When trading options online you may ask, what is a coupon trade? In our trading group this is what we call an out-of-the-money options trade with a long expiration date. Other words, this is an intermediate option trade with expiration of 3-4 months or more.
Why would a person coupon trade?
Uses less capital
Normally does not require constant monitoring
You are looking for a long term investment. Several months.
When not to use a coupon trade
If your weekly charts and your long term are not in solid agreement
If the volatility of the stock or option is too high
If you can not find an option with an acceptable delta that is between 25-40 cents
What to look for in a coupon trade
Look for low volatility stocks that have a solid trend in the same direction on both the weekly and monthly charts.
When looking for the desired option, look for deltas between 25-40 cents.
Look for expirations that are at least 3-4 months out.
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I have been trading stocks and options since the early 90s and made about every mistake that can be made. Here I have listed those mistakes in hopes that the reader can be aware and maybe avoid some of these themselves. How to Find Printable Online Coupons
Printing coupons from the internet can be a great way for you to save money on anything you buy. If you are looking to save money at the grocery store or at the mall you can print these coupons online. Saving money is something that everyone wants to do and with printing coupons it can be a reality.These need time to develop.
Look for stocks that are being traded (higher volume stocks)
When to close your position
Close your position when the delta reaches 50 cents. Don’t get greedy.
If you reached a pre-defined limit or you feel you have made enough profit
If the trade starts reversing
Coupon trading is a good way to trade if you have a smaller trading account or you don’t want to spend a lot of time in front of the computer. Some of our traders in our trading group have been very successful with this strategy. The most important criteria are picking low volatility stocks that have a history of sustained movement over 3-4 months.