 Hey everyone, welcome to this lesson from Navigation Trading. In this video, I want to talk about the top five options trading strategies that we use to generate monthly income. So to go over these strategies, I'm going to be referencing our ebook, the Trade Hacker's Ultimate Playbook, 19 Bulletproof Strategies to Trade in Any Market. Now we're just going to be focusing on the five core income strategies, but there are also seven strategies to use in a bull market and seven strategies to use in a bear market. But again, we're just going to be focusing on the five core income strategies. And after the video here at the end, I'll show you how you can get this ebook for free. So let's get started. I'm going to jump over to the table of contents and just click on one of the core strategies. I want to start with Short Strangle. The short strangle is a neutral trade, so you don't care if the stock goes up or down or sideways. You just want it to stay in a specific range based on when you enter the trade. You want to enter these when implied volatility is high. And we like to enter in between 30 and 60 days to expiration. We're looking for a profit target of between 30 and 50% of max profit. So we never want to hold these trades all the way to expiration. The downside risk is undefined as well as the upside risk is undefined, and we're typically looking at about a 70% probability of profit or more on this strategy. Now to enter the trade, we're simply going to sell one out of the money call. We like to do it around that 15 to 20 delta, and you're simultaneously selling one out of the money put in that same 15 to 20 delta range. Now this is how the trade looks from a visual perspective, but we'll go to the platform to get into a little bit more detail about that. The other thing to remember is that time decay works in your favor. So it positively impacts this position. And remember, this strategy must be traded in a margin account. You can't trade short calls or short strangles in an IRA. Let's go to the platform and take a look. OK, so as you can see, I've already entered this trade and put it in our Analyze tab in Thinkorswim. So I've checked on the strangle down here. I'm showing if we were to do 10 contracts. And as you can see, we're selling the out of the money call. We're selling the out of the money put. The call strike is at 285, as you can see here by the bend in the graph. That annotates the short call, and the bend over here annotates the short put, which in this case is at the 259 strike. Then what I've already done is you can set these price slices to the break-even point, so where it crosses the zero line on your graph. And then the platform automatically populates what your probability of profit will be if you hold the trade all the way to expiration. But remember, we're going to be closing our winners at 30% to 50% of max profit. So instead of a 61% probability of profit, we're actually looking at closer to 80, 85, sometimes 90% probability of making money on this trade. And if you view the little box down here as I hover my mouse, you can see the maximum profit on this trade is $3,650 as we're doing 10 contracts. So we're looking to take somewhere around $1,415, $1,600 of profit out of this trade. Now let's bring our strategy ebook back up and take a look at the next strategy, which in this case I want to look at short straddles. So straddles are very similar to strangles. Our market assumption is still neutral. We want to put these on when implied volatility is high. We still want to enter with 30 to 60 days to expiration. Our profit target is a little bit smaller. We're only looking for about 25% of max profit with a straddle, but the downside undefined, the upside undefined, and our probability of profit is a little bit less. And by doing this, we're simply selling one at the money call and selling one at the money put. And so this is what the graph looks like. Time decay or theta is also positive. And again, just like the strangle, this strategy must be traded in a margin account. So if we jump back over to the platform and uncheck our strangle and we check on our straddle, what you'll notice is that our breakeven points are much closer to where the current price is. So if we drag our price slices to those breakeven points, again, the platform will automatically give us our probability of making money on the trade if we hold it all the way to expiration. So it's a lower probability trade than the strangle, but our max potential profit is much higher. And so that's one of the reasons why we closed these trades earlier. We're not waiting for a full 40% or 50% of max profit. We're going to close this with about 25% of max profit and book those gains and then redeploy that capital into other high probability trades. So the only difference between a strangle and a straddle is how wide you want to be away from price. A strangle is going to be a little bit wider, but your max profit isn't going to be as high, whereas the straddle is going to be more narrow, but your probability, excuse me, your potential profit is higher. Let's go back to the ebook to look at income strategy number three. And in this case, we're going to look at the butterfly spread. So a butterfly spread is similar to a straddle, except the difference is we're actually defining the risk. So our downside risk is defined. We know exactly what our risk is at order entry, as well as our upside. We're still putting these on in a market neutral assumption. When implied volatility is high, still entering with 30 to 60 days to expiration, we're taking a profit target a little bit earlier, but fairly similar to a straddle, kind of in that 15 to 25% range. And we typically have a probability of profit between 35 and 50%. Now to enter a butterfly, you are buying one in the money call. The width of the long call should exceed the expected move. We're going to sell two of those. And then buy one out of the money call. The width of the long call should exceed the expected move. And you can use all calls or all puts. The other thing is, as before, time decay positively impacts this position. The other thing about a butterfly is this strategy is eligible to trade in an IRA. So you can trade a butterfly in a margin account or in an IRA. Let's go back to the platform and hopefully I can make that all make sense. So if we click on our butterfly strategy, what you'll see here is that our probability of profit gets in even a little bit tighter. So we are narrowing our range. So