Conservative Protective Exit Strategy | Instant Options Income

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172 Responses to Conservative Protective Exit Strategy

  1. Dan says:

    Bill, I’ve noticed that on the open the bid/offer spread is much wider for the first few minutes until the market makers see where the market will settle. Aren’t we giving up a lot of slippage by placing a market order on the open? Thanks

    • Bill Poulos says:

      If you are able to monitor the market, it is best to go in with a limit order that splits the bid-ask and then see if you get filled and, if not, change the limit price a bit until filled.

  2. Robert says:

    Love the protection while still having profit leverage returns.

    Not sure what options trading level I need to sell puts and calls

    Will check with my Broker.

    • aLV says:

      YOU DID A GOOD JOB EXPLAINING THE CREDIT SPREAD CAN THESE BE DONE ON THE WEEKLIES?

      can you do one on cash protected put next?
      Thanks

  3. Pichu crowe says:

    I am learning something new.

  4. Jeff says:

    How do you make 2 % on your account when you obviously can’t put all your money on a trade?
    Are you giving more than 1 trade per week?

    • Bill Poulos says:

      Yes, 1-4 trades per week.

      • Mike O. says:

        This confuses me Bill, it was a good question that I was also wondering about? If you put trade on Friday, your previous weeks trade has not expired yet? So how do you use all your money to put the trade on? I have been doing this Monday morning because my previous position is now closed, money freed up for next trade, how do you do this Friday before your position is closed?

        • Bill Poulos says:

          Well, let’s say you have a $5,000 account – when you put a credit spread on, risking a maximum of, say, $200, that is all the buying power you need in your account, so you still have $4,800 left to apply to the new trade on Friday.

  5. Doyle says:

    Can you just buy back the 120 put and keep the 115? You wouldn’t have loss anymore by keeping the put you bought would you? Isn’t it already paid for or is credit spreads done differently? If it dropped below 115 you could have recouped some of your losses.

    • Bill Poulos says:

      You could, but when its time to get out of the spread, the long strike option usually still has value. So you want to sell it to capture that value, because, otherwise, if the market does not drop below 115, the long strike option will expire worthless.

      • Mike O. says:

        Bill, you didn’t mention selling the put that you bought for protection, you said it usually has value left. Is that correct, you didn’t mention it in the video when calking the loss? Just to make sure I understand. So you buy back the put that has gone against us and also try to sell the put we bought for protection right?

        • Bill Poulos says:

          Correct, you cover both legs of the spread at the same time. You want to capture the value of the long strike.

  6. Barrie Kelby says:

    Why would you exit both positions? With this BPSpread example your loss would have been much lower by holding your long position until the next day.N’est pas?

    • Bill Poulos says:

      Only if the market moves past the long strike, otherwise it will expire worthless

  7. Norm says:

    How do you determine what level to sell the option?

    • Bill Poulos says:

      Many factors, such as the trendiness of the market, price action, the Implied Volatility of the various option strikes. This is all done for you with the Instant Options Income service.

  8. Brent says:

    Since there is no “weekly” option on week where there is a normal monthly option, is this strategy still advisable on the normal option (3rd Sat expiration)?

    • Bill Poulos says:

      Yes, correct.

  9. rd says:

    Hi Bill,

    Thank You for your latest video …
    One question: What would be the possible outcome if price closed beyond the Buy Call/Put price level?

    Thank You.

    • Bill Poulos says:

      You would lose the maximum possible loss, which is the difference in the strike prices less the credit received. However, our Conservative Exit Strategy is set up to minimize losses in a losing trade.

  10. David Little says:

    I really appreciate what you cover every time I see (or read) any of your materials. I’m curious though, with what you’ve covered on this strategy, sometimes you choose, like this example, $5 spread increment, other times $2.5. Is it because of the levels available for the instrument used at the time of implementing the strategy?

    • Bill Poulos says:

      Yes, but it’s also dependent on which strikes give you the most credit for the least risk.

  11. carl says:

    where do you get the .21 cent credit from

    • Bill Poulos says:

      From my broker’s option pricing tables.

  12. francis ebenger says:

    do you have a chat room your presentation is great do u have a monthly subscription?

    • Bill Poulos says:

      Francis, we do not currently have a chat room. Please stay tuned for more information.

  13. Michael says:

    I get what to do with the option that you sold, but what about the option that you bought.
    Keep it open as it’s recouping money for your loss, or do you go ahead and sell it too?

    • Bill Poulos says:

      When our exit strategy tells you to close the trade, you then place an order to simultaneously “Buy to Close the short strike and Sell to Close the long strike” at the market. If you are able to monitor the market, you could go in with a limit order instead of a market order, but that is not required. Once your order is filled, you are out of the trade.

  14. Robert Carr says:

    Love credit spreads. Hate research. Price of service?

  15. Onex says:

    Enjoyed your videos. was hoping that you would elaborate more on the exit strategy “how to”. One question I have; Could you not also place a bracket type order on the opposite ends of the trade to protect you from a severe loss?

