Dramatically raise your odds with one small change
Hey traders, The market is creeping higher in the face of potentially bad news: CPI, PPI and earnings, which start dribbling out tomorrow through the end of the week. This is a very bullish sign for the market. But even more bullish is how both institutional and individual investors are going after options instead of buying the underlying stock. And so one of the top questions I get is: What stocks have the best options? As always, it depends what you mean by "the best." The best options for buying and watching them zoom higher are going to be different than the best options for selling and creating income. | |
For me, personally, I go with the sell side. I think the odds are about 1000x times better as an options seller. When I look for good options to sell, I look for 2 things: - First, the stock has to have some volatility - a bit more than the broad market
- And secondly, the stock has to have a directional bias. In other words, a trend.
To find a stock's volatility, you can look at a measurement called beta. You can find this on Yahoo Finance or plenty of other platforms. This tells you how much a stock moves relative to the broader market. And the magic number is 1. If a stock has a beta lower than 1, it means it's less volatile than the broader market. (not what we're looking for) And if it has a beta higher than 1, it means it has more volatility than the broad market. For example a 2 would be twice as volatile as the broad market. So to summarize: When I look for great options, I look for stocks with a beta greater than 1 that also have a directional bias. One way to use this is to take the strike price of an option 30 to 40 days out and divide it by the stock price, which will give you the yield as a covered call. You can also use this as a rating that tells you how valuable that option is relative to the stock or other options. Right now, some stocks with great options to look at are: META, AAPL, NVDA, TSLA. (Tesla currently has a beta greater than 2!) If you want to see how I'm using options to create weekly income, I recorded a video for you. Click here to watch it. | |
Jack Carter Jack Carter Trading | |
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