During any 30-day period from 1993 through 2014 the SPY (the Exchange Traded Funds, or ETFs, tracking the S&P 500) closed down 5% or more 11% of the time. I know this obscure fact because for every one of the 5,502 trading days during that period I compared the SPY closing price with the closing price 30 trading days later.
By my best calculations, going back to my piggy bank years, my personal spending has increased by 10% annually—and my assumption is that I will continue shelling out at this rate well into the future. Sure, I am a spender, but when you really think about it 10% is not crazy.
Anyone who manages their own money should use a multiple strategy approach—a form of diversification, if you will. I personally maintain 4 strategies: buying & holding stocks, investing in real estate, index option credit spread trading, and directional option trading. I find these to be great options for diversification.
Here we explore the put credit spread trades I placed on the SPY durning the month of December 2014. This is my primary trading strategy for monthly income. By trading put credit spreads on the SPY I am typically in a trade for 23 days but no more than 45 days.
I love this time of year: vacation, family, drinks, parties, gifts, Santa, and the rest are all great. Almost equally I love this time of year because I am reminded to take time to reflect on the past year, which gives me an opportunity to map a game plan for the coming year.
The catch is if your strategy is not well planned or implemented with discipline. Meaning that what makes the 3 factors so definitive when trading credit spreads is implementing a brilliant strategy with fidelity.
A put credit spread (also called a bull put spread) is an options strategy where you sell a put option and simultaneously buy a lower-strike put option, collecting a net credit. It's one of the most popular income-generating strategies because it profits when the underlying stock stays flat or goes up—and you get paid upfront. In this guide, I'll explain put credit spreads using a simple insurance analogy, walk through real examples with actual numbers, and show you when and why traders use this strategy.
A put option is a contract that gives you the right, but not the obligation, to sell an asset at a specific price within a set time period. Put options are one of the two basic types of options—the opposite of call options—and understanding them is essential for anyone looking to trade options or protect their portfolio. In this guide, I'll explain put options using a simple real-world analogy, then show you how they work with actual stock examples.
A call option is a contract that gives you the right, but not the obligation, to buy an asset at a specific price within a set time period. Call options are one of the two basic types of options (the other being put options), and understanding them is essential for anyone looking to trade options. In this guide, I'll explain call options using a simple real-world analogy, then show you how they work with actual stock examples.
The difference between success, failure, and mediocrity on Wall Street is your ability to pick a smart trading or investing strategy and stick to it. Jumping into the market without first carefully defining your strategy is akin to driving a car with a blindfold on—and, likewise, you will crash at some point.