our probability of profit between now and expiration is a little bit lower than a straddle. However, it's a very similar graph with the wings that we're buying defining our risk. So we know that if the market crashes, the most we can lose is what we enter the trade with. Now we're doing 10 contracts here. So we're looking at 11,200 as far as our max loss. Both the upside and the downside. But again, we're looking to be in this trade for just a short period of time, capture some profit, and then book those profits and redeploy that capital into another high probability trade. Going back to the ebook, let's take a look at income strategy number four. And that strategy is an iron condor. Now an iron condor is one that a lot of newer traders start with because you can get wide away from price. You can build a nice wide range to profit in, but you're also defining your risk. So just like the others, our market assumption is neutral. So we want price to stay in a specific range. We want to enter when implied volatility is high between 30 and 60 days to expiration. We're profiting a target of max profit of 30 to 50%. And remember, our downside risk is defined. So we'll know exactly what that is before we even enter the trade. And we're simply going to sell one out of the money call around the 20 delta, and then buy one further out of the money call. And the width is based on the specific symbol you're trading. Same thing on the put side, we're going to sell an out of the money to put. We like to do it around the 20 delta and buy one further out of the money put with the width depending on the symbol that you're trading. So this is what the graph will look like. Again, like the others, time decay is positive. And this strategy can be traded in an IRA or a margin account. Let's jump back over to the platform and take a look at an iron condor. So if we click on this here, you can see we'll need to reset our slices to the break-even point to get that probability of profit. But the way that you can think of an iron condor is you can think of it as a strangle but with defined risk. So I'm going to click back on the strangle to give you an idea. So you've got the same long, flat, max potential profit range. The difference is with an iron condor, because we are defining that risk, our probabilities are going to be a little bit lower than a strangle. So our probability of profit is not quite as high, and our max potential profit is going to be much lower as well. But in return for that, you have defined risk. So you can see where it flatlines here all the way to the upside, no matter how high the stock goes. And the same thing on the downside, if the market were to crash, that's the maximum that you can lose. So there are positives and negatives to both. If you're okay taking that undefined risk, then the short strangle might be the best strategy for you. But if you want that defined risk, if that's the most important thing to you, then an iron condor can be a great strategy as well. Remember, there's no right or wrong answer. It just really depends on your risk tolerance, your account size, to depend on which strategy you choose for your account. So all four of these strategies that we've covered so far, the iron condor, the strangle, the straddle, and the butterfly are all trades that we want to put on in periods of high implied volatility. So what do I mean by implied volatility? If we go to the charts, what you'll see down below is our navigation trading implied volatility indicator. You can get this for free by simply logging into your free membership at navigationtrading.com. You'll be able to copy and paste the script directly into TOS, and then this will show up on your chart just like it does here. When we say that implied volatility is high, that just means that we want it to be above the 50 level. So you can see there's two different types of implied volatility tracking here. We're looking at the IV rank, which is just the implied volatility in comparison to its yearly high and low. And then what we call the IV percentile, where the percent of days out of the last 252 trading days were below the current implied volatility. And as one of these lines is above 50, we consider that high implied volatility. So that's when we know that the pricing of the options is elevated. The pricing of the options are expensive and gives us the ability to put on these iron condors, strangles, straddles, and butterflies. But what if implied volatility is low? Then what kind of strategy can we use? Now that's where the calendar spread comes in. So let's go back to our ebook and reference the calendar spread. And this is what that looks like. So again, our market assumption is neutral. But this is where we want to enter these trades when implied volatility is low. We're looking for a profit target of 15 to 25 percent of the debit paid and similar to a butterfly or an iron condor. Our downside risk is defined as well as our upside risk is defined. And to enter a calendar, you're simply going to sell one at the money put in that 30 to 45 days to expiration. And you're going to buy an at the money put in a further out expiration cycle in that 58 to 80 days. This is what that'll look like on the graph, like the others. Time decay is positive. And this strategy is eligible to trade in an IRA. So you can trade it in an IRA or a margin account. Let's go back to the platform and take a look. So if we click on the calendar, here's what that looks like. As you can see, the risk is defined. So you can't lose any more than what you put it on for. We're looking at 10 contracts. So our max loss is $1,390. Obviously, if we kick this down to one contract on any of these, it's going to be a tenth of what we're looking at here. So your max risk would be $139. So you can do these in any size account. And then we can set our probability of profit. So our range is not very wide, similar to a straddle or a butterfly. So we want to manage these profits early and get out at a percentage of max profit. So we're in that 15 to 25% range. And then again, redeploy that capital into other high probability strategies. So those are the top five income strategies that we use to generate consistent income. The iron condor, the strangle, the straddle, the butterfly, and the calendar spread. So if you'd like access to our ebook, the Trade Hacker's Ultimate Playbook, where it'll list all 19 strategies, just click below and you'll get immediate access. I hope this was helpful. We'll see you next time.