Warrior Trading Blog

$C Options Spread Nets 20% ROI

$C Options Spread Was Another Winner for Chat Room Traders

I have to say, it is NOT easy making money in the stock market consistently. If it was, then everyone would do it all the time and nobody would ever write an article about failure like THIS. It is only through failure, that we can begin to truly appreciate, respect and foster success. The month of December has not been my best. In fact, before the 20% win on the $C options spread, swing trades were at only 40% profitablity on 5 total trades. This is not a typical month for me as most of our chat room members and swing traders can attest to. The slower holiday season trading is not really favorable to day to day volatility, where the good swing trades are hiding at. Having a total of 5 closed trades, 12 total on the month means only one thing, EVERY TRADE COUNTS.

 

The trade with the $C options spread was alerted on 12/19/16 in the chat room. The idea was to catch a bull flag breakout on a low implied volatility name, and ride the winner up. Well, we never got a breakout, but what we did get, was a bump in the IV or implied volatility. For those not familiar with options or some of these terms, you can check out www.warriortrading.com/options for more information. The bull flag tested, tapped and flirted with the breakout spot over 61.00, but never quite pulled it off.

 

$C options spread chart

 

These tests, taps and tries however, resulted in one thing, and that is a small, but nice, increase in implied volatility. This increase in implied volatility allowed us to profit, netting a 20% return on our investment, without ever seeing a substantial or significant increase in the underlying asset price (stock price). We bought the Feb17 60/62.5 call spread for a debit of 1.02 on 12/19/16. We sold this trade on 12/22/16 at $1.20 for a net return of 20%. If you took 100 spreads on this trade, you spent a total of $10,200 to be in the trade. If you sold them at $1.20 with me, you would have made $1800.00, before commission. That is not a bad day at the office, for a boring and underperforming trade. Checkout the video below for more trade details on our $C options spread.