads is a way I can do it without predicting the market for the month. In any given month, the market can move higher, sideways, or significantly lower and I still have a profit. In my view I am trading without concern over market direction except for a major crash lower.

CBOE Virtual Trading - Free, Easy and Educational

2008-02-09T20:59:00.000-06:00

Visit the link to access CBOE's new virtual trading system. This system is free to use by anyone and no brokerage account is needed. Paper trading is the best way to learn how to execute, track and manage stock and option trades. For both new and experienced options traders this system allows you execute trades associated with all the option strategies. I am recommending to all my new subscribers that they use this system during their 60 free trial to paper trade all my credit spread trades.

Also, the system CBOE is using is OptionsXpress's actual virtual trading system which is one of the best available on the internet for paper trading option strategies.

http://www.cboe.com/tradtool/virtualtrade.aspx

Update on Open Trades Expiring In February (15th)

2008-02-09T18:08:00.000-06:00

Only 5 days remain and our open trades are all safe. Even with a market surge up or down next week our trades should expire worthless. The total return for February will be 3.2% ($158/$4,892). I will be posting a few new trades expiring in March later this weekend.

Update on Open Trades Expiring In February (15th)

2008-02-03T10:43:00.000-06:00

Only 12 days remain and our open trades are all safe. If the markets start surging up and down next week I will email and post adjusting trades to roll open trades in trouble. We are closing/exiting open trades much earlier now.

Update on Open Trades Expiring In February (15th)

2008-01-26T10:01:00.000-06:00

Only 21 days remain, and the markets are not surging up and down anymore. Our conservative trades that are filled and the new trades below are fairly safe. The interest rate reductions and positive earnings reports has lessened investor’s fears of a recession and brought back buyers looking for bargains. The RUT Index and IWM ETF index are the safest index’s to trade this weekend so I have posted 2 new Bull Put Spread trades with returns of 4.3% and 3.4% on the members page.

New Trades Expiring in February

2008-01-20T09:39:00.000-06:00

I am only trading new Bear Call spreads this weekend and next week. I feel the markets will continue to drop until the Federal Reserve lowers interest rates and even then the markets might still trade lower. This is a bear market now with sellers dominating the trading volume each day. The only safe strategy now is to trade against this trend. This is why I am only trading on the call side. These new trades are very conservative with smaller returns than in past months. I will try and complete Iron Condor trades for each of these 3 indexes only if the Bull Put trades are safe and 15 days or less are remaining.

For each new trade I will include a screen print of the exact OptionsHouse order ticket I processed today. I am doing this so that the details of the trade are clearly understood. It’s very important that you are selling and buying the correct options. I am also including a 2 point SPY ETF Bear Call Trade. Each point requires $100 in margin so each contract for this trade will require $200. We are trying to get an $8 credit per contract so the return on this trade will be 4.2% ($8/$192). Be aware that you will have higher brokerage fees trading these 2 point ETF’s credit spreads. This is why many subscribers who are trading ETF spreads are opening accounts with OptionsHouse. This broker only charges $9.95 per options leg, or $19.90 per spread trade, no matter how many contracts you trade.

New Risk Management Strategies

2008-01-13T12:27:00.000-06:00

The markets are very volatile now and this makes Iron Condor Trading very challenging. My strategy is to make money every month but in early 2008, and probably most of 2008, this strategy will included these risk adverse steps:

1) Exiting open credit spread trades and Iron Condor trades when 80% of the return has been realized. For example if we open a trade and collect $20 a contract we will exit the trade when the debit, or ask, is $4. By exiting a trade early we eliminate any risk of the trade ever becoming ITM (In The Money) due to a market surge. I will be detailing the GTC exit trades we can process with our brokers that will automatically close these trades when 80% of the profit has been realized. This GTC exit trade is in addition to the contingent stop loss order that also automatically closes the trade when the index reaches and touches a trigger price.

2) Immediately after exiting a trade we will enter a new trade. Since our margin is released and we can enter into a new trade expiring in the same or next month. When we enter a new trade expiring the same month we earn an additional credit for the month. When you can enter a new trade 40-50 days away from the next expiration date in the next month you can earn a higher return because there is more time.

