After a few tough weeks, we got back to banking income last week. We closed 10 profitable positions, earning just over $2,500 in the live account.
Here are all of the closed trades from our services for the week of March 17-21:
As you can tell by looking at the table above, we’ve adjusted to the current market environment by playing the bearish side.
Two of our three profitable bull put spreads were on SPDR Gold Shares (GLD), an ETF that is often considered to be a safe haven in times of economic and market turmoil. And our sole cash-secured put closeout was on another gold-related asset, the VanEck Gold Miners ETF (GDX).
And five of last week’s winners were bear call spreads. This is a neutral-to-bearish options strategy best used when you anticipate a decline or limited upside in the price of an underlying asset.
This included a trade on the small-cap Russell 2000 (RUT) that we put on during the 5k Challenge Live Trading Session on Thursday morning. The spread hit its target exit price at 2:50 p.m. ET, and we booked a profit of $210 on three contracts for an 8% return in a matter of hours.
In the previous Weekly Income Report, we mentioned that we’ve found success with this same options strategy as a hedge in the Income Masters program using SPDR S&P 500 ETF Trust (SPY). This highly liquid ETF tracks the performance of the S&P 500 with a share price that is one-tenth that of the broader market index.
Since late October, we have been using SPY bear call spreads to hedge against a market sell-off as an alternative to more traditional hedging strategies like buying put options.
Buying put options is often compared to paying for auto or homeowners’ insurance. You pay a relatively small premium for the potential of a large payout if disaster occurs. By purchasing a put, you stand to make a lot of money if the market crashes. But as with insurance, most of the time you pay your premium and nothing happens.
With bear call spreads, we collect income upfront and can come out ahead whether the market falls, stays flat or potentially even if it moves higher. To illustrate this point, the chart below shows roughly where we entered and exited each of our hedges.
As you can see, our initial hedge was entered prior to the post-election run-up in stocks. We managed to roll the position to buy time and eventually closed it at a solid profit thanks to market weakness at the start of the year in combination with the erosion of time value in the sold option.
And our latest hedge hit its target exit price two weeks early despite SPY rising about 0.7% from where we entered, earning us $465 on five contracts and an 11.5% return in 10 days. In other words, this alternative hedging strategy eliminates the need to perfectly time the market.
In total, we’ve closed four profitable hedges, earning $1,985 in cash since late October.
Given the high degree of uncertainty surrounding President Donald Trump’s tariff plans and how the market will respond, having some sort of hedge in place for the foreseeable future seems like a wise move. In fact, we put on a new SPY hedge in Income Masters just hours after the latest closeout.
Could we have made more money buying put options? That’s certainly possible had we gotten lucky with our timing. But whatever profit we made would have been reduced by all the times we watched our purchased puts expire worthless when the market didn’t sell off.
That’s not to say that there’s anything wrong with buying puts. How you choose to hedge is up to you. At its core, hedging is about providing you with some peace of mind.
But as options sellers, you have the tools at your disposal to hedge a different way. While traditional hedging methods like buying puts offer protection, the income-generating potential of strategies like bear call spreads, as well as cash-secured puts and bull put spreads on safe-haven assets, provides a compelling alternative.
