SPX weekly Calendar Trade

With the volatility once again in a lower range I like the success possibilities of an SPX weekly calendar today. I am looking at the trade below:

Sell 1 SPX June 2nd 2395 put
Buy 1 SPX Jun 16 2395 put
Debit for spread is approx. $9.00 with SPX trading at 2395
Total cost per spread at this level would be $900 plus commissions. Looking to close trade at a 10% gain or 10% loss. If you get filled at $9.00 immediately place good to cancel order to sell at a profit at $10.00. Close trade at a loss if you are down $100 on the spread.

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Live Trade for today: Call Credit Spread in SPX

With SPX currently at $2393, about 12 points from the all time highs, I am looking at a Call Credit Spread. I am looking at a 24 day trade in the June 16 expiration. Sell 1  2430 Call and Buy 1  2440 Call for an $1.90 Credit.  Just filled this trade   live at 11:35 am central time with SPX at 2393.

The Delta of the short call is 20, that means there is only a 20% probability that SPX will finish over the short strike of 2430 in 24 Days. The margin or risk on this trade is $810.

Credit Spread

I am looking at making around 10% or around $80 on my risk capital of $810 for every 1 contract. I will have an order in to buy back the credit spread at $1.10 Debit as a profit target.

If SPX continues up, I will have an order in to buy back the spread at 2 times my profit target of $80. So I will buy the credit spread back for a loss if the credit goes from the initial $1.90 credit to $1.90 plus $1.60 or $3.50.

Always have a Plan before you start each trade! The position Greeks of the Trade for every 1 contract:  Deltas -6.66  Gamma  -.14  Theta  6.22  Vega  -40.42.

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What is Implied Volatility and How Can it Help Me?

AAPL is at $155 today. The at-the-money 31  Day Call in the June 16 Expiration is trading at $3.30 with an Implied Volatility of 17.41.

What is Implied Volatility?

In the above example, the market price is $3.30. The 17.41 Implied Volatility is the input you put in the Options Pricing pricing model that spits out the market price of $3.30.

If I put in 15 into my pricing model, it might spit out a price of $2.00. That wouldn’t be the Implied Volatility. Remember, Implied Volatility is the input you put in the pricing model that equals the current market price.

How can knowing Implied Volatility help me?

Now that I have the implied volatility number as a metric of the current option price, if I can compare the number to Historical numbers ,  it will mean something useful. The Historical Implied Volatility Range in AAPL over the last year is around 11-29. Now having some Historical perspective, historically, I can see 17 is in the lower end of the range.

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A Practical application is this:

If I am bullish , buying a Call at around 17 volatility isn’t a bad buy from a Volatility perspective. Analogy: It’s like buying a pint of raspberries at Grocer for $7. I come home and ask my wife if it was a good buy. She grimaces! She says” The range over the last year for a pint of Raspberries is $2- $7. I paid the top!

Dan Sheridan


VIX at 10, time for a Back spread!

When VIX is at 10 and SPX is near all time highs, I like Call out-of-the-money  Back spreads .  Here is the trade in SPX at the $2390 price: Buy 2  June 19  2450 Call and Sell 1  June 19  2420 Calls  for $3.40 Credit.

Position Greeks: Deltas -3   Gamma  .21  Theta  -4.70   Vega  71. Total Risk or Margin $2600. Total potential  Yield  if SPX under 2420 at Expiration in 38 Days is 14% ( credit divided by Risk or Margin).

Vega and Time Decay Risk

Because of the Vega and Time Decay Risk, would only stay in this trade till next Thursday or Friday. Looking  for about 6% profit on risk of $ 2420 or about $145. Just executed this trade live at 2:11 pm central time on Friday ( today)  May 12. Watch Blog next week for updates on this trade.

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SPX weekly Calendar Trade

With the volatility in a lower range, I like the possibilities of an SPX weekly calendar today. I am looking at the trade below:

Sell 1 SPX May 19 2390 put
Buy 1 SPX Jun 2 2390 put

Debit for spread is approx. $7.25 with SPX trading at 2390
Total cost per spread at this level would be $725 plus commissions. Looking to close trade at a 10% gain or 10% loss.

