September has gotten off to a pretty good start. The S&P 500 tacked on another 1% this past week, buoyed by a rally in tech stocks and news President Trump was postponing the latest round of tariffs on Chinese goods by two weeks.
The S&P 500 is now up about 6.7% from its early August low. That being said, you can see in the chart below that the index has only recouped its losses from the sell-off in early August.
So, if you are a long-only stock trader, you’ve basically been treading water for the past seven weeks.
That’s one of the main reasons I trade options. While stock traders are at the mercy of Mr. Market, options traders can make money whether he’s in a good, bad or simply blah mood.
Of course, beating the market isn’t as simple as just trading options. You need a proven system like the one I use when selecting the Trade Of The Day.
If you’re unfamiliar with it, the Trade Of The Day represents the single option trade I believe is the best bet for your money on a given day. It’s always on SPY — the highly liquid ETF that tracks the S&P 500. And I deliver it to traders 30 minutes prior to the market open each trading day.
The goal is simple: To get into the trade and then exit a few minutes to a few hours later, walking away from the market for the day richer than you were when you woke up.
I have honed my system over years of trading, but at its core are two things:
- Support and resistance levels
- A few simple technical patterns
To illustrate how I utilize these, day-in and day-out, let’s run through the past week’s trades.
SPY Daily Move: 0.1%
Option Traded: SPY September 13 299 Puts
Technicals Used: Support/Resistance, Declining Channel, Doji Candlestick
Max Return Potential: 84% in 3 hours
In Monday’s Trade Of The Day alert, I told members that SPY was approaching $300 — a psychological round-number resistance level.
In addition to SPY approaching this resistance level, Friday’s trading action produced a doji candlestick. A doji candlestick is formed when a security has a nearly identical open and close, and it represents indecision. All else being equal, this indecision would have me leaning bearish (i.e., put options).
I told traders that I would be watching charts closely leading into the open as I believed we could see a very short-term pullback.
In the chart below, which includes extended premarket hours, you can see a declining channel (blue box) on increasing selling volume in the premarket. When regular trading began at 9:30 a.m. ET, we saw an immediate drop, again on increasing selling volume.
Less than two minutes after the market opened, I alerted members via email and text that our trade plan had triggered. And those who followed the alert could have booked an 84% profit in three hours.
This just goes to show you that you can make outstanding gains even in flat markets if you have the right system on your side.
SPY Daily Move: 0.0%
Option Traded: SPY September 16 297 Puts
Technicals Used: Support/Resistance, Head and Shoulders
Max Return Potential: 54% in 12 minutes
Tuesday was another day in which SPY closed flat, but those who followed my Trade Of The Day alert could have made up to 54%… IN ONLY 12 MINUTES.
In Tuesday’s alert, I told traders that as long as SPY remained below critical resistance at $298.20 (Monday’s close), I would look for a head-and-shoulders pattern followed by a move down to the $295 support area.
The head and shoulders is my favorite pattern for timing put option trades. If you’re unfamiliar with it, you can learn more about it here.
As you can see in the chart below, the head and shoulders triggered just minutes after the open and shares quickly dropped toward support.
Within minutes, traders could have locked in a 50%-plus return. I guess you can see why I like this pattern so much!
SPY Daily Move: 0.7%
Option Traded: SPY September 16 299 Calls
Technicals Used: Inverse Head and Shoulders
Max Return Potential: 150% in 6.5 hours
While it was the bearish head-and-shoulders pattern that led us to big gains on Tuesday, it was its bullish counterpart — the inverse head and shoulders — that helped traders land up to 150% on Wednesday.
After the pattern triggered, SPY moved steadily higher.
While it was unable to break through $300 resistance, that didn’t matter to Trade Of The Day members. They had a shot to book a triple-digit percentage return by market close. Not bad for a day’s “work”!
SPY Daily Move: 0.4%
Option Traded: SPY September 18 302 Calls
Technicals Used: Support/Resistance, Inverse Head and Shoulders
Max Return Potential: 84% in 3.5 hours
Thursday’s trade was another example of the power of the inverse head and shoulders — my favorite pattern to time call option trades.
On Thursday, SPY finally opened above the $300 resistance level. As you probably know, old resistance becomes new support.
I also told traders to keep an eye on $302 as resistance, as it marked the high from Wednesday’s after-hours trading session.
And sure enough, after the inverse head and shoulders triggered mid-morning, SPY ended up topping out right around $302 resistance.
Traders who heeded the technical signals that day could have made up to 84% in just three and a half hours.
SPY Daily Move: 0.7%
Option Traded: SPY September 18 301 Puts
Technicals Used: Head and Shoulders, Red European Markets
Max Return Potential: 66%
My Friday Trade of the Day caught my members off guard.
SPY futures were in the green and most were expecting the rally to continue. But here’s what I told them…
“Well, with futures as green as they are and with SPY trading above 300, this may come as a surprise to you, but my indicators are pointing south, as in we might see a little bit of a “breather” in markets today if my indicators are accurate.
Honestly one day to “cool off” wouldn’t be such a bad thing!”
My plan was to wait for a head and shoulders pattern to develop to trigger an entry. And to ensure I stayed on the right side of the trade — and to reduce risk — we’d close the trade if SPY moved above $302.50.
As you can see from the past week’s trades, I utilize simple technicals to yield outstanding return potential.
But while the levels and patterns themselves may be simple, I’ve had years of practice pinpointing them and turning them into actionable advice.
If you’re tired of being at the mercy of the market’s whims and want to start using proven technicals to make consistent cash, try out my Trade Of The Day.
My next alert will be out 30 minutes before markets open on Monday…