From the stock grad call 9/24/09. Because Indexes are a compilation of many stocks it can be safer to invest using options strategies regarding them. Some of the most played indexes are the NDX, RUT, SPY, and DIA, Selling premium or credit spreads far away from the current price can be a nice way to make 5- 10% a month return without too much worry of being in a loss situation. As all strategies have risk the idea is to limit the probability of getting close to the credit spread buy choosing strike prices that are far enough away from the norm or the index’s average movements. For instance the NDX is currently at 1800 and the NDX has an average move of 150 points per month over the last 6 months, then you may want to play a credit spread, over 175 points away, to assure that does not get hit. Playing these strategies about 5 weeks away from expiration will allow you to get a good credit, and still have time decay work to your advantage.
By Daniel Araujo
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