The key to steps 1 and 2 is to exit trades early so we eliminate any risk of trades being ITM in the future. This is a conservative strategy that is used by successful full time traders. Leaving trades open to expiration is very risky in a volatile market like we have now.

3) When the markets start a downward trend we will invest a portion of our credits in ETF Put options. Buying Put options when the markets start dropping is like buying insurance. I am creating a tutorial detailing this hedging strategy and will be posting these Put trades in future months. The only folks making money in the markets now are those who shorted the indexes and this is what we will be doing from now on to protect our losses.

Because we will be trading more often you have to use a broker that has low fees. Many subscribers are now using Optionshouse to process all their trades. They only charge $9.95 per leg no matter how many contracts you trade.

For February and beyond (2008) the monthly returns net of trading fees might only average 2%-3% and not 3%-5%. With the US close to entering a recessionary period we must implement these risk adverse steps to protect ourselves from realizing any losses. If we can make money every month when the Dow and S&P stocks are trading at historic lows we are doing OK. Someday in, maybe 2009, the markets will return to a normal, or neutral, trading pattern. This is when we can enter Iron Condor trades and forget about them because they expire worthless month after month.

This is much more material covering these steps that I will be emailing and posting on the members page throughout January and February. I want subscribers who lost money this month to have the opportunity to recover with an improved risk adverse options trading strategy. We all can benefit in the long run from these recent events as long as we modify our trading strategies and manage risk more effectively.

Update on Open Trades Expiring In January (18th)

2008-01-13T09:30:00.000-06:00

When the markets drop day after day we have to do what we can to prevent a max loss. We all did one strategy and that was to close out our trades at risk. The other strategy that we did not do and will do in the future is invest a portion of our credits in ETF Put options. If we had done this 2 weeks ago our gains on these Puts would help offset a large portion of our losses. Buying Put options when the markets start dropping is like buying insurance. I am creating a tutorial detailing this hedging strategy and will be posting these Put trades in future months. The only folks making money in the markets now are those who shorted the indexes and this is what we will be doing from now on to protect our losses. In February I will only be trading new Bear Call trades in the beginning. I want to make sure the this market has at least started trading normally and not dropping. If it continues dropping we will be buying Puts, and or debit spreads, to short the market as well as Bear Calls.

Subscription fees collected by PayPal for January will be ((12/22/2007 - 1/18/2008) will be refunded this week. Look for emails from PayPal detailing these refunds.

Update on Open Trades Expiring In January (18th)

2008-01-08T22:16:00.001-06:00

Unfortunately it is time to exit all our Bull Put trades and wait for the market to settle down. For those you have rolled to new February trades you have more time for the market to flatten out . There are a few upcoming events that could positively influence investors. In February we will trade Bear Call spreads and probably just short the market as insurance by buying cheap ETF puts.

All subscription fees collected will be refunded via PayPay over the next few weeks because this will be a losing month for many subscribers including myself.

Update on Open Trades Expiring In January (18th)

2008-01-06T18:28:00.000-06:00

With only 12 days remaining to expiration our Bull Put trades become risky due to the sudden drop in the markets last week. This caused us to employ risk management strategies this weekend to adjust these trades when the markets open on Monday. We are rolling the January Bull Put trades to new Bull Put trades expiring in February. This strategy buys more time for the market to settle down and maybe rise again. Earnings reports and lower interest rates could positively impact th markets prior to the expiration of these new trades which we want to expire worthless.

Update on Open Trades Expiring In January (18th)

2007-12-28T22:32:00.000-06:00

With 22 days remaining to expiration the filled NDX and RUT Bull Put trades are very safe with distances of 307, 207 and 81 points from the closing index values last Friday. Click on any of the Trade Alert Dates (first column) to display the actual trade.

I have also posted 2 new trades this weekend. The NDX Bear Call completes our first Iron Condor for this expiration period. With both sides of the NDX IC trade filled the return is 5.3%. The SPX Bull Put trade is the first side of a SPX Iron Condor trade I want to complete later next week. My goal this month is to complete at least 2 Iron Condor trades.

