Market Overview

Maximizing Profit Using Volatility, Technicals With All Star Charts Strategists At The Benzinga Options Boot Camp

Share:
Maximizing Profit Using Volatility, Technicals With All Star Charts Strategists At The Benzinga Options Boot Camp

This special presentation from JC Parets and Sean McLaughlin is from Benzinga's first-ever virtual Benzinga Options Boot Camp on Saturday, April 18. Check back with Benzinga for more coverage of this all-day event with options trading experts who are giving traders of all experience levels real, dependable strategies for hitting the ground running or expanding an existing portfolio. 

Here's a look at how JC Parets, CMT, chief market strategist at All Star Charts, and Sean McLaughlin, options strategist at All Star Charts, use options as a low-risk way to gain leveraged exposure in the market.

‘Minimize Risk, Maximize Reward’

Opportunity is gauged through the use of volatility metrics and technicals.

When volatility is high, Parets and McLaughlin recommend that options be sold in high volatility and bought in low volatility.

The two presenters provide relatable examples, such as trading the Technology Select Sector SPDR Fund (NYSE: XLK) ETF.

“At that time, volatility was at its lowest point that it had been in close to two years,” McLaughlin said.

McLaughlin placed a delta-neutral, long-option strategy in which he bought options on both sides of the market.

“It didn’t cost a lot more to buy a call and a put, turning this into a delta-neutral trade.”

Additionally, McLaughlin recommends 25 delta options due to the unique risk-to-reward payoff.

“I like to buy the 25 delta options. That option value moves 25 cents for every $1 move in the stock,” McLaughlin said. “If I get one right, the percentage gains that I earn on that trade will dwarf an at-the-money or in-the-money option.”

Locking In Profits, Managing Losers

“Sell a call against the long call; this removes your original risk.”

According to the speakers, when a long-option strategy works, it’s important to reduce risk and capture some of the returns.

By selling an OTM option against a profitable position, the downside risk is reduced. Additionally, traders can sell half of their position when the premiums have doubled in value.

“For us, a best practice when buying straight long calls — whenever the calls double in value, I want to sell half of my position.”

 

Related Articles (XLK)

View Comments and Join the Discussion!

Posted-In: All Star Charts Benzinga Options Boot CampNews Options Events Top Stories Markets Trading Ideas Best of Benzinga