Chuck Hughes: Option Spread Strategy Produces 194% Return

The option spread strategy is a great way to profit in up, down or flat markets. A diversified portfolio of option spreads can be traded in smaller accounts. For example, trading one contract would only require a $4,800 trading account for the option spread portfolio below. Learn how this portfolio produced a 194% average return.

Category:

Education

Tags:

• Chuck Hughes
• options spread strategy
• return
• profit
• down market
• flat
• diversified portfolio
• small trading account
• trade contract

[TraderBob2012]

What determines when you go ahead and sell the option to create the spread ? Is it based on moving average signals ? Or maybe a moving to the bottom of the keltner channels ? Or maybe a certain percentage profit ? Could be time based, I'll give the trade 30 days and then create the spread. There are wide percentages on the spread trade, what's the reasoning behind when you choose to go short ? Eager to find the answer to this. Thanks.

[TraderHughes]

I normally look for a 50% return.

[malkitbanwait]

Chuck, your figures don't tie up.

U have in the money Call option at strike price of $45 when stock price is $76.42. Intrinsic value is at least 31.42 so your buy price not possible!!!!!!!!!!!!!!!!!

[TraderBob2012]

@TraderHughes Unless you're doing a three-legged box at the short call strike. RWT essentials teaches this. Do you do this ? Have your cake and eat it too ?? 

[TraderBob2012]

@TraderHughes On yet another trade, I had a little over 10% profit on the straight option. I was able to sell a call and achieve a 50% ROI on the spread. But I still had a way to go to achieve 90% profit on the trade. So I made 2/3 of my profit, and I took out nearly 2/3 of the money in the trade, and greatly reduced my downside risk. Is this how this strategy is implemented ? Seems anyway you have over 100% in a spread, you've already realized all of the potential profit.

[TraderBob2012]

@TraderHughes I guess I'm still confused. I did a trade, was up over 40%. Sold a call against it, my ROI was over 100% !! I had a $10 spread that I paid a little over $4 for. So $6 profit, I'm looking to get $5.40 (90%) out of it. I put in a GTC and immediately got filled, I realized that I already had over 90% profit in the spread I put on. So why create a spread when I've already ITM and already have my profit ? Nothing left in the spread. Unless I do a three legged box

[stockmasterman1]

funny how all your videos show prices that are not possible. For instance, this shows a current price of $76.42 on the stock and a buy price of the $45 strike call at 15.35. With no time premium, you would have to pay $31.42 for this option. I noticed a similar deception in another of your videos.

[TraderBob2012]

I'm assuming you mean 50% as a result of creating the spread trade. And not 50% return from the single long option.

As soon as the long option trade runs up 20% or more, you can usually turn it into a spread trade with a 50% return I've realized.