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CAPS and Profits from Options

September 09, 2008 – Comments (0) | RELATED TICKERS: AAPL , CSCO , BBRY

Getting the edge for consistent profits means achieving pretty high (better than 50/50) accuracy.  But to drive that up above 80% isn't something that I've been able to do without getting an extra boost from options waste premium.  Putting out spreads by selling a close to the money call or put in combination with the next one or two strike option away (protective option) let's me gain the significant waste premium with a 6 to 10 week timeframe to expiration.  If I'm also right a good part of the time on my expectations coming into earnings, they both go to zero at expiration and I can consistently gain 15% to 30% on the trade.  If I'm totally wrong, then the position loses about 50% by closing right after the earnings event.  It's not 70% to 85% because of the remaining waste premium on the protective option.  The winners I let run 'til expiration.    [more]

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