Sister Site

Option Spreads will be providing specific examples of different types of spreads while our sister site will be providing information for the beginnning option trader and how to trade options, specifically ways to use option conservatively, meaning how to trade spreads.

Conservative Options - www.conservative-options.com

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Sell in May and I went away

Sorry for the lack of posting but I am in the process of revamping and remodeling the site. I plan on offering new services including the podcasting I have been promising for the past year. I would like a little more interaction as well so many of the posts will need your input. I am looking forward to these new changes so give me about a week to implement everything and then I will be back posting anew with the strategies on how to trade conservative options.

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Sell in May and Go Away

The old adage sell in May and Go Away is a statement about the trend that stocks do not fair well during the summer months from May 1st through October 31st - called the Summer Doldrums. Historically you would make more money if you traded the indices by selling in May and then buying back in Novemeber 1st. Well this year so far has been a little different, except for the last few days we have not seen any significant down turn in the markets. Even now we had three days of the bear only to be brought back today in a large fashion.

Now two things here are really shaping up to make for better credit spread trades.

1.) If the summer doldrums occur since this year seems to be less of a bear we should get a choppy market stuck in a channel. This is great for credit spreads.

2.) the last few days have really brought the volatility up so premiums should be better. If this market starts to chop and continues in this fashion we should be able to place some good spread trades.

Andrew Crowder seems to agree…check out his post from a couple of days ago - What about a neutral based strategy now? The “Summer Doldrums” are typically the time to at least consider the notion.

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AMZN and BZH

Here are a couple of stocks I am looking at *CAUTIOUSLY* for a possible trade -

AMZN - July Bull Put Spread using 60 as a good support. AMZN has been a rocket in this bull market and is most likely way over priced, but for the time being I do not see a slow down in the next month. IS the summer slump not coming? Not sure if the year before an election has anything to do with it but the slump should have started and it seems we are just picking up steam and this one has good solid support at 60. Although the technicals are not saying that the rise will continue it is difficult to assess these technicals with the way AMZN has been rising. We would be looking at a .30 to .35 credit for the July 60/57.5 Bull Put spread.

BZH - July Bear Call Spread using 40 as a good resistance at the 200 dma. The Housing Industry may have seen the bottom but many people are claiming not in any case there is still weakness in the Housing Sector so even in this bull trend I find it difficult for BZH to break the 200 dma at 40 in the next few weeks. So we would be looking at a .50 credit for the July 40/45 Bear Call spread.

Neither of these trades are set in stone and I will continue to watch these two stocks and make a decision next week. We are 50 days away from July expiration which is entirely too long to be in a trade. If we can get in next week and then close the trade with enough gain prior to expiration I will be happy. These are not the most profitable trades out there right now but they are conservative and thats what I like. So we will check back on these next week.

amzn, bear call spread, bull put spread, bzh, credit option spreads