Are You Making the Most of Market Volatility?

Last Week's Income Report: April 25th, 2022


 Volatility is NOT Risk

Last week culminated in a nearly 1,000-point loss on the Dow on Friday. It was also the third week in a row that the S&P 500 lost at least 1%.

Among the reasons for last week’s selling were the prospect of a half-percentage point interest rate hike in May and downbeat earnings reports from retailers and health care companies. 

I can understand why some of you may be nervous by the market’s recent gyrations. However, it’s important that traders, specifically option sellers, don’t confuse volatility with risk.

Repeat after me: Volatility is NOT risk. 

Volatility is found in the short-term movements of a stock. Risk is found in the longer-term performance of a company and valuation of a stock.

As an option seller, you can use volatility to your advantage, as higher volatility translates into higher option prices. 

This requires that you think longer term like an investor (i.e., selecting solid stocks to trade) while trading shorter term for cash. 

That’s exactly what we do at Options Income Blueprint. Last week, we closed two winners on volatile stocks, booking $90 in cash and earning excellent rates of return.

The Trade Desk (TTD)

With both trades, we were able to use volatility to our advantage. We collected outsized premiums upfront for the sale of the puts, which gave us the flexibility to close the positions early and still exceeded our annualized rate of return goal. 

As I’ve said before, my goal is not to trade new names each week. It’s to make as much cash as possible.

March’s winners bring our year-to-date cash total to $1,296.

I’m happy with this outcome, especially during such a tough quarter

In the latest Options Income Blueprint Weekly Income Report, I discuss last week’s trades, take a closer look at volatility and risk, and review our recent position in The Trade Desk (TTD).

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