blue_streakIs the correction here? Is the near-historic low in volatility about to end?

I am not sure – no one is sure – but uncertainty is now high enough for you to make money trading options on volatility. Selling them, not buying them.

Keep it simple – take a look at the VXX, the ETF for the VIX, the index for volatility. And rather than speculate on whether it will rise faster and faster, or come to a halt again, take money from the speculators and sell them a put. Right now, the VXX has punched through $20. The big technical ceiling is considered by many to be around $22. That gives you a lot of room to make money.

125% a year?

Take a look at a couple of different positions – something that expires at the end of the week or something that expires mid-month.

If you sold the $19.50 put right now, you would pocket around $10 a contract. Small potatoes, right? Not really – watch the VXX, get comfortable with it, and do it 50 times a year and your annual return is 25% or more. If you believe $20 is a support price and sell the $20 weekly put, and this works every week, you can generate a 125% return a year. That was not a typo.

Or you could buy the VXX – it is one way to hedge your portfolio against volatility and its typical parent, a correction. If you buy it around $20.25 and sell the $20.50 call that expires this week, you would net that return of 125% a year. Or if you are called out, 250% – one half percent in two days times fifty.

This is not a new tactic – for professionals. In my service Options Income Blueprint, we do this all year long – sell calls and puts – and are very happy to take speculators’ money as they try to play volatility. Don’t speculate – just turn their speculative fever into your income.

Think about it.

 

 

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