(Long-Term Equity Anticipation Securities)
Strategy: Buy n Puts, ≈1+ Year DTE
Price Chart: Downtrending
Current IV%: ≤ 25%
IV Rank: ≤ 30
Trade: Buy one or more put options.
Typical Strike Delta: ≥ −0.45 to −0.55
Goals: A strong, sustained drop in the price of the underlying is required to move the long put deeper ITM for a substantial increase in premium value.
Manage: If the long put moves deeper ITM according to the trader’s bearish bias (on the basis of the price charts and either corporate or the corresponding financial sector falling from favor), the trader may sell the long puts for substantially more premium than originally paid. If the long put options move deep ITM, consider exercising the put options when the intrinsic value less the remaining extrinsic value returns more profit than selling the option premium. Also consider selling a series of short-term call options to collect additional premium during the life of the long put. If the price of the underlying begins to rally, sell the long put and consider buying a long call to take advantage of the price increase.
Profit: Close when this trade returns a profit of 50 percent or more.
Loss: Close when this trade approaches a 10 percent loss.