Generating Monthly Income through Options Trading

Feb 17, 2025

Retirement Strategy Using Options Trading

Introduction

  • Strategy generates approximately $5,000 monthly income.
  • Has helped retire the speaker's wife from public school teaching.
  • Over 600 people have successfully used this strategy.

Lecture Plan

  1. Introduction to Options
  2. Explanation of Option Selling
  3. Core Strategy for Monthly Income
  4. How to Trade Using Charts and Brokers
  5. Risk Management
  6. Automation for Passive Income

Understanding Options

  • Options: Betting on a stock's performance (e.g., price will go up or down).
  • Types of Options:
    • Call Options: Profit when stock price goes up.
    • Put Options: Profit when stock price goes down.
    • Selling Call: Profit when stock price goes down.
    • Selling Put: Profit when stock price goes up.

Option Selling

  • Selling contracts (e.g., call or put options) to bet on stock performance.
  • Strategy involves selling puts to bet stock will stay above a certain level.
  • High win rate and profitability due to market movement in any direction except below a certain margin.

Core Strategy: The Strangle

  • Strangle Strategy: Involves short selling both put and call options.
  • Betting a stock remains between two price levels.
  • Works best in slow bullish, bearish, or sideways markets.

Trading Strategy

  • Assets: Use highly liquid assets like ETFs (e.g., SPY, SPX) or Futures (e.g., ES, MES).
  • Expiration Dates: Between 90 and 120 days (DTE - Days to Expiration).
  • Strike Prices:
    • Put Option: 10 Delta (far out-of-the-money).
    • Call Option: 5 Delta (more room for upward market drift).

Managing Trades

  • Profit and Loss:
    • 25% Take Profit.
    • 300% Stop Loss.
  • Back-tested with a 97% win rate.

Trading on Broker

  • Set up trades using Delta and open interest on a broker platform.
  • Example trades on SPY and Futures to demonstrate returns and leverage.

Risk Management

  • Market Risk: Use indicators to avoid rapid market shifts.
  • Volatility Risk:
    • Adjust trading size based on VIX.
    • Use longer DTE for higher win rate and less risk.

Automation

  • Use automation software like Options Auto Trader.
  • Structure trades with rules for automatic execution.
  • Risk management features include adjusting for market volatility and crash indicators.

Conclusion

  • This strategy offers a consistent and reliable source of income.
  • Automation can free up time and manage trades efficiently.
  • Trial options are available for automation tools.