A subscriber recently sent me this question:

Sean, what is your strategy for handling the impact of Theta on an open position? Is there a bailout point where the time decay outweighs the potential upside?

The answer is YES. Theta, as well as Gamma often become my enemy as we near expiration. Here's how I approach it...

JC recently published a piece highlighting the action in the Financials space:

Today we’re looking at Financials pushing up against their historic 2007 highs for the 3rd time.

The way I learned it was that the more times a level is tested the higher the likelihood that it breaks through. I don’t know if this is going to be it, or if it will take a 4th or a 5th test. But I do think there is a blog post coming soon where we’re looking at Financials at all-time price highs.

Meanwhile, on a total return basis, Financials are already making new all-time highs this week.

Looking at these charts, it is hard not to be enthusiastic about the potential for a major breakout in this sector:

We're seeing a pretty sexy opportunity set up in the auto space. <--- that's a sentence I never thought I'd write.

Even more sexy is the potential breakout could be from a nearly TWELVE YEAR BASE.  Mizutamari!!

Naturally, we want to go along for the ride.

I recently received an email from a subscriber asking about best practices in exiting options positions:

How do you automate managing risk on options if you want to define it through the base stock price? E.g. you have calls on MSFT that you bought based on MSFT holding support at $100. Do you auto-sell (put a stop loss) on the option based on the MSFT price, not the option price itself?

Good question. And the answer is no. 

This is the video recording of the November 2019 Conference Call for Members of All Star Options

There are bullish setups all over the place. My friend Aaron couldn't have said it better:

<----- drowning in setups

— Aaron (@ATMcharts) November 4, 2019

I agree. Lots to play on the upside. That said, lets not get crazy here. We still need to put ourselves in some high probability situations and not bet the farm on any one trade. So let's take a look at a good opportunity in that vein.

As I do at the end of every month, I scan across my portfolio of open positions and observe any positions which hold options nearing expiration in the upcoming month. Today being October 31, I'm setting my sights on November expiry.

I think it's fair to say we options traders -- and really all traders -- see and think about the world around us differently. I mean, who has conversations like this?

I've been noticing some mostly sideways action in the oil & gas space in recent months. And with premiums somewhat elevated in options, delta neutral income strategies become extremely appealing.

Selling premium when options volatility is relatively high is a repeatable edge that plays out in my favor over time. So I like to put myself in position to take advantage of these situations as often as I can -- ideally when the underlying is caught in a range and my analysis indicates the range is likely to continue.

I found a stock where earnings have come and gone with little impact upon the overall trend, volatility collapsed (predictably), and now the only question left to ask is: when does the Santa Rally begin?

Oh boy. I love when my boy JC gets fired up on an idea.

In a recent piece on copper and emerging markets, here's JC:

Have you noticed that with Tech and Software and other areas grinding sideways or lower, we’ve seen a consistent bid in Emerging Markets? ...I really think the squeeze is on.

He was a little bit more, um, verbose in an email header sending this piece to his subscribers that read:

Emerging Market Shorts Will Get Their Faces Ripped Off

LOL.

Well, I'm game. Let's do this.

One of our bigger directional wins this summer/fall is showing signs of taking a breather, but traders with a memory are still keeping a bid under options prices. This is setting up the potential for a nice "income trade." When volatility is high (and therefore options premiums are juicy), and my bet is some sideways action in the near-term, these are the ideal situations to employ delta-neutral credit spreads.