Managing Options…

Hey 5-Star Trader,

Trading options has undoubtedly changed my life for the best, but the road to where I am has been filled with its own unique ups and downs.

As a self-made trader who learned completely online, there were many questions I had to answer myself. One important question was, “How do you determine what strike price to select when buying or selling options?”

Knowing what I know now, I’d say selecting a strike is arguably the most important aspect of options trading. Usually, I like to pick options strikes based on the expected move, reasonable key psychological targets, and pairing it with a directional setup.

What is the difference between strikes when buying versus selling options?

If you’re selling options, you would want your key target to be outside of the expected move. However, if you are buying, you would want the price to hit that value.

Examples of key psychological targets… 

The best tickers to trade in the options market, in this manner, are tickers that trade high volume and have a lot of open interest at key psychological values. A good example of this would include Microsoft (MSFT) to $340, Apple (AAPL) to $175, or Tesla (TSLA) to $1,100.

Putting it all together… 

Once you have picked a proper strike it is important to follow it up with a directional setup. Personally, I like to consult the squeeze – otherwise known as a consolidation breakout – to determine potential directional moves.

Ultimately, trading is not a linear process. A sign of a great trader would be the continual reinvention of their own strategies and methods.

But, if we can master the basics, like setting a strike, we will all be better for it in the long run!

-Danielle =) 

Up Next...

‘Tis the Season: Stocks Splits

Nvidia Stock Split: A Recap Nvidia (NVDA) announced its stock split on May 22, 2024, and since then, it’s traded from a (split-adjusted price) of around $95 to a new, all-time high at $129.74 (as of this writing). It’s still going and is currently up another +2% four days after the split, making it significantly … Read more

Read More

Bullish Setup in NFLX

I’m eyeing NFLX for an entry to the long side before the next upcoming earnings report in July. Check out the video for my upside targets, setups, and various options trade ideas.   P.S. To join us in the Simpler Central trading room, click this link to learn more!      

Read More

Trading GameStop for a Pre-Earnings Short

Hey traders! GameStop has 25% short float, and Roaring Kitty has thrown massive fuel on the fire right before earnings. With GME trading higher on high volume, and breaking through levels of previous highs, that sets it up for a potential short squeeze pre-earnings. GME will typically trade higher before earnings, as buyers speculate and … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now