Option Trading Strategy – QQQ Put Spreads

A ‘Put Spread‘ is when you buy a put and simultaneously sell a put on the same underlying security, with the same expiration date, but at different strike prices.  E.g., buy a put on QQQ for $100 per share 3 months out, and simultaneously sell a put on QQQ for $105 per share 3 months out.  As usual Investopedia has a good description of the basic idea.

Put spreads do best in markets that are rising, but not strongly.

The strategy I describe involves specifically 3-month put spreads.  Any term could be used, of course, and I’ve investigated several others.  I like the 3-month spreads because they don’t tie money up for a long time, even though longer term spreads are probably more consistent.  If there were 12-month QQQ options available every quarter I would probably switch to those to get long term capital gains tax (20%) instead of short term capital gains tax (39.6%), but QQQ currently only has 12-month options available in January.

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joseph AT StockMarketMovement.com