Before we discuss this very special options strategy to use to generate an almost every month monthly income, let's first discuss what are the good months of the year and the possible bad months of the year. This is very important before we can start using our special option strategy.
Since 1988 up to now we can say that the following months are good months meaning that we don't get into bear market during those months. Those months are january, february, april, may, june, july, from mid-october to the end of the year. A few exceptions occured since 1988. It was february 1991 and july 2002. We can then conclude that the months of march, august and september are the ones to be concerned the most. Most of bear markets started in march and august-september period.
We must have those facts buried in mind when we want to execute our special options strategy. This option strategy consists of using your margin to sell naked puts on either SPX OEX index options or on SPY etf option. You must be aware before putting in an option trade like this one that for each SPX index option contract you need between 10000 - 15000 USD available margin for each contract you want to trade. As discussed earlier we have 8 months in the year we can consider to put those trades in. The way to do it safely is to trade naked PUTS (sell option) way under the lower band. Depending on the month we can vary the distance under the lower band as the strike price. We have been using this options strategy for quite some time now with no bad trades over 2 years. We don't need to wait for a buy signal to put that trade in. It can be initiated at the beginning of a new option period(options expire on every 3rd friday of each month).
Here is an example. We are in mid october and the market just hit the lower band at 1100 on SPX. We can then decide to put a trade in by selling an SPX Put for november even december at 1050 strike price. This is about 50 points under the lower band. If in that year no bear market occured or we are not under any stop loss condition or under a down trend recognition pattern, this is usually the best time of the year to use this options strategy. We would get about 200$ for each november contract and possibly 500$ for each december contract which would be yours to keep when they will expire.
On some other months we might want to use the options strategy a bit safer. We can choose a strike price which can be up to 3 times the band size under the lower band. We would then get a smaller amount of money but it is easy money.
It may sound a bit complicated to use but the good news is you don't have to worry about deciding when to trade it or what strike price or which month. You will find this information on our signal page every month. All the details will be displayed so you won't have to worry about what to do with this special option strategy. (Link).
Click here for how to use options strategy with index options
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