With the VIX (volatility) so low, it is starting to get a bit more challenging to find great trades, however sometimes the trades that do not look great can actually turn out fine.
For example, we may have have a stock that doesn't have the tendency of fluctuating much, therefore the volatility is low and the premium is not eye-popping. In these instances I like to do:
a. sell a strangle (sell put and call) against it. We often find that the annualised return is over 200% if the price remain between our two strikes and we hold the position to expiration, which is a phenomenal return. So seemingly boring trades can also produce great results. The added benefit is that they require less work as generally we don't have to touch it.
b. wait for the price to move a bit bigger (preferably over 3% on a given day) and sell a naked option depending on the direction of the move. E.g. if the price jumps up then I like to sell a call option against it as after the initial hype that caused the sudden spike the price tends to come back down a bit.
What's my trade for today?
#XBI (#BiotechETF). The price has fallen to the bottom of its recent range so selling a put option against it seemed like a good idea. The $75 level is fairly strong so I am happy to take a bit more risk with it.
XBI Daily Chart
Trade Type: Short Put
Expiry: 16 Dec
IV Rank: 12.9
Cap Req: $1093
Annualised Prof at Expiry: 171%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.