So how do we trade STELLAR9 with options?
With stock it's easy but with options it's a little bit different in that we have to pick the right strike with the right expiration when buying or selling options. Now I'm talking about buying calls and buying puts; this is what we do mostly.
If you wanted to use STELLAR9 options trading signals for using credit spreads, naked actions or other options combinations variations then you could do so as well, STEALLAR9 gives an excellent momentum signal that you can use to put strong momentum behind your other options strategy trades.
That said, STELLAR9 moves usually mature out between 5 to 10 trading days, 5 to 10 bars on the charts. So that time frame per trade, and it's usually 5 bars on average, sometimes even less, will have to be kept in mind as to what type of options strategy you want to use vs. time to expiration. STELLAR9 brings strong momentum so you would want to pick the best options strategies that fit in order to make money in options in an optimized way.
The one main thing that needs to be understood before you and your position is that if you get exercised upon if you sold the option or if you let the in the money position run into expiration because you forgot about it and you simply need to be able to purchase the full amount of stock equivalent to your options position. Yes you can use margin to help with that but on the whole it is wise to pick trading positions that you can fulfill with stock just in case you run into expiration and you get assigned the stock.
But the good news with that is that you can firstly talk with your broker because different brokers have different platforms and ask them about a plan of action to make sure that your options position doesn't get exercised upon expiration if you were buying calls and buying puts. For example, what you can do is use a time based contingent order, that your options broker should have these days, so you can set that time based contingent order to get out at say 30 minutes before close on the expiration day.
For most people 99.9% forgetting about a position into expiration and having it exercised requiring you to buy all the stock needed to cover your options assignment is a non issue. Most options traders are paying attention. But this is just said to bring clarity to the process of options trading. Clarity brings accuracy and greater peace of mind.
So when you can take care of bottom line pitfalls up front then you can then free yourself up to focus on making money in options. You just want to learn how to prevent mistakes that waste money and turn that into a habit so you don't have to worry about it later.
Now if you're in the money with very little premium on a short options position, well you can get exercised at any time. We are going to focus on buying calls and buying puts only. And we are going to buy in the money calls and in the money puts. You can do whatever you want but that's what we are doing. But if your selling naked options or even using credit or debit spreads, then usually, if you have some premium on the short option then it usually will not get exercised.
So the point is, although selling in the money naked options is important to capture the momentum that comes with STELLAR9, you'll want to make sure there's some premium on those options you're selling. And of course, you always want to be able to cover any stock assignment if your selling options, and technically too, if you're buying options and expire ITM.
So we are looking to buy, usually, around 2 weeks out till expiration, somewhat deep in the money calls or puts, going long not going short, to ride the momentum move with STELLAR9. Two weeks usually covers the trade just fine.
Occasionally we'll have a super duper run that may go a little beyond two weeks but we can always close the current position and enter a new one. But if you like trading ATM and OTM, you can do that too, you would just want to go out further in time to reduce premium decay rates.
Because if you go too short term on ATM or OTM options, you're then requiring the stock to move a great distance each time to cover the extrinsic value and the premium on top of that. Yes, you get options at cheaper prices but probability for profit becomes reduced and you lose more when trades don't travel enough.
Why are we buying short-term in the money options? Because once the stock moves in our favor then we start getting high delta's right away and that means we start making more money faster on our options position. This is as opposed to putting on an at the money or out-of-the-money position which requires a certain amount of points just to cover premium decay and then cover any distance out of the money.
Also when we go deep into the money or rather fairly deep, there is not much premium on the options position so we mitigate premium decay factors that go against us. And since STELLAR9 trades usually move right away with good velocity , when the trade goes in our favor then whatever premium that was on the option becomes a non-issue since we are riding right up into very high deltas getting close to 1 to 1, tick for tick with the stock.
Now depending on the stock the average ITM options position trade on a good moving stock is around 9ish, currently of this typing going pretty deep in the money. But as of this typing we are in very volatile time so maybe those prices will get even better as things settle down. That's said lower price stocks will have cheaper options at this distance in the money between 4 and 7ish. Of course you can study options chains at your broker to see. Or just go Barchart.com, for example, to get good options quotes aftermarket for study.
So what's the difference between this STELLAR9 options signal service versus STELLAR9 stock trading signal service at TheStockTradingAUTHORITY.com ?
Sometimes, at TheStockTradingAUTHORITY.com there will be similar stocks based STELLAR9 trades but with options we have to focus on the good options to play. And with stocks, we can't go too high in price or many will not be able to afford it. Yet with options we can play more expensive stocks with options and ride more huge momentum for a lot of profit points.