Options Trades In The High-Probability, Mean-Reversion Strategies

|
Includes: DBA, DIA, EEM, EFA, EWY, EWZ, FXI, GDX, GLD, IBB, IWM, IYR, OIH, QLD, QQQ, RTH, SDS, SLV, SMH, SPY, SSO, TBT, TNA, TZA
by: Andrew Crowder

A trade in the High-Probability, Mean Reversion Strategy looks likely if IWM happens to open flat or open tomorrow. Of course, there are a few other things that need to line-up, but the first trade of a slow August seems likely.

Our latest Theta Driver Options trade looks very good. Last Monday, I placed our first trade for a credit of $0.25 and thanks to some help from the bears (although a flat to slightly higher market would have worked as well, just not so quickly) the credit spread is now worth less than $0.05. With only $0.05 and 25 days left until September expiration I will mostly likely lock in the gain for roughly a 9% gain (including commissions) and place another Theta Driver trade within the next few days. Volatility remains high so we might be able to extend our gains this months. My goal is to seek out a credit spread trade that allows a 10-12% gain over the next 25 days. I might have to take a bit less if volatility declines sharply tomorrow, but my guess is that unless the market moves sharply higher, volatility will remain above 40 which will allow me to continue to sell some great premium.


(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GLD, SLV over the next 72 hours.