The markets should trade normally in January unless events in Pakistan get worse. The Fed meeting is not until the end of the month and the quarterly and year end earnings reports will start publishing after the 18th. This should be a very good month for Iron Condor trading.

All December Trades Expired Worthless Friday the 21st!!!!!

2007-12-22T14:18:00.000-06:00

All Bull Put and Bear Call Spread trades expired worthless on Friday December 21st. This is the 4th month in a row that all trades have expired. What's most impressive is that these trades expired during a very volatile period with the markets going up and down 100-300 points at a time. At times the market was Bullish going up every day and other times Bearish dropping every day. This key factor contributing to this positive track record is the selection of very safe credit spreads to trade. The short options for these spreads must have a 90% or more probability of expiring worthless at the time the trades are filled. The trade off is that the returns will average 3% per trade. This is why completing an Iron Condor trade is so important. We consistently earn 5% or more when both a Bull Put and Bear Call trade is filled on the same index.

This month we earned an additional credit ($65 per contract) by rolling up the NDX Bull Put 1725/1700 spread trade to the NDX 1950/1925 Bull Put spread trade. Some subscribers collected another net credit rolling this NDX 1950/1925 Bull Put spread trade to the January 2008 NDX 1825/1800 Bull Put spread trade. With the markets rising again I fully expect this January trade to expire worthless.

The total return this month was 9.9% ($330/$3,325). All credit premiums collected totaled $330 (135-40-70-65-15) and $3,325 (2,365+960) margin was required per contract. If you traded 10 contracts per spread your credits totaled $3,330, 20 contracts $6,600. This month we had one Iron Condor trade completed on the NDX Index. I plan on executing many more rolling trades in 2008 so that we can achieve 6% to 9% returns on some of the Iron Condor trades.

New trades expiring in January will be posted to the members page later this weekend.

Update on Open Trades Expiring In December (21st)

2007-12-15T10:40:00.000-06:00

With just 6 days remaining to expiration the open NDX and RUT trades are very safe with distances of 347,122,253,228 and 113 points from the closing 12/14/07 values. Even with the market dropping our Bull Put trades are still very safe for the remaining days. Having distances of 100 points or more is a very comfortable position to be in during the last week of expiration.

This market continues to move up and down on good and bad news but this does not effect any of our trades because that are based on a neutral trading strategy. We do not care what direction the market moves in and we can handle swings of 100 points or more. I really like this stress free trading strategy. We only had to adjust trades a few times in 2007 and I expect only a few adjustments in 2008. Adjusting trades is not a big deal as long as you can break even and protect your cash flow.

I hope many subscribers had a chance to roll up the original NDX Bull Put trade last week. Those who did collected a very nice net credit and increased the return on the NDX Iron Condor to one of the highest all year. I plan on executing many more rolling trades in 2008 so that we can achieve 6% to 9% returns on some Iron Condor trades.

New trades expiring in January will be posted to the members page next weekend following expiration Friday.

Improvements to my Advisory Service !!!!!

2007-12-09T16:14:00.000-06:00

This month I have improved my advisory service many ways:

1) Member’s Area: All the new trades and weekly updates are now posted to a members page that is accessible 24/7. Once logged into the members area subscribers can also download flash movies that illustrate how to select, order and close credit spread trades. New movies are being added weekly. I still create email alerts and blog post to notify subscribers when I have added a new post to this page.

2)I have started creating audio streams that I am adding to my web pages, member page and emails. I feel talking to subscribers is a better way to communicate. These audio streams will be 30 seconds to 5 minutes in length and cover my new trades, my weekly updates and common questions about my trading strategy.

3) Auto Trading will be available later this month. I am finalizing an auto trading arrangement with OptionsHouse later this month. They are charging the lowest trading fees of all the brokers and all my orders are getting filled quickly. The majority of new subscribers this month are setting up their trading accounts with this broker and I have many established subscribers who will be setting up auto trading accounts once this service is available.

