Options Trade Of The Week 8/10/18 – QQQ

Posted in: Options Trading, Stock Trading, Trade Of The Week

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Markets have continued their impressive move higher so far this summer. During that move higher, the Nasdaq has been the leader with names like AAPL, FB, AMZN, and GOOGL leading the charge. As we head into the end of summer, we are expecting the market to slow down and potentially reverse to the downside. 

With this week’s Options Trade Of The Week we will be looking to benefit from a market pullback. We will use QQQ which is the Nasdaq ETF for this trade. Since we want to lean bearish on this trade, we will be selling a call spread.

Why wouldn’t we just buy a long put option?

The problem with buying a long put is it would only give us 1 way of making money on the trade. QQQ would need to move lower quickly otherwise the time decay would hurt us. While it would give us more profit potential, it also comes with the lowest probability of success.

Instead, by selling a call spread we will give ourselves 5 ways of making money on QQQ. We can make money if the stock moves up, down, or sideways as long as price stays below our breakeven point. We also make money from time decay adding up and from volatility decreasing. While it gives us a lower profit potential when compared to the long put, it provides a higher probability of success.

We will be selling the QQQ 21Sep18 185/186 call spread for $.37. These are the September monthly options with 42 days left. We are selling the 185 call and at the same time buying the 186 call to make it a risk defined trade.

For a complete break down of our Trade Of The Week make sure you review the video below. We will cover the details of how we are placing trade trade including how we plan on managing it from start to finish. Feel free to contact me directly with any questions you might have. Mike@netpicks.com.

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CoachMike

4 Responses to “Options Trade Of The Week 8/10/18 – QQQ”

  1. Rajendra

    Hello Mike,
    This is Rajen from india.
    Your strategy is awesome but one question in my mind, will your trade setup work on Indian market like Nifty50 ,Bank nifty index and stock
    Please give reply ,i am waiting from so many days

    Reply
    • CoachMike

      Rajen The system can work on any stock or ETF. However, we like to focus on the markets that are most liquid. In most cases this has us focusing on the U.S. markets. I’m not saying it won’t work on the Indian markets but we haven’t done any testing on them at all. As long as it has good movement and good liquidity your can use the system on many different markets. Let me know if you need more details on this.

      Reply
  2. Cathy

    Hi Mike I liked your presentation and I pretty much just play credit spreads collecting premium bull or bearish. I saw that you don’t have a set up for E-Trade and that is who I with for years, are you going to be making your system available in the future for other brokers or are you going to keep the three you mention? Thanks for video as even though that is how I trade I did like your input on your set ups with the range ticks although was not sure or missed how you create the signal line.

    Reply
    • CoachMike

      Cathy the indicators are supported for Tradestation, Ninjatrader, and Thinkorswim. As long as you have access to one of these three for your charting you can use the broker of your choice to take the trades with. Send me an email and I can get you more details on how you can get access to the Thinkorswim platform to use for charting for no cost. This way you can use Thinkorswim for your charting and then still execute your trades with E-Trade if you want to. Mike@netpicks.com

      Reply

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