Strategy: Buy n Calls, ≥ 90 DTE
Example:
Price Chart: Uptrending
Current IV%: ≤ 20%
IV Rank: ≤ 30
Trade: Buy one or more ATM or slightly ITM or OTM call options.
Strike Delta: ≥ 0.55
Goals: Buy one or more call options on an underlying security that is trending upward. Provide ample time for the long calls to move ITM for a corresponding increase in premium value. Long options are purchased for a fraction of the stock price. If the price of the underlying continues to rally, the return on investment is substantially better than a similar trade made on the underlying stock or ETF itself.
Manage: If the long call has returned an acceptable profit, and before Theta begins to erode its premium value, close the long calls for profit. If deep ITM, determine if exercising the option (receiving the intrinsic value less the remaining extrinsic value) is more profitable than simply selling the long call options for the current premium value.
Profit: Close when this trade returns a profit of 30 percent or more.
Loss: Close this trade if the price of the underlying reverses direction as a result of poor earnings or an unexpected corporate or financial sector event and the remaining premium approaches a 10 percent reduction in value.