4) I will be reaching the maximum number of active subscribers in early 2008 that I can support. I can only support a fixed number of subscribers in order to provide the high level of professional service everyone expects. My monthly subscription fee will also be increasing to $59.95 later this month. This increase is justified because of the additional services I am adding this month and will be adding in 2008.

Update on Open Trades Expiring In December (21st)

2007-12-08T09:48:00.000-06:00

With just 14 days remaining to expiration the open NDX and RUT trades are very safe with distances of 405,195, 170 and 145 points from the closing values last Friday. Even though the market continues to rise I feel our Bear Call trades are safe for the remaining days.

We have an opportunity next week to roll up the NDX Bull Put trade to a new NDX Bull Put trade expiring in 14 days. The NDX index has reached a very high level and is projected to keep increasing after the Fed lowers interest rates next Tuesday. This new trade is posted on the members page. When we can roll one side of an Iron Condor trade we significantly increase the return because we now have collected 3 credits and incurred on small debit.

Later this month the monthly subscription fee is increasing to $59.95 to slow down my growth. I am will be reaching the maximum number of subscribers that I will support for this service in 2008. This new rate will only apply to new subscribers who subscribe with PayPal after the new rates takes effect.

Update on Open Trades Expiring In December (21st)

2007-12-01T11:30:00.000-06:00

With 21 days remaining to expiration the NDX Bull Put and Bear Call trades are very safe with distances of 300+ and 200+ points from the NDX closing value (2089) last Friday. The RUT Bull Put trade is also very safe with a 100+ point distance.

Many subscribers have not been able to get the original NDX Bear Call trade filled. I will post on the members page an alternative NDX Bear Call spread trade later today. I want all subscribers to complete a NDX Iron Condor trade this month to realize a 5% + return.

I will continue to research RUT Bear Call trades next week in order to complete a 2nd Iron Condor trade this month.

The members area is live now. Your logon ID is your e-mail address and your initial password is the word “password”. At the request of many subscribers I will send an email each time I added a new trade, or update report, to the members page. I will also add a post on my blog for subscribers checking my blog each day with an RSS feed.

It's Time To Start Thinking About Taxes - Option Index Trades and Taxes

2007-11-27T22:27:00.001-06:00

Short-term gains from most types of stock and option investing are taxed at the same rate as ordinary income. Long-term gains on stock and option investments held for more than 12 months are considered long-term and taxed at 15% in most cases. If your tax bracket is below 25% then long term gains are taxed only 5%.

The good news is that the gains from the stock index options trades we are trading are taxed differently than gains on individual stock options and stocks. Gains on our stock index spread trades are considered ITC Section 1256 contracts. This means any gains made in these trades are taxed under a 60/40 rule. This rule states that gains are treated as 60% long-term capital gain income and 40% short-term capital gain income (ordinary income) regardless of how long the investment was held. So when we hold a index spread trade for 30 days (our average holding period), 60% of the profit made from that trade is treated as long-term capital gain income and taxed at 15% or 5%. Please do not take this information as tax advise. Do your own research with a tax advisor like H&R Block.

Update on Open Trades Expiring In December (21st)

2007-11-24T16:39:00.000-06:00

With 27 days remaining to expiration the NDX Bull Put and Bear Call trades are very safe with distances of 303 and 297 points from the NDX closing value (2028) last Friday. The RUT Bull Put trade is also very safe with a 115 point distance. Even though the markets had some wild up and down swings last week our trades were not effected.

Many subscribers have not been able to get the NDX Bear Call trade filled. I will email an alternative Bear Call spread trade early next week if the NDX has some down days. If the NDX continues to rise from Friday's close the bid/ask values will increase so we might still be able to get .50 cents, or $50 per contract, so it's prudent to keep this NDX Bear Call order open with your broker.

I will be researching RUT Bear Call trades and a even a few SPX trades next week. If there are any safe trades with 3% or better returns, I will execute the trade, or trades, and send emails (PDFs). I would really like to complete a 2nd Iron Condor trade this month. I want to end the year with another 5% monthly return like we experienced in November.

