High Probability Stock Option Trades

Happy Cinco de Mayo!

You may have been wondering why I have not been posting as frequently to this blog. What's happening is that I have been working on a private site, documenting all of my income trades. The SPX is part of it, but I have also been posting every income trade I have made over the last few weeks.

So, over 1,500 on the S&P 500! Another psychological milestone reached. The bulls keep nudging this market higher, no matter what the news brings.

A June iron condor has been opened on the SPX, using the 1,420 - 1,430 - 1,580 - 1,590 strikes. That was opened for a $1.25 credit. Even with the continued upside move, the spread continues to maintain a primarily neutral market position.

What are the other positions I am trading? I am about close an April bull put spread in the DIAmond for a 25% - 30% return. A calendar spread on IWM is doing well, but will need to be adjusted if there is continued upside movement.

One of the more bullish plays has been an out-of-the-money call calendar on NRG Energy, Inc. It is poised right now to return in the neighborhood of 40% to 50% in the first 40 days, with room for continued profitability in the months to come.

The most recent trade I opened is a double diagonal spread on Starbucks. They reported earnings and investors are somewhat "ho hum" about it all. If the stock sits still for the next 30-days it should do very nicely, but there is also a plan in place to deal with moves outside of the expected trading range.

Each these trades have several characteristics in common. They include: 1.) When opened, they each had a relatively high probability of being profitable and, as such, the odds of each trade were squarely in my favor; 2.) Each trade has a defined, limited risk which means that I know precisely the maximum loss I can sustain on each position so that there are no surprises; 3.) Each trade has a specific plan for managing market risks going forward.

I will try to add more detail to the concepts behind my trading in future posts and keep you updated as to my progress. Questions are welcome, so feel free to leave them in the comments section.

Good trading!

Christopher Smith
TheOptionClub.com