If you get filled at $7.25 immediately  place good to cancel order to sell at a profit at $8.05. Close trade at a loss if you are down $80 on the spread.

Mark Fenton


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Trading Options Successfully for the Long Term

Over the past ten years I have been a full-time trader and options trading mentor. I have found that becoming a mentor, and coaching students all day, has helped my own trading  immensely.

Trading Successfully

As a mentor I see  day in and day out what works and what doesn’t, So whenever someone asks me how can I trade options successfully I speak through the experience of the hundreds of students that I have mentored over the years.

The most important component to being a successful options trader is to have a plan. The plan is what will I trade, how will I trade it, what will my profit goal be and what will my max loss be.

Before Entering a Trade

A very important part of the plan is to  find a valid option strategy and having a good understanding of how the chosen vehicle moves. Once I enter a trade how will I manage it if it works for me or if it happens to work against me how can I hedge my risk and how can I adjust my trade.

These are all very important things you must know before you ever enter a trade.

Unforeseen Conditions

Many times I see traders who  have a plan, but the plan goes out the window once they are confronted with any unforeseen conditions and recklessness and indecisiveness ensues.  So  stick with your plan and adjust  only if needed, not following every emotion and whim that arises while you are in a trade.

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I think it’s also important with the trade not only having a strategy and a plan but to have trading  goals. You should keep a written record of your trading goals and your trade results over time so you can see for yourself what works for you and what doesn’t, and make changes along the way.

Risk management is so key as well as a max loss number and adjustment plans.

Many times when you are trying to make a monthly living in options trading it’s really not how much money you make when you win, but losing the least amount on a loser.

Profit Goal

If you have a 10% profit goal a month and you are successful most months, that will work if you keep your losses to 10 or 15% the months  you lose, but if you are losing 30% and 40% in bad months that will become a problem.

Lastly, you need some accountability. I found for myself and for other traders if you have someone to talk to about your trades and to give you a second set of eyes to look at them and give you some guidance will do great things for your trading and take you to new levels of ability and success.

One on One Mentoring

At Sheridan Mentoring that’s why we feel that one on one mentoring is the best process for developing traders. Trading can often be solitary and being on your own you can tend to lose your way.

Having  someone checking in with you that can keep you accountable will keep you on the right track and make your trading much more successful. We at Sheridan options mentoring are here to help you with your planning and educational needs.

Mark Fenton


Covered Write for the Downside (Long Diagonal)

With SPX at  2398

Buy 1  Jun 16  2430 Put    Sell 1  Jun 2  2400 Put.    27.60 Debit

Greeks:  Deltas  -15,  Gamma  -.29,  Theta 5, Vega  32,  Margin or Risk  $2760

5 Step Trade Plan:

#1   Why am I doing this? Market near All time highs and hedging IRA or individual trades to the downside.

#2   Set up:  I am Buying my Long Put Option in SPX about 30 points in-the-money and selling my Short Put option about at-the-money. I have no risk on the downside.

#3   Risk Management:   Profit Target about 7-10% of initial debit. Max Loss is about 10% of initial Debit.

#4  When to Adjust on Upside?  If SPX hits 2410-2415 area

#5  How to Adjust on Upside?  Buy 1 2400 P  and Sell 1 2410 P (Put Vertical). If SPX continue up, Buy 2410 P and Sell 2420 P. (All Adjustments in the June 2 Expiration).

Dan Sheridan


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Protecting a Portfolio Against Downside Moves

Sometimes in a long bull market trend, like what we’ve been experiencing, it is easy to overlook protecting options trades and stock portfolios against downside moves.

It is easy to get complacent whenever you see the market shake off any negative news and maybe only with a pause it goes back up, but eventually the market will have a correction.

Protective Measures

Of course one of the best ways to protect yourself is to have some protective measures on ahead of time so that you are not  scrambling to protect yourself once the move is in play. In my mind one of the best ways to do this is to consider purchasing long verticals or long calls in the VIX options two to three months out in time.

