By: Steve Smith
I like to describe the Options360 concierge trading service as having the luxury of taking an “unconstrained” approach. What does this mean?
Many people, or services, focus on a single options strategy, i.e. credit or debit spreads, buying puts or calls outright, or some hybrid such as diagonal spreads, my mantra is “use the strategy which best aligns with your thesis.” In other words, Options360 will use any of the above options strategies depending on the specific name we may be targeting while also considering the overall market environment.
In the past few weeks, I turned a bit cautious and slapped on a bearish position in Visa (V) that delivered a nice 45% in under a week. I’ve also been working a put position in the Invesco Power Shares (QQQ) leveraging Monday, Wednesday, and Friday expirations to get multiple rolls to collect premium and bring the cost basis next to zero.
Here’s a snapshot from the Options360 website which tracks the portfolio’s real-time trades. You can see we’ve rolled some 3 times in the past 5 weeks. The position’s now paid for (free) with a minimal 18% locked profit with two more weeks — where I can keep collecting premium, or at some point, just stay outright long the Aug (8/30) 360 put, if I feel a deeper correction coming.
This bearish QQQ position has been a nice counterbalance to what honestly has been a couple of poorly-timed bullish positions. In the past few weeks, I added diagonal spreads in Micron (MU), Southwest Airlines (LUV), and Energy Select SPDR (XLE) as the charts approached support and the belief concerns over the delta variant would quickly dissipate. That hasn’t been the case and it’s left me scrambling into defensive adjustments. The positions are down just 10%-20% with over 6 weeks remaining for either a price recovery or additional income collection.
More importantly, being actively involved provides a good sense of the overall market tone. And my conclusion is that we’re entering a state of stasis; waiting on the Fed and the Aug 29 Jackon Hole meeting. This is where the tapering timeline should be clarified, market-moving earnings reports are winding down, and the last two weeks of August are a seasonally low-volume, low-volatility period.
This has pushed me to scour the landscape for Iron Condors; positions to sell a put and call spread for a credit on the belief that a stock will remain range-bound.
This week, Options360 established iron condors in Roku (ROKU) and Home Depot (HD), both sold off hard following their earnings reports. They both should have a period of consolidation within the support and resistance levels over the next week or two. Their implied volatility remains elevated post-earnings release. This made them great candidates with attractive risk/reward for iron condors that’ll benefit from the stocks remaining in range, a decline in IV, and the theta (time decay) tailwind.
Though both are already seeing their P/L ticking into the green, it’s not too late to get into either of these trades. You just need to take advantage of our special offer below!
The main point is, the Options360’s “unconstrained” approach allows us to switch gears and employ strategies that align with a current market thesis, which makes us money under any market condition. Presently, its neutral and iron condors will hopefully deliver us profits through the end of the month.