5 Keys to a Successful Option Spread Trading Plan

The key is likely to first develop a trading plan for your spread positions in conjunction with the tools on PowerOptions. A trading plan may consist of:

1. What are my goals for monthly or annual income?
2. What exposure am I willing to risk in the market?
3. Should I look for lower probability trades with a higher return, or higher probability trades with a lower return and higher risk vs. reward ratio?
4. What is most important in your trade selection:
   • The underlying security?
   • Minimum option premium?
   • Volatility?
   • % Return or % Annualized Return?
   • % Probability?
   • Difference in strike prices (risk on the trade)
   • Time frame for an open position (weeklies vs. standard expiration).
5. Detailed Exit Strategy, including what is an acceptable loss vs. management techniques in various situations.

This may sound like a lot to cover but once you map out a trading plan the pieces will fit together regarding:

1. What criteria are most important to use in the PowerOptions search tools.
2. What steps will you use to research and analyze the position more effectively.
3. What alerts to set in the Profit and Loss Portfolio tool as you track your spread positions.
4. What to look for when adjusting, rolling or closing a spread position.

The PowerOptions’ staff is available every trading day during trading hours by email and toll-free phone lines to help you get your trading plan together and get you setup with the PowerOptions tools to make your investing plan easy to implement.