The members area will be live later this weekend. I will be sending all subscribers an email when the area is live. During this transition I will continue emailing my PDF files to insure every one receives all my new Trade Alerts and Updates. I will be eliminating the HTML emails.

I am in the process of setting up auto trading partnerships with OptionsHouse and MF Global Securities. I have waited a long time for these brokers to offer auto trading accounts. Once I have these brokers setup I will consider others like Think Or Swim and OptionsXpress.

All October Trades Expired on Friday November 16th!!!!!

2007-11-17T19:13:00.000-06:00

All Bull Put and Bear Call Spread trades expired worthless on Friday November 16th. I am very committed to ensuring this expiring trend continues. My trading strategy is very conservative resulting in safe credit spread trades earning 3%-8% each. I will strive and complete safe Iron Condor trades earning 5%-8%. My goal for the remainder of 2007 and the 1st quarter of 2008 is to earn a respectable 5% each month. This was accomplished this month.

The total return this month was 5.1% ($270/$5,290). All credit premiums collected totaled $271 (100+60+75+35) and $5,290 (2,400+1,925+965) margin was required per contract. If you traded 10 contracts per spread your credits totaled $2,700, 20 contracts $5,400. This month we had one Iron Condor trade completed on the NDX Index. This trade required margin for one side and generated a return of 6.6% (160/2,400).

New trades expiring in December will be emailed later this weekend. I will continue to focus on selecting very safe trades. I have another NDX Iron Condor trade and RUT Bull Put trade identified. The NDX 25 point Bull Put and Bear Call and RUT 10 point Bull Put spread trades have been very profitable and safe these past few months. With the markets continuing to rise and fall by 100 point and more I will be executing new trades with lots of distance.

Update on Open Trades Expiring in 4 days

2007-11-10T20:12:00.000-06:00

With just 4 trading days remaining to expiration the 4 Bull Put and 1 Bear Call filled trades are still safe and out of the money now and should easily expire worthless with short option strike prices 109, 72, 52 and 316 points away from the current index values. If the markets keep trending down next week we will have to adjust one or more of the Bull Put trades. I will be pro-active and email adjusting trades when the Index price is within 20 points. The NDX and RUT indexes are slower moving than the DOW and SPX so with a few up days next week our Bull Puts should be expiring.

Members Area Almost Ready

2007-11-09T17:38:00.000-06:00

I am very close to turning on a new "Members Area". It should be operational by the end of this month. After logging on subscribers will be able to view and print my current trades. Prior trades will also be available as well as a summary of the monthly and YTD performance history. I will still be sending all my trades (PDF Files) to subscribers requesting this service. This Members Area is long over due and will help all subscribers insure that they are getting all my trades.

Update on Open Trades Expiring In November (16th)

2007-11-03T16:48:00.000-06:00

With just 13 days remaining to expiration the 2 Bull Put filled trades are still way out of the money now and should easily expire worthless with short option strike prices 288 and 97 points away from the current index values.

Two new trades were emailed this weekend and both are conservative and safe:

1) The NDX 25 point Bear Call spread completes an NDX Iron Condor trade so now our total return is 6.6%. A big benefit of getting this Bear Call order filled next week, assuming you have the Bull Put trade filled, is that the option brokers will not require any additional margin.

1) The RUT 10 point Bull Put spread trade safe and has a 3.6% return for just 13 days. RUT Bear Call spreads are risky with small premiums so I will not be able to complete an Iron Condor trade on this index this month.

Update on Open Trades Expiring In November (16th)

2007-10-28T11:33:00.000-06:00

With 20 days remaining to expiration the 2 Bull Put filled trades are way out of the money now and should easily be expiring. The market continues to rise even though oil is approaching $100 per barrel and turmoil exists between Turkey and Iraq. I will be researching Bear Call spreads very carefully next week after the Fed meeting. Their decision on rate changes could have a significant effect on the market and cause it to spike in either direction. I hope the impact has a neutral effect on the NDX and RUT Indexes. I will also research safe SPX Bull Put and Bear call trades. I really want to complete one or two iron Condor trades this month.