Review of "How to Trade Options Strategies Based on Overnight Futures Price Action"

Link:   https://www.youtube.com/watch?v=RxvyHK6OKjk


This video shows how to use support or resistance levels from overnight futures activities to structure options trades.

Once we have support and resitance levels determined, figure out a plan if there is a breakout.  In the video, there is a breakout downwards in the SPX, so they set up a short position consisting of:

  • A short call at the top of the resistance level range
  • A long call about 25 points above the resistance level
  • A long put such that net premium is positive
The maximum loss of this options strategy is $2,500 - premium.

The goal of this construction is to make money from the option strategy - in this case $17 - so that if there is no significant drop in price (to increase the value of the long put), there still is a net profit from the premium.

Of course, if price actually recovers and rallies above the resistance levels, there could be a big loss.

As it happens, SPX dropped below the strike price of the long put, making over $2,000 in the process.  A near 100% return.

Concepts covered
  • The use of futures to determine support / resistance levels
  • Options that offset each other in price
  • Support and resistance levels

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