We have been talking about how volatility was due to move higher and that has certainly happened in a big way the last few weeks.
The market has been trading in big ranges in both directions which has left many traders scratching their heads on what to do next.
The beauty of trading options is that we have many different strategies for all types of market conditions. We don’t care if the market is moving higher, lower, or sideways.
There is always something for us to do.
Oversold Levels In Play
The move lower the last few weeks has left many stocks at oversold levels heading into next week. When you add in the higher volatility, it leaves you with expensive options.
To take advantage of the pricey options we will look to sell a credit spread.
For this week’s Options Trade Of The Week we will be using Netflix (Symbol: NFLX).
Along with the rest of the market, NFLX has seen a nice move lower which leaves it with a near term oversold condition.
We expect a period of consolidation or a bounce higher over the next few weeks.
We are selling the September 6 weekly 292.5/290 put spread.
This means we are selling the the 292.5 put and buying the 290 put at the same time. These options have 21 days left to expiration.
This trade makes money over the next 21 days if the stock stays above $291,73, from time decay adding up, and from volatility decreasing. This gives us 5 ways of making money on the trade.
For a complete break down of our Trade Of The Week as well as a look at our open trades from the last few weeks make sure you review the video below.
You will learn the details of how we are placing trade trade including how we plan on managing it from start to finish.
If you are interested in learning how to find these trades, feel free to contact me directly with any questions you might have. Mike@netpicks.com.