Make A Living Trading This ONE Option Strategy (For Beginners)

Summary

The video introduces the Put Credit Spread strategy, also known as the Bull Put Spread, designed for beginner options traders. It emphasizes defined risk, boasting an 80-90% win rate, and the importance of risk management. Two execution methods are discussed: the Perpetual Method and the Selective Method, which focus on timing and market conditions. Overall, this strategy aims for long-term profitability, particularly with index ETFs, while helping traders maintain psychological resilience.

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Q & A

What is the primary trading strategy discussed in the video?

The primary trading strategy discussed is the put credit spread, also known as the bull put spread.

Why is the put credit spread considered suitable for beginners?

It is considered suitable for beginners because it is a relatively simple strategy to execute and has defined risk, which limits maximum loss.

What is the maximum loss associated with the put credit spread?

The maximum loss is limited to the difference between the strikes minus the premium received, as long as a long put is purchased.

What is the win rate of the put credit spread according to the video?

The win rate for the put credit spread is approximately 80 to 90%, depending on how the trader manages the strategy.

How does the win rate impact losing streaks in trading?

A high win rate implies shorter losing streaks, allowing traders to maintain their psychology and confidence even after a few losses.

What is the significance of the probability table mentioned in the video?

The probability table helps traders understand the likelihood of consecutive losing trades, which is crucial for managing expectations and psychological resilience.

What factors should traders consider when selecting the underlying asset for the put credit spread?

Traders should consider choosing an index ETF like SPY due to its historical positive drift and reduced volatility from earnings reports.

What are the two methods of trading the put credit spread discussed?

The two methods are the Perpetual method, which involves continuously maintaining a position in index ETFs, and the Selective method, where traders choose specific entry points based on technical indicators.

What is the recommended action at 21 days to expiration (DTE)?

The recommended action is to close the trade at 21 DTE, regardless of profit or loss, to optimize performance and manage risk.

How can traders use technical indicators like the stochastic oscillator or RSI in the Selective method?

Traders can use these indicators to identify oversold conditions and then look for support levels to place their put credit spreads below these levels.