To The Moon

Many readers here are mostly beginners to stocks and options, and the allure of high-risk day trading strategies can be tempting but also daunting. Instead of sharing a day trading options strategy that involves super high risk, I will be sharing a relatively low-risk strategy with around an 84% win rate. It's designed to help those new to options trading build wealth steadily while managing risks. [Allin] 

Choosing the Right Stock

GOOG Daily Chart

First and foremost, selecting the right stock is crucial. For this example, I am using $Alphabet(GOOG)$, a large-cap, relatively low-volatility stock. I sold $GOOG 20231027 123.0 PUT$ on 11 Sep and $GOOG 20231027 125.0 PUT$ on 12 Sep.

Strike Price and Expiry

Select closest to -0.15

When selling put options, you have some flexibility in choosing your strike price and expiry. As a rule of thumb, I usually select the strike price with the delta closest to -0.15. Alternatively, you can sell at-the-money (ATM) put options, but be aware that this has a lower win rate (around 55%) with potentially higher rewards and risks. Beginners are encouraged to follow the first approach with smaller accounts to gradually build wealth and gain a better understanding of the process. Remember, the key rule here is to take calculated risks while preserving your capital.

For expiry, opt for the closest option with around 45 days to expiration. You can also choose options with 30 days to expiry or even zero days to expiry (0DTE) for faster and potentially higher rewards. However, keep in mind that shorter expiries come with significantly higher risks, which can erode rewards in the long term.

Managing Your Trade

Press Sell to sell put

Once you've sold the put options, your goal is to secure the profits or premium you've earned. Avoid holding until expiry; instead, consider closing the trade early when you see a significant rise in the stock's price, causing the put contracts to lose value. For selling puts, you profit when the contract price decreases since you're effectively shorting the options.

Here's my guideline for profit-taking based on the duration of the trade:

• If I achieve a 40% profit after 7 days, consider closing the trade.

• If my profit reaches 50% after 14 days, it's a good time to close the trade.

• When my profit hits 70% after 21 days, strongly consider closing the trade.

After 21 days, if my trade is still open, it's time to start conducting technical analysis on the stock. If I observe potential signs of a stock price decline or recent downward trends, I will actively manage the trade and close it early for smaller profits rather than waiting until expiry.

My current positions [Miser] 

123 Put

125 Put

Conclusion

This low-risk options strategy provides beginners with a methodical approach to building wealth in the stock market. By selecting the right stock, strike prices, and expiry dates, and by proactively managing your trades, you can steadily grow your wealth while minimizing risks. Remember that patience and discipline are your allies in this journey. Start small, gain experience, and gradually scale up your investments as you become more confident in your abilities as an options trader.

As a side note, historical data often designates September as a challenging month for the stock market. This is due to a recurring pattern where stock prices tend to experience declines and conclude the month with losses.[Warning]  You may consider trying out this strategy using the demo account first especially if you have no clue about options. [Sly] 

Disclaimer: The information provided in this post is for informational purposes only and should not be considered as financial advice. This post reflects my personal opinions and should not be considered as financial advice. Investment is subject to significant risk, including the potential loss of capital. Always conduct thorough research before making any investment decisions. [Observation] 

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