How To Get Out For Deep In The Money Option Writes

Studies show that the average millionaire has seven sources of income.

Of course, we can't exist everywhere at the same fourth dimension, so the real primal to building wealth is passive income sources.

And while my Options Profit Planner premium service has not seen a losing merchandise since its inception—I all the same only trade about ten minutes a day.

Heck, my trading strategy virtually runs on autopilot, there are days, like yesterday, where I don't even have to check the market or look at my portfolio.

Do you know what the major difference is between traders who live a good life and those that struggle month to month?

An border in the markets – The pros accept a trading plan that works!

They've invested coin and time to discover trades with a verifiable edge.

If y'all're uncertain of what an edge strategy looks like… you're in luck… because I'k going to share with yous one of my favorite option strategies.

Selling Options

Before we begin…

Did you know that almost traders are e'er trying to score big… driven by the burning desire to hitting information technology big.

They are addicted to the thrill of the game as they continue to look for that next explosive trade.

And so the game is over.

Why?

Because 90% of traders who buy options without having an edge lose money.

Information technology's a fool's errand.

Buying options is a lot like gambling at the casino.

Y'all're betting for a specific upshot with odds of winning a mere 25% to 40%!

This is why it's the strategy at Options Turn a profit Planner to focus on short options strategies and see go those business firm odds put into our favor.

So let's review…

The Problem With Ownership Options

Buying options is almost worse than buying or selling stock outright.

When a trader buys a stock, they have time on their side and only have to pick the correct direction.

If a trader buys options they demand to have time, direction and distance all chosen correctly with nothing on their side to help them.

Here is an example payout diagram from a long put pick at expiration.

As you can run into, the trader tin but profit from the merchandise if the stock decreases in value(direction), before a specific time (expiration), and by a set amount (breakeven).

Factor in commissions, fees, spreads along with other costs to operate your trading business the breakeven is actually much higher.

Then what's the solution? To be the seller of options (the firm) instead of the heir-apparent (the gambler)!

This article is going to cover selling deep in the money (ITM) calls.

For a more than comprehensive breakdown of the different strategies, Click Here To Read… Selling Options To Boost Your Income

The Problem

One of the nearly popular short trading methods is selling out-of-the-money (OTM) telephone call options.

Don't worry – in that location is nothing incorrect with this strategy!

It'south not the right tool for all of the jobs…

Let's assume this is a trade you lot desire to place on AAPL, or improve known as, Apple.

You accept a price target on AAPL of $270 ( or lower ) in the side by side month based on a technical assay of the stock nautical chart.

How practice y'all capitalize on your idea?

Your Choices

Y'all tin can select from a multifariousness of different strategies.

Simply out of the thousands that are available which are the best for me?

Well, showtime you want to empathize the problem you are trying to solve then narrow downward which options strategy works best for you.

It'due south ok if it's overwhelming, For new traders, this is a common problem and it takes some time to become familiar with the strategies available to you.

To make information technology easier, let's take a look at the 4 common trades to solve this trouble.

Sell the stock
Buy a put option
Sell (credit) call spread
Sell naked calls

Ok so now we can interruption these down and come across the pros and cons of each.

Sell The Stock

This is the general answer to all questions when yous ask someone what to do when yous expect the stock to go lower. (For equity traders information technology's the only choice they have!)

The Trade:

Sell 100 shares of AAPL at $284.27

Pros of a Short stock:

Profit on trade at target $250: $3,435.00
Profit on overall trade: Unlimited

Cons of Curt stock:

The toll of the trade is $27,000
Risk on trade: Unlimited

Buy A Put Option

A very common strategy when a trader is going lower is to buy a put option.

This Trade:

Buy 1 x 21 Feb 20 $280 Put at $8.65

Pros of Long Puts:

The cost to place this trade is $865
Profit on this trade at $270 is $1,365 at expiration
Profit on overall trade: Unlimited
Run a risk on merchandise Limited to $865

Cons of Long Puts:

Must be correct on time, direction and motility before options expire.

Credit Put Spread

At present, this is where things start to get kicked upwardly a notch and get interesting.

Instead of selling a standard credit call spread, let's take a await at what happens when we sell a deep in-the-money (ITM) call spread.

This Trade:

Notation: To maintain a constant adventure of approximately $1,000 the size was increased to 10 contracts.

SELL ten 10 17 January 20 250 Call at $35.05
Buy ten x 17 January 20 270 Call at $16.25

Pros of ITM Credit Call Spread:

Profit on merchandise at $250 is $eighteen,800
Max loss on trade: $ane,200
Covered position
Reduced margin requirements

Cons of ITM Credit Put Spread:

Limited upside profits

Naked Phone call

A final solution to this trade is to sell the expected target price on AAPL.

Since selling calls is a bearish strategy, a trader needs to be absolutely positive that the stock is going to decrease over time.

At that place are tremendous amounts of risk to the upside if the stock experiences a strong rally.

If confidence is loftier that stock volition fall to $250, then a trader is able to collect the almost amount of premium and get short stock at a target toll for further profits.

This trade:

Sell $250 calls at $35.05

Pros of Naked Calls:

Like shooting fish in a barrel to manage the position
Sell stock at a target cost $250
Max Profits at $250 : $35,050

Cons of Naked Calls:

Requires large corporeality of capital
Unlimited losses (more and then than naked puts)
Extremely high margin requirements

Concluding Thoughts

Selling options is e'er a risk that many traders don't experience comfortable taking when they starting time trading them in the markets.

With the proper education and guidance, this is a fear that is soon overcome.

Selling options truly places the business firm odds in your favor and this strategy is widely used as it provides a trader with a consequent income stream calendar month over month.

The winner in the competition higher up is the Credit Phone call Spread trade.

This position gives the best of both worlds with the added benefits of removing the risk associated with naked calls.

By trading a deep ITM Credit Telephone call Spread, a trader is able to capture a large premium in the choice forth with reducing all downside risk associated with brusk stocks and choice trading.

Even though the spread does not outperform a naked telephone call directly, it does in one case you lot add the risk associated with this merchandise back into the chance-to-reward profile.

Now information technology'southward time to get out in that location and plough yourself into the casino – once and for all!

And if you need a trading partner, someone to navigate yous, then consider signing up and becoming a paid-upwardly member of my Options Profit Planner service.