Sell options with strike prices beyond support and resistance

Essentially, an option seller is collecting a premium in exchange for the risk of the underlying futures market trading beyond the strike price of the short option. Placing the strike price of any sold options beyond known support and resistance sounds like an obvious strategy, but it tends to be overlooked as traders seek more premium and disregard risk. Nevertheless, proper strike price placement is a very effective way of shifting the odds favorably.


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Know the volatility tendency

Most markets have a particular direction in which they are capable of the most explosive moves. For instance, the stock market tends to take the stairs up and the elevator down. As a result, put options tend to be relatively expensive when compared to calls in the e-mini S&P 500. Even more so, S&P puts are prone to massive panic pricing in a volatile down-turn. However, S&P calls generally don’t have an explosive pricing nature. Crude oil and the grains, are typically the opposite; they have the potential to move higher faster than they can move lower. Knowing this, extra caution should be warranted when selling puts in a quiet S&P environment, or calls in a quite grain market.


Option Selling is not for everybody due to the prospects of theoretically unlimited risk. Yet, it is a strategy that everyone should consider in light of the high probability of success on any particular trade.

*There is substantial risk of loss in trading futures and options. There is unlimited risk in option selling!


Futures and Options Trading Booksby Carley Garner

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