3 Credit Spreads (including one in Amazon) we put on to take advantage of this volatile market
Stocks have come under pressure of late.
Tons of potential reasons:
- Concerns of slowing economic growth while inflation remains sticky,
- AI spending might be a money pit,
- The Trump policy surrounding tariffs is causing a whiplash of uncertainty and
- Musk’s DOGE slash and burn approach (fire, aim rehire) is creating havoc.
We also just heard today that the Fed’s GDP estimate for 1Q is NEGATIVE 1.7%. (a recessionary indicator).
All of this has sent the major indices down a whopping 4% from all time highs.
Which in turn has caused the VIX, a broad measure of option pricing, to pop some 25% to get above 20 for the first time in two months
So, what do option traders do when they finally get a taste of premium. We sell it. Or at least I and the Option360 crew did.
We did it in the form of selling credit spreads.
While there might be more downside to come in the next month or two I think Tuesday’s tail, a near bullish candle at the $590 level, represents a short term low.
Credit spreads are a great way to ‘buy the dip’ when you think a short-term low might be in place but are not sure if we will be ripping to higher.
It’s basically a way to play and get paid by buying against support without needing a big upise move.
The premiums collected and time decay do the work for you.
Here are three credit spread Alerts the Options360 group put on this week.
Note, they are still open so the jury is out and while they look OK things can change.
1. AMZN ($214.90) left a long tail with a low down at $204 yesterday and has followed through with a higher opening today. This suggests a short-term low is in place.
Let’s establish a bull put spread.
ACTION:
-Buy to open 2 contracts Mar (3/14) 200 Puts
-Sell to open 2 contracts Mar (3/14) 205 Puts
For a Net Credit of $0.90 (+/- .05)
2. PLTR ($86.20) has now declined some 30% over the past sessions and into the earnings gap and near the 50 dma at the $85-85 level. Let’s use a bull put spread to see if it can make a stand here.
ACTION:
-Buy to open 2 contracts Mar (3/14) 76 Puts
-Sell to open 2 contracts Mar (3/14) 79 Puts
For a Net Credit of $1.00 (+/-0.10)
In QQQ we went with an iron condor thinking it will stay in range in during the next week once the big bad event of NVDA’s earnings comes to pass; it did on Wednesday barely causing ripple.
3. QQQ ($514.30) has sold off about 5% over the past 4 sessions and looks like the $510 level has held as support. There had been a ton of put selling and open interest at the March $510 strike; 65K contracts open and 20k traded thus far today.
Everyone is bracing for NVDA earnings tomorrow so IV is staying pumped. I think we could see some initial knee-jerk reaction but it seems the Index has carved out a short-term range.
Let’s establish an iron condor.
ACTION:
-Buy to open 2 contracts Mar (3/4) 506 Puts
-Sell to open 2 contracts Mar (3/4) 509 Puts
-Sell to open 2 contracts Mar (3/4) 525 Calls
-Buy to open 2 contracts Mar (3/4) 529 Calls
For a Net Credit of $1.70 (+/0.10)
If you want alerts on when to close these trades… plus when to open the next trades in this volatile market…
Check out Steve’s popular Options360 service.
It’s excellent for small accounts or those learning spreads, iron condors and other income strategies.