Sell Bull Put Spreads Ahead of Earnings Season – Take Advantage of Time Decay

Posted 10:15 Am ET - Yesterday, the market tried to rally but resistance at the all-time high was stiff. By the end of the day the gains had evaporated and we saw a little selling in the last 30 minutes of trading. The market lacks a catalyst. Flash PMI's were mixed. Strength in Europe was offset by weakness in Asia. Japan has been printing money like mad and their flash PMI hit its lowest level in almost a year. This tactic has not stimulated economic growth and rate cuts are no longer pushing equities higher. Economic growth and corporate profits are the key components of any sustained rally. Earnings season will start in two weeks and we could see relatively weak results. Tough weather conditions, a strong dollar and higher minimum wages will hurt the bottom line. The market has been trapped in a range and we are likely to stay in it. Stocks typically rally into earnings season and I believe the bid will be sturdy for the next couple of weeks. I sold out of the money put credit spreads (bullish put spreads) last week and I sold a few more yesterday. If the SPY trades below $209, I will short the S&P 500 as a hedge on an intraday basis. I believe the price action will be dull the rest of the week and I want to take advantage of time decay. I am finding day trading opportunities on individual stocks. Try to sell some out of the money put credit spreads on strong stocks. Make sure that technical support lies between the short strike price and the price of the stock. If technical support is breached, buy back the spread. Keep you size small in this low probability environment and focus on selling strategies. . .

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