The Short Dimer Package is exclusively an options selling program. We look to capitalize on the volatility risk premium. This is difference between implied volatility and historical volatility. This is done by researching thousands of options on stocks and indexes. There are several different factors in our analysis but we only recommend short puts/put spreads, short calls/call spreads and iron condors that we believe have the highest probability of winning.
Writing uncovered puts is a strategy that is used when we are bullish on a particular security or index. The trader receives premium for selling the put, but if the underlying falls below the strike price, then the option will be exercised, and the investor has to pay the exercise price to receive the underlying. This can also be a great way to purchase stocks at a discount. We generally roll our strikes or buyback our options but if a subscriber really likes the security, they can let the option be assigned and own the security. We expect our recommendations of short put options to expire worthless, or to be able to repurchase the option at a profit.
Sell to Open 1 GE November 25 Put for .27 cents. Or Sell to Open 1 CSCO April 30 Put for .33 cents Buy to Open 1 CSCO April 28 Put for .09 cents. Net Credit .24 cents.
We typically stick with S & P 500 names and among those we generally stick with the less volatile names among the SPX. It sounds counter intuitive that we would focus on names with less volatility and less premium. We have found that sticking to blue chips generally works better for writing puts. It also keeps us in line with our motto "A Steady Dime is Better Than a Seldom Dollar." It`s tempting to write puts on highly volatile tech and biotech names when you see the large potential premiums. The problem is it only takes one failed drug, bad earnings call etc. to wipe out several months of profits.
Many times, we will sell put spreads rather than just an uncovered put. For example, if we sell a put on General Electric, we may only sell an uncovered put knowing our downside is limited. On the other hand, let's say we did in fact sell a put on a biotech such as Gilead Science. We may decide to sell a put and buy a put lower to know what our max loss would be. Additionally, if one of our short put recommendations goes in the money and we still like the name we may decide to roll down and out. This means we buy back the front month option and roll to a lower strike later on the calendar.
The iron condor is a limited risk, non-directional, market neutral option trading strategy that is designed to have a large probability of earning a small limited profit when the underlying security or index is perceived to have low volatility. The iron condor strategy can also be visualized as a combination of a bull put spread and a bear call spread. The strategy attempts to collect the volatility risk premium which is a persistent feature of equity and index options. The volatility risk premium is simply the difference between implied volatility and realized volatility.
Sell 1 SPY 100 Put @ $1.50
Buy 1 SPY 95 Put @ $.50
Sell 1 SPY 105 Call @ $1.00
Buy 1 SPY 110 Call @ $.2
Max Gain = $1.75
Max Loss = $3.25
We generally use SPY or SPX index options. We may also use another index or etf`s such as NDX, RTY, QQQ, IWM etc. We screen for indexes that have higher volatility but where we believe volatility will be low over the time period, we trade the condor. We thoroughly screen the market for levels of implied vs realized volatility and go where the best opportunity presents itself.
By their very nature Iron Condors are already hedged but depending on market circumstances and levels of volatility we may from time to time make dynamic adjustments as necessary.
Trades will vary depending on levels of volatility in the index or security. Some months where we expect volatility to revert to the mean we may put as many as five trades on. Other months where volatility is compressed, we may do as little as one trade. Our goal is to have a high probability of winners and not just make recommendations for the sake of recommending. We truly believe in our motto a steady dime is better than a seldom dollar.
If you choose a monthly subscription the rate is $119. A yearly subscription is $999 and saves you over 30%.