Considering VIX options currently in late May or early June  would be attractive. What I like to do is  wait for a day whenever the VIX pulls back a bit and then look at buying options at  2 to 3 points out of the money and  a few more points out of the money.

For example if the VIX is at 11, you may want to consider buying 13 call options and also calls at maybe 17 or 18. I think that those are all attractive levels to look at to protect yourself.

VIX Moves Fast

You will see that the VIX moves very quickly whenever the market makes down moves and often you have many chances to be profitable in these options on the market pullback, particularly a quick one, and you can do this by either purchasing long calls or long call verticals, your choice.

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Of course long call verticals can lower the cost of the trade but with slightly more brokerage fees.

When you do strategies on option plays  such as butterflies or calendars, you can also consider buying an out of the money put below a position to protect yourself  if the market makes a quick pullback.


Once the down move is underway look for an opportunity for a slight pause or  pullback in the VIX to make your entry. You can still protect yourself even on some slight spikes, and this was just a few of the ways you can give yourself some peace of mind against the coming downtrend or a quick bearish market moves.

We at Sheridan Options Mentoring are prepared to help with this and further developing your options trading business.

Mark Fenton


Getting Started in Options Trading

Where to start? This is often the question many beginners of option trading ask. I’ve listed here five tips that will set you on the correct path to profitable option trading.

1. Understand how options work and move.

There are many free online resources that you can use to learn about options and how they work. It is fundamental that you understand they are derivatives of another product and how that underlying  product’s price movement affects the movement of the options you’ve bought or sold.

A solid understanding of the exponential benefits and dangers of trading options is key.

2. Volatility.

Understanding how volatility works and how it affects the pricing of your options is very important. Volatility is really the main driver of option pricing besides the options in the money premium and time premium. Entering and exiting a trade as well as choosing what strategy to use all revolves around your understanding of volatility.

3. Know your underlying product.

Whether you’re buying or selling options on an index or a stock, it is imperative that you understand the underlying, how it moves and what news may be coming to affect its price movement. Study the stock or index  for news that you feel will make it move hard in one direction or another or non-directionally.

That requires an understanding of what the drivers of the stock’s pricing are.

4. Setting reasonable goals.

Once you know the options and the underlying that you are trading it is important to set reasonable trading goals.

  • How much money can I reasonably make?
  • How much risk do I want to take?
  • How does this affect my overall account?

These are all questions that you need to answer before you begin trading options strategies.

5. Have a plan.

Nothing is more important in any kind of trading than having a good  plan.

  • When will I enter?
  • When will I exit?

Profit goals and adjustment plans. How will I manage it whether it goes for or against me are all fundamental components of a good plan.

At Sheridan mentoring, every day we work with traders to help them develop these skills. Please take all these tips and apply them to your options trading business.

Mark Fenton


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Using the Leverage of Options for Bullish Sentiment

When you are “bullish” a stock, it is your opinion that the stock is going to go up in price. While you could simply buy the stock, it is often more expensive than using a bullish options trading strategy.

You can have a lot more leverage, meaning  more potential reward with spending less money using options by simply buying the stock. There are many options strategies to employ when you have a bullish sentiment.


One option strategy you can use, is to buy a call on the stock above where it is currently trading. If the stock trades higher and goes through the call strike by more than you paid in  premium you will be profitable.

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You could also use a call vertical. The call vertical is when you buy a call at a lower strike then you sell a call at a strike two or more higher. By doing this you still get the advantage when the price goes through the strike but you decrease your cost by selling a further out call.

Reduce Cost

Of course the further out call will cap your gains at the strike you sold,  but this is a simple method to reduce the cost/risk whenever you buy a call vertical. Another bullish strategy is to sell a put vertical.

Meaning you sell the put closer to the money and buy another further away from the money as a spread. If the price of the stock stays the same or goes higher, you make money. If the price declines you would have to close or adjust the trade.

How to Manage Options

When and how you buy these different option strategies and how to manage them is what we teach at Sheridan mentoring every day.

With our options education you can learn to take your sentiments whether bullish or bearish and know how you can use options and the leverage they afford, to your best advantage.

Mark Fenton