Top five options trading strategies for
monthly income. My name is David Jaffee from BestStockStrategy.com I make
around a million dollars every single
year from trading. In 2017 I made almost
$800,000 with a
95% plus success rate and I can tell you
that the only way that you can
statistically make a lot of money in a
consistent way in the stock market is by
selling options specifically put options
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the point of you watching this video is
for me to provide you with as much value
as possible so the top 5 strategies on
how to make money trading options I try
to keep things as simple as possible
the first is selling a naked option
there are a lot of misguided principles
and misinformation out there that tells
people that selling naked options is
risky when a reality selling naked
options is by far your best strategy on
how to consistently make money and the
reason is that you collect more premium
and it's actually extremely easy for you
to manage the position in the worst case
scenario if the second option or the
second best strategy is vertical credit
spreads but with a vertical credit
spread where you sell an underlying put
and then you buy a lower price but that
is in my opinion substantially more
risky because you're essentially
throwing money out on buying that lower
priced insurance as a result you have
way less flexibility and way and you
have a lot less options or a lot less
available flexibility if you want to
manage that position so the first thing
that you should do and
best strategy by far is sell naked
options an example of this is Facebook
right now is selling it around 175
dollars a share you would wait until
Facebook falls to around 170 then you
would sell a put option with a strike
price of around 150 eight dollars and an
expiration of five or six weeks out this
trade is profitable around 98% of the
time and by selling a naked option with
one contract if you have in account size
that's less than $10,000 I wouldn't sell
more than two contracts if you have any
count sizes between ten and thirty
thousand dollars you can sell three
contracts but it's very easy to manage
in the worst case scenario where
Facebook falls to like 150 you will end
up owning Facebook around at a price of
a hundred and fifty eight dollars less
the premium that you receive and this is
only going to come into play around 3
out of 100 times
the remaining 97 out of 100 times you're
going to collect and keep a hundred
percent of the premium and in those
three out of a hundred times you can
easily manage and roll that position so
by far the best strategy is to sell
naked options the second best strategy
is to use vertical credit spreads
vertical credit spreads and the example
that I gave that I gave before is let's
say you would sell you sell the same
strike price one hundred and fifty eight
dollars on face book and instead of
having it be naked you would then buy a
lower price put option with the same
expiration let's say you would buy the
one fifty strike price so you would sell
a 158 put option on face book and you
would buy the 150 strike on face book
the only advantage to using a vertical
credit spread is that it reduces your
buying power so it reduces your buying
power reduction so for example if you
sell the naked put on face book with a
strike of 158 your buying power is going
to be reduced by around 20% of that so
that would be around a little over
$3,000 but if you
instead would use the vertical credit
spread where you would essentially
bracket Facebook into an $8 stock which
is the difference between the put that
you're selling at 158 and the put that
you're buying at 150 that's only eight
dollars or eight hundred dollars in risk
so as a result each vertical credit
spread that you sell you're only going
to reduce your buying power by around
160 dollars the reason why I don't like
vertical credit spreads is people
inherently are greedy
that's just our human nature so what
suitings do is they end up selling and
so if they would sell one or two naked
options they end up selling like 30
vertical credit spreads and then three
out of a hundred times they will
Facebook will drop to like 153 which is
that no-man's land between the 158 and
the 150 they'll get assigned those
options and then their broker will force
them to close it at a huge loss and they
will lose all of the money that they
made on the 97 previous winning trades
as a result I do not recommend that we
trade too many vertical credits price
although if you have a small account you
definitely should use vertical credit
spreads and I still use vertical credit
spreads
I'm very expensive stocks like Amazon
but I would just say that it requires a
lot more discipline and it's also much
more difficult for you to manage and
roll the position because you're
essentially throwing money away by
buying that lower price point option the
third best strategy is to sell cover
calls on stock so if you own 500 shares
of Facebook you can simply sell a
covered call and you would make it an
out of the money call option so Facebook
is trading on 175 you can sell if you
