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Master Options Trading With the Right Deltas and Spreads One of the biggest frustrations in options trading is dealing with wide bid-ask spreads. If you’ve traded long enough, you’ve probably found yourself eyeing a great setup, only to balk at the numbers staring back at you in the options chain. Wide spreads can eat into your profits and make even winning trades feel like a losing battle. Let’s break this down and find ways to navigate these challenges effectively. During a recent live session, I vented about a common issue with spreads, particularly on Electronic Arts (EA), in this instance. Despite being a solid setup, the spread was annoyingly wide, making it tough to execute with confidence. “Why do they make the spread wide?” someone asked. My answer? It’s the market maker — who is most often not your friend. Spreads widen when liquidity dries up or when market makers want to hedge their risk. That’s why you’ll see tighter spreads on highly liquid names, and wider ones on less active options. It’s not always fair, but it’s something we need to manage. Choosing Deltas: The Key to Strong Setups Delta is a critical metric in options trading, and I use it as a starting point for every trade setup. For example, when I discussed potential options plays in Robinhood (HOOD) and Hims & Hers Health (HIMS), I zeroed in on options with deltas between .65 and .77. Why? Because these options balance directional exposure with reasonable costs. Take HIMS as an example. A .69 delta, Dec. 27 expiration, $28.50 strike call stood out as a viable choice. With a delta in this range, you’re getting a solid balance between premium price and responsiveness to the underlying stock’s movement. Now, let’s talk about the practical side of trading in these conditions. Wide spreads don’t mean you should abandon the trade — but you need to adjust your strategy. Limit orders are your best friend here. Never take the market maker’s first offer unless you enjoy throwing away money. For EA, I explored alternatives like a Dec. 20 call with a .79 delta, but even that had a wide spread. If you’re stuck with these options, scale down your position size or look for a different trade altogether. No setup is worth overpaying — especially if the underlying stock doesn’t offer substantial upside. The bottom line is trading isn’t just about spotting the right opportunities — it’s about executing them efficiently. Whether it’s navigating wide spreads or choosing the right deltas, small adjustments can make a big difference. And remember, the market maker isn’t doing you any favors. That’s why you need to approach each trade with precision and discipline. Keep your focus sharp, your orders smart, and your spreads tight. After all, it’s your money on the line — not theirs. I hope that helps!_________________________________________________ Stop Hoping Markets Go Up and Do This Instead Ever notice how most trading patterns fall apart the moment market conditions change? The last five months proved this painfully true. Two major pullbacks rattled even the most seasoned traders, and sent "tried and true" strategies straight into the trash. But through all this chaos… One specific pattern didn't just survive — it went on a winning streak of 16 straight without a single miss. You see, I've traded through every kind of market over the past 30 years… Managed hedge fund money and money for some of the wealthiest families on earth. But I've never seen anything maintain this kind of consistency through such volatile conditions. That’s Why I Call It My All-Weather Pattern The profits and performance shown are not typical, we make no future earnings claims, and you may lose money. From 2/25/20 through 11/7/24,the average win rate on live published trade alerts is 75.2%. The average weighted rate of return on options trades was 6.23% over a 12 day average hold time.Follow along and join the conversation for real-time analysis, trade ideas, market insights and more! Telegram:https://t.me/+_vmfwkeP8fA5YWQ5 *This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Join the Conversation Give us a follow on your social media platform of choice, and make your voice heard! |
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