This trade is fairly simple. It is called a credit spread and it is being done on the Nasdaq 100 ETF. Symbol: QQQ
Sell to Open Dec 80 Puts (.38)
Buy to Open Dec 79 Puts (.28) for a credit of .10
If you do one contract of this trade the maximum you can make is $10 while your margin, also known as the maximum you can lose is $90. So your potential return is 11%.
As long as QQQ stays above 80 this trade will make money. Right now QQQ is trading at 83.76.
The trade has a 85% probability of working out and expires on 12/20 so 36 days from now.
Options Selling Plan
The plan is simple.
It the trade works, I will let it expire worthless. The options will go away and I do not need to exit the trade.
If the trade does not work out, I will exit when I am down 25%. To protect myself I will put in a limit order to exit if the debit to exit the trade ever gets to .23 cents.
Note: This trade is part of the Glimpse of Genius trading series. Glimpse of Genius is a free service where we share one delta neutral/option selling trade a month so that you can see how these trades work in real time. We do these “live” and you can sign up to be updated by email whenever we adjust or exit the options trade. To sign up for these email alerts Click Here.
This trade and all information on this site is for education and entertainment only. You should always seek professional advice before option investing your money in anything.