Home
>
Stocks & Mutual Fund
>
Stock Options Trading Strategies - Lean

Stock Options Trading Strategies - Lean

Professional stock options traders use the term lean to refer to one's perception about the directional strength of the stock. When you own a stock option and intend to hold it for a period of time, you are aware that you will probably be holding it while it goes up and while it goes down.

This means that at any given moment in time, you might have a different opinion of the potential movement of that stock. Knowing this, there is a way to address your present level of confidence or "lean." You do this by your choice of which option you sell.

While it is true that the at-the-money option has the most amount of extrinsic value, it might not always be the ideal option to sell in every situation.

For instance, if you feel that the stock itself has a very high chance of producing capital appreciation above the potential amount of premium you could receive from selling an at-the-money call, then sell an out-of-the-money-call so you can allow yourself a little more room to the upside on the stock.

For example, let's say the stock is trading at $27.00. Normally, you would sell the 27.5 calls at say $1.00. If the stock were to rise quickly and eclipse the $28.50 mark, then with the buy-write strategy, your position would have maxed out at $28.50, and you would have a $1.50 one month gain. Not bad, but if the stock went to $29.50 then you would have missed out on another $1.00 profit. However, if we had sold the 30 calls for $.30 then we would have another outcome. You bought the stock at $27.00 and sold the 30 calls for $.30 and the stock goes to $29.50.

You would have made $2.50 in capital appreciation and $.30 in option premium for a total of a $2.80 return.

So, if you feel the stock has a real good shot at taking a run up, you can lean your position long by selling an out-of-the-money call.

If you have a more neutral view on your stock you would sell an at-the-money-call in order to receive a bigger premium which allows for greater downside protection if the stock trades down and higher potential profit if the stock becomes stagnant.

This strategy also works on the downside. If, by chance, you feel that the stock may trade down a bit during the life of the option, then you can sell an in-the-money-call. The effect of this would be to provide you with a little extra premium to cover more downside risk.

Remember when you sell an option you seek to capture extrinsic value. An in-the-money option not only has extrinsic value but also some intrinsic value.

When you feel that you want to lean your covered call strategy (buy-write) a little short, choose to sell an in-the-money call so you can also have some intrinsic value to cover your downside.

As an example, say your stock is trading at $29.00 and you feel that your stock may trade down a little but still remain in an uptrend cycle. You don't want to get rid of the stock but you also don't want to lose any money so you sell the 27.5 call at $2.00.

The stock starts to trade down and finishes at $26.00. If you had owned the stock naked, then you would have lost three dollars since you owned the stock at $29.00 and it closed at $26.00 on expiration.

However, because you sold the 27.5 calls at $2.00, you would only realize a $1.00 loss in the stock. The premium received will offset the loss due to the fact that you identified and adjusted for a likely move.

As you can see, the buy-write strategy can be altered to fit any directional view you have on your selected stock.

Finally, if you intend to use the buy-write strategy successfully, you generally need to sell the calls against your stock on a consistent, recurring interval, over a period of time.

This means that you will have to be prepared to roll your calls out to the next month come expiration. Sometimes, all you'll need to do is to sell the next month out call.

-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
If You Would Like to Learn More About stock Options
Responsibilities Then Discover How to Protect Your Investments
With the Leveraged Power of options & Learn How to Trade options
Like the Pros..

Click Here --> stock
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-

elite cleaning services Deerfield ...

In The News:

Uber teen accounts now feature live video streaming from the driver's camera, but encrypted recordings stay on Uber's servers for up to 14 days.

Router firewalls and software firewalls serve different roles in protecting your home Wi-Fi from unwanted traffic and suspicious connections.

A Chrome extension with 70,000 users and a 4.7-star rating began injecting fake update warnings after a threat actor acquired and weaponized it.

Amazon's Alexa+ rolls out free to Fire TV devices across the U.S., but hands-free microphones and stored voice data raise key privacy questions.

Meta's new teen accounts settlement sets a default two-hour daily limit on Instagram and Facebook, plus night mode and school mode restrictions.

The CareCloud data breach exposed Social Security numbers, banking information and medical records belonging to more than 3.75 million people.

Waymo reveals its custom 5-nanometer chip and dual computing systems designed to take over instantly if the robotaxi's primary computer fails.

Identity theft now includes account takeover, phone hijacking and payment card exposure. Here's what to look for in identity theft protection services.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

The FBI and Justice Department seized domains tied to QScan and QTRouter, tools allegedly used by China-linked hackers to breach NASA and other agencies.

Uber Eats drone delivery launches later this year through a Zipline partnership, starting in Dallas and Houston with a goal of one million daily flights.

Medicare Open Enrollment scams start with data broker targeting months before October. Learn why August is the time to remove your personal info.

The World Humanoid Robot Games' crashes show how far the technology still needs to go to be useful, "Survivor" reality TV star and robotics scientist Christian Hubicki says.

X-Humanoid's TianGong Ultra ran 100 meters in 9.32 seconds at Beijing's World Humanoid Robot Games, beating last year's winner by more than half.

A tap-to-pay charity scam is turning small $15 or $20 donations into charges of nearly $5,000, with victims losing thousands before they notice.

Kurt Knutsson shares seven emergency preparedness lessons from surviving Hurricane Katrina inside a New Orleans hotel as conditions turned desperate.

A contractor stored credentials in a Google Doc set to "Anyone with the link," and Google Search autocomplete eventually surfaced the password string.

New Orleans 911 uses Carbyne AI to triage repeat auto crash calls, but strict limits keep human call-takers in control of all other emergencies.

A single card skimmer can generate $1 million in stolen funds, and Secret Service video shows criminals installing them in under two seconds.

ChatGPT, Meta AI and Google now use memory, connected apps and past chats to personalize ads and responses in ways most users overlook today.

MagicalAuth by Glide.id uses cryptographic SIM credentials to verify bank logins without sending SMS OTP codes that scammers can intercept or phish.

A humanoid robot named Lightning Bolt ran 100 meters in 9.39 seconds at the World Humanoid Robot Games in Beijing, edging Usain Bolt's record.

An AI agent using Claude AI canceled another person's gym booking after finding a security flaw in the reservation system's authorization checks.

Trump signed a memorandum allowing vetted private U.S. companies to conduct cyber operations against foreign criminal organizations under oversight.

Your Social Security number appeared in a breach, but exposure and identity theft are not the same. Here's how identity restoration actually works.

Stock Options Trading Strategies - Lean

Stocks & Mutual Fund