    • Bill Poulos says:

      Yes you could, but keep in mind when you enter an order to cover the spread at a loss, using stops on options is not necessarily a good idea because the bid-ask spread could kick you out of a trade prematurely. We find it better to simply close out the spread in the event the Conservative Exit Strategy is triggered.

  16. sam says:

    I am totally new to options. I have a think or swim account and if you are sending weekly vidoes based on option express, will i have difficulty in following?

    • Bill Poulos says:

      I use optionsXpress in my videos. However, we recommend several different platforms to our Instant Options Income subscribers, which are all good and should not be difficult to follow.

  17. Steven says:

    would we receive notification if an exit strategy needs to be implemented?

    • Bill Poulos says:

      No, but that is not necessary because we teach you exactly what to look for after the market closes and it takes less than 2 minutes. We do this because we want you to learn how to trade and manage credit spreads, not just follow alerts.

  18. Gerald says:

    As a senior citizen who has been trading options in order to supplement my social security income I was wondering if you could structure the fee for your credit spread services as quarterly payments instead of a lump sum payment up front.

    Thanks for considering this optional approach to the fee.

    GLS

  19. keith says:

    hi bill. why do you not cover debt spreads? if you have i must have missed it. when vol is low is it not better to do debt spreads instead of credit spreads ?

    • Bill Poulos says:

      Yes, it is. But as you know, debit spreads is a different options strategy out of the many that are available to trade. If interested in different options strategies, please contact us at: support@profitsrun.com and we’ll send you more information.

  20. Bernie Glendon says:

    Bill. You buy back the sell call to close but don’t you make money on the buy call at 145?
    If the stock goes against the sell call and buy call example. Don’t you just buy the sell to close and keep the buy call for a profit?

    • Bill Poulos says:

      No, because with our Conservative Exit Strategy, to minimize the loss on a losing trade, at the point you cover the spread, the long call still has value and you want to capture that value, rather than take a chance that the long call will expire worthless.

  21. Kurt says:

    What is the minimum account size for this system?

    • Bill Poulos says:

      You can get started with as little as a $2,000 account.

  22. Allen says:

    I really like the way you teach this.Thank you

  23. Kiet says:

    So wonderful and powerful way to trade , I wish I know your advices much sooner . I will apply these techniques right away . You didn’t just help me but many traders as well.
    Thanks
    Kiet

  24. Kiet says:

    I really like your systems
    Thank you

  25. John Durand says:

    What you didn’t mention is the commission ratio involved in trading only 1 contract spreads. In the case of Ameritrade the commission would be around $24.00 for the spread.

    • Bill Poulos says:

      You must use a good online discount broker to minimize commissions, some are as low as $1 per option contract.

  26. rose says:

    What kind of money do you have to put in the account to start this trading? is this trading allowed in Canada. Your technique is very simple to understand.
    Also if you want to exit before the week is over like this example do you just put a sell.

    • Bill Poulos says:

      You can get started with as little as a $2,000 account. You will need a broker that handle US equities, such as Interactive Brokers.

  27. popuri krishna says:

    you have explained well how to cut the loss. if the price is going against the credit spread how do i know it if I am not watching the price movement every day?

  28. sam says:

    I am worried that you did not mention think or swim as an alternative broker among your list and I use mainly that to trade, not in options though. any difficulty in implementing your credit spread strategy with TOS then?

    • Bill Poulos says:

      We can’t recommend or endorse specific brokers. But we can name a few that can provide the features and services to support our products, in this case, Instant Options Income.

      There should be no issues with ThinkorSwim, which is a good broker. The reason why we mention opstionsXpress is because that is what I use in my videos. And Interactive Brokers comes into consideration because we have a lot of international students interested in trading the U.S. markets, requiring an international broker, which they are. They also happen to be a good online discount broker, which is important to help minimize commissions.

  29. Linda shaw says:

    Oh dear , I am too late for the enrolment. The guys who joined are lucky indeed. Can I still get in? Hows the results so far?

  30. Beth says:

    Great videos, Bill. Thank you for all of the information presented so clearly and concisely.

    A question: When do you have to be concerned about being assigned (something I’m terrified of)?

    • Bill Poulos says:

      Nothing to be terrified about. First, the chance of assignment, before expiration, is remote. But, even if it does happen, you simply exercise your long option and you are completely out of your position.

      • Beth says:

        Thanks, Bill. And thanks again for the very clear, detailed videos.

  31. Buck says:

    Bill,
    If the trade goes ITM on the option sold, on Fri. expiration Intraday, would you exit the spread intraday or let it expire if it looks like it won’t make it back OTM?

