November was a decent month of options trading.
The biggest lesson I learned was to keep my position sizing small so there would be less risk of a major loss.
In the previous month I made a big bet with Meta stock which went against me.
It costed me over $2,000 and wiped out a lot of my other winning trades.
So this time I have reduced my risk, even if it means earning lower premiums.
Through a combination of selling weekly put and call options I was able to make $3,099 net of expenses throughout the month .
After more than a year of trading options I think I’ve finally found a consistent way to generate monthly income while controlling for risk.
I’ll have to see how this strategy plays out over the next few months but it basically consists of 3 ways that all involve shorting options.
- Playing earnings.
I basically sell a very out of the money put (or sometimes call if I think a company will miss earnings) the trading period before the company releases its quarterly financials. I want to sell options when the implied volatility is at the highest point. And then buy it back cheaper when IV collapses the next day, or let it expire worthless. But the income generated is not very consistent. I tend to make more during earnings season like now, but not so much when there are few companies reporting. But overall I can average about $1,000 a month by doing this. If you want to know exactly how I sell options for this strategy I provide some examples in this video here.
- The daily SPY spread.
This is a new strategy that I’ve recently implemented since November and it’s been working well so far. I basically sell out-of-the-money verticals on the SPY that expire either 4 or 5 trading days into the future.
So if today is a Monday, I would sell a put spread expiring on Friday for example. I usually choose a delta of 5 to 10 percent. So far I haven’t had to close any positions yet. But when I eventually do it should be a small loss compared to all the other times the spreads expire worthless. I’m currently making about $500 per month using this strategy.
- Weekly options.
The last method I’m using consistently is simply selling weekly options. My weekly Google options challenge is an example of this. Sometimes I trade daily options as well using the SPY, QQQ, or SPX.
I find that as long as I keep my positions relatively small and get out of losing trades quickly before they turn too negative, I’m able to take smaller losses on the downside, while maintaining a decent amount of income from option premiums. 🙂
I expect the stock market will be flat or down this month in December because central banks haven’t stopped tightening just yet. In the past the bottom of the market typically happens only after the Federal Reserve starts to cut rates. We’ll have to see what happens. But I do maintain a neutral to bearish bias throughout this month.
Random Useless Fact:
Cheddar cheese originates from the village of Cheddar in England.