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  • Question about Monthly Income Trading

    January 28, 2010 by  
    Filed under Options, Stock Trading, The Greeks

    QUESTION: I have read the special report and if I’m interpreting it correctly we have been in a low volatility environment for the past few months, but appear to be entering a period of increased volatility. So put debit spreads seem to be in order along with vertical call spreads for credit at areas of resistance.

    ANSWER: Right! You got that right away… very impressive.

    I never said adjusting your credits will give you the same profit potential as the original trade… but it does save the trade and sets up potentially more profit by adding to your inventory.

    If I went further than that in the videos I’m afraid I would have lost most of my viewers because there is so much more to successful income trades than just making robotic adjustments at break even points.

    If you can grasp what I’m about to tell you I think you could graduate to a higher level of income trading:

    Most traders think 2 dimensional, when you need to think 3 dimensional. Credit spreads and condors and calendars, etc are only names we give to help us profit from theta decay but the reality is all you are doing is adding to your ‘inventory’ of short positions and adjusting your deltas and vega according to market conditions and volatility.

    It’s a completely different mind-shift when you begin to think in these terms. Suddenly you are like a real business… you add inventory at opportune times and then simply manage it being aware of your risks: delta and vega – the 2 most important risks of the income trader.

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