    • Bill Poulos says:

      If the short option is ITM on Friday expiration day, you should close out the spread intraday before the close. If not, you will be assigned on the ITM short option over the weekend, which is not a problem in and of itself because you would simply offset the assigned stock (long or short) by selling or buying to cover on Monday’s open and you are out. But I prefer to close out the spread on Friday. If, on the other hand, you can monitor the market throughout the day, and the stock trades back OTM on the short option, you can just let the spread expire worthless and keep the entire credit.

  32. Pradip says:

    1. I am in the UK, do you track the UK markets?
    2. What is the recommended account size to earn a decent income ($5000 per month)

    many thanks

    Pradip

    • Bill Poulos says:

      1. You will need a broker that handle US equities, such as Interactive Brokers.
      2. You can get started with as little as a $2,000 account.

  33. joseph patrinostro says:

    This info is worth a fortune to the average investor like my self.Looking forward for more info etc. jp

  34. joseph patrinostro says:

    Looking fwd for more info. jp

  35. Raj SHah says:

    Very nicely explained in a simpler way.

  36. Bob says:

    In your example on how to enter a bull credit spread your example showed a limit price you submitted in the option market order. What do you do if the limit price does not get accepted during the day on Friday? Do you change it to a market order?

    • Bill Poulos says:

      No, keep it in as a limit price until the close on Monday and, if still not filled, cancel the order. Do not chase the market.

  37. Ted Calinog says:

    Greetings Bill!

    You have a good propensity for showing details that’s easy to understand. I guess it comes with your background and experience. I am very fond of vertical spreads and had been using it all along. I also use it to cover my loses in my long stocks and in conjunction with covered calls. I appreciate your charitable kindness !

    Lastly, a great majority of wall street gurus are predicting a big downturn this year! Do you have any probability prism that will give one an inkling when this might occur.

    With great admiration,

    Dr. Ted C.

    • Bill Poulos says:

      No one knows when a downturn will occur, the best they can do is guess.

      This is the third year of the presidential cycle, which is, historically, the strongest year for the stock market; on the other hand, there is plenty of trouble in the world, which could derail that tendency at any time.

      We feel the key is to, first and foremost, manage risk by not risking more than 2% or your account size on any one trading idea, and to then apply a good method that includes an exit strategy so that when the market does crack wide open, which it will again at some point, you will already be out safely in cash.

  38. Bill says:

    Bill it was very nice representation keep up Your good work.
    I thank you very much.
    Bill

  39. glen says:

    Nice work.Very interesting.Wonder what kind of annual return on the collateral one would achieve if the stategy was employed week after week on different stocks and etfs over a year.Also, I wonder if the returns would be enhanced by an iron conder leg .

    • Bill Poulos says:

      Returns can be quite good, depending on market conditions and, of course, stock and related option selection.

      Yes, the Iron Condor is another great way to generate income, but requires the underlying security to close within a tighter range (upside and downside) than does a credit spread, and you have the cost of two more commissions.

  40. Michael says:

    Hi Bill, learning about your exit strategy, would it not be more profitable to just sell a naked put, since you exit the trade once a candle closes below your target? I understand you limit your downside risk with the long leg, but exiting as soon as the option closes in the money limits your downside as well, not requiring the long position, right?

    • Bill Poulos says:

      Naked trades are the riskiest option strategy of them all because you have unlimited risk and should generally be avoided. (Even with the exit strategy, a stock could gap against the trade, creating a much greater loss than expected.)

      With one exception, if you have determined that you want to own a stock for the long term, instead of buying the stock directly, you could sell a naked put option at a strike price below the stock price and if the stock falls to that price or lower by expiration, you would be buying the stock at a “discount”. If the stock does not fall below the strike price at expiration, you get to keep the credit you received when you sold the put. Yes, your capital commitment is huge, because you must have enough equity to buy the stock if you are assigned the stock.

  41. Matthew says:

    Thanks

  42. David Peterson says:

    Great tutorial to minimize loss rather than take the full loss.

  43. sam says:

    HOW MANY WAYS TO ADJUST A SPREAD TRADE?
    WHAT MIGHT THEY BE?

    • Bill Poulos says:

      In the training video we are teaching you one trading method that is used for finding high probability credit spread trades. But with Instant Options Income, we also use other trading methods as well to find even more profit potential and that is what you are seeing.

  44. Randall Fraelich says:

    Is there any way to add an automatic stop loss to a credit spread? Because it seems to me that selling an option so close to the option price leaves very little room for error.

    • Bill Poulos says:

      I prefer not to use stop loss orders on credit spreads because they are notorious for triggering bad fills. Better to follow our conservative protective exit strategy and simply cover the spread if the underlying stock closes beyond the short strike price.

  45. Vahan Kuyamjian says:

    Beautifully clear money management technique – nothing unusual for Mr. Poulos!

  46. Kevin says:

    Bill what about doing a condor? That way if the trade works against one side you minimize the loss with a winning position.

    • Bill Poulos says:

      Yes, the Iron Condor is another great way to generate income, but requires the underlying security to close within a tighter range (upside and downside) than does a credit spread, and you have the cost of two more commissions.

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