have if you're a long 500 shares of
Facebook you can sell 5 calls of
Facebook with a strike price of 185 an
expiration of around
three or four weeks in the worst case
scenario though if shirts get called
away from you I also don't really well I
don't own any stock I don't treats not
at all
all I do is trade options so I'm not
really a big fan of selling covered
calls but if you are you know launched
for equity and you take inventory and
ownership of stock then I guess selling
cover calls can add around five or ten
percent to your bottom line every single
year the fourth option there really
isn't any I mean you want to focus on
the things that are going to make you
money and I can tell you that I make
around a million dollars every single
year by being extremely disciplined so I
guess the fourth strategy is you should
really reduce the number of underlying
stocks in your watchlist to no more than
like ten if you have an account size
that's between five and ten thousand
dollars you should trade at most two
underlines you should trade like
Facebook and Bank of America Facebook
and Boeing or Facebook and Lockheed
Martin or maybe you want to trade like a
gaming stock like a TVI and Boeing or
something like that you want to pick
large cap stocks that have a market cap
of over a hundred billion dollars now I
know that there's no large cap stock in
the gaming industry that has a market
cap of over 100 billion dollars but you
want to choose a market leader so
whether it's Lockheed Martin which is
around a hundred billion or Boeing which
is around two hundred billion or
Facebook or Amazon or something like
that you want to limit your risk or and
rather you want to limit the amount of
information that you were consuming and
by choosing large papp underlyings
you're not going to compete on
information so it doesn't matter if you
read and spend 24 hours a day reading
press releases and reading the 10k and
10-q of Facebook because you're not
competing on an informational manage
there's essentially perfect information
out there and everything that you read
is just purely for entertainment
it's not going to help you make any
money so if you have an account size of
below $10,000 you only want to trade in
the maximum to underlyings I have an
account size of multiple
Millions and I trade around five
securities I trade I always have
positions on Facebook Amazon Lockheed
Martin Boeing and a gaming stuff like a
TVR I also usually have a position on in
a banking stock like Goldman Sachs or
PayPal or Bank of America or something
like that but that's pretty much it and
my account size is multiple millions of
dollars so you want to keep things
simple you want to limit your
informational uses you don't want to
listen to fake gurus so that's the
fourth tip is to make sure that you only
trade and you only watch like two or
three or you know you watch a maximum of
around five or ten securities in your
watchlist and then you simply get
comfortable with the price movement of
those securities and then what is
trading in the bottom half of its range
then you sell a put that's around ten
percent below its current market price
the fifth strategy that everyone should
employ when trading options is to not
trade very large and to wait for the
specific underlying to be at the bottom
part of its trading range so last month
in July of 2018 Facebook had the single
largest market cap loss in its history
but the reason why I actually made
$50,000 and all of my students made
money is because we did not chase the
stock in a month or two prior to
Facebook following it essentially went
up from 180 to 218 and it was up like
practically every day it did not provide
us with an entry point as a result I had
no puts that were above 170 dollars and
the reason I'm telling you this is you
should never chase tops you should
always wait for this underlying stock to
fall in the bottom part of its trading
range of its recent trading range and
then you should sell puts a small amount
you don't want to get too greedy that
way if in the worst-case scenario like
Facebook had in July of 2018 you can
easily manage the position so you don't
want to trade too large and you also
want to be patient and diligent
and also you want to be very strategic
in the traits that you made so that you
only want to sell puts on positions that
are trading in the bottom part of its
trading range you need to be disciplined
if you're gonna make money and if you
are disciplined you will make money I'm
98% of your trades literally like no
joke I mean 2500 trades a year and I am
profitable on almost all of them yes I
in 2018 it has been a little bit of a
challenging year but I'm still up money
and it wasn't as good as 2017 but I'm
learning no one's perfect and you can
subscribe to the trade alerts every
single one of my students are profitable
you can learn more it's only $19 for
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in the comment section and I will answer
every single one of your questions this
is David Jaffee from BestStockStrategy.com
and thank you for your attention
and for watching this video
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