June was the calmest month in the markets since the start of the pandemic, with the CBOE Volatility Index (VIX) averaging 14.
Many are calling for volatility to return to the market. For instance, more than three-quarters of clients surveyed by JPMorgan Chase (JPM) expect volatility to pick up at some point in the third quarter.
We’re seeing signs of life in the VIX this month, which peaked above 17 on July 6. Prior to that, the VIX hadn’t hit that level since June 1.
With earnings season set to kick off this week, we could see some more volatility, if not in the broader market, at least in some individual stocks and sectors. We’ll be looking to capitalize on that amid the broader low-volatility environment.
Options Income Weekly members closed one trade last week, on Roku (ROKU), booking $26 per contract in cash and earning a 0.5% return on their capital in less than 24 hours.
This was our eighth winning trade on the TV streaming platform operator this year and our 19th since we began trading it in Options Income Weekly back in late 2019.
Here’s a look at our ROKU trades from 2023:
So far this year, we’ve generated $281 in cash from ROKU with just one contract sold. Meanwhile, our average trade has returned 0.7% and our average holding time is just four and a half days.
We entered our latest trade on July 6. ROKU was down more than 6% that day, trading around the $61 level, as investors looked to offload riskier names.
We like to sell puts on down days in a stock or ETF because we can take advantage of elevated premiums. Additionally, it decreases our chances of entering a position at a short-term top and allows us to exit early if a reflexive bounce occurs.
And that’s exactly what happened with Roku.
We sold the ROKU 21 Jul 54 Put, which was more than 11% out of the money, for $0.53, or $53 per contract. This provided us with a nice cushion in case the stock continued to sell off.
However, the next morning, Roku embarked on a recovery rally. By 10:30 a.m. Eastern, the stock was up around 3% and the premium on the put we sold has fallen to our target exit price of $0.27. So, we recommended members book profits, pocketing $26 per contract in premium for a 0.5% return on our capital in less than 24 hours.
ROKU actually continued higher that day, and many members likely got out at a better price. But as it stands, we were happy to earn a 0.5% return on our capital in such a short time frame.
The short holding time also allowed us to redeploy our capital the next day with a new trade in another of our favorite income stocks. You’ll be hearing more about that trade later this week.
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