The Holy Grail of Option Trading

Yo Pit Crazies


Who doesn’t like winners?


Today, I have a trade that I put on in the Trading Legion that worked out very well.


I closed it for an overnight gain of 40% — with a bit more to take since I got paid 40% to own the upside call spread.


You see, I was able to create positive gamma and positive theta for an overnight trade.


It’s what I like to call the Holy Grail of Option Trading!


Gamma Without Theta Is the Holy Grail


The type of trade I am talking about is long gamma and long theta


What that means is the position should make money when the stock moves — up or down — but the time decay cost is positive.


Positive time decay/positive theta is what the market pays to hold the position. In the case of  Apple Inc. (Ticker: AAPL) below, the position looked something like this:



Note from this Thinkorswim strip that the gamma, theta and vega were all positive.


This also meant the stock had big potential gains if AAPL went down and small gains if it went up. 


The delta was flat at the time of inception and AAPL did drop $10 since I put on the trade


The Lesson: Being a little creative with short term option positions can bring low risk/high reward trades.


We’ll teach EXACTLY how to do this in Trading Legion.


WATCH: The link to the session is here.


The Rundown


Capitol Gains w/ Frank Gregory
Option Pit DC and Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.


      • I closed ALL Palantir Technologies Inc. (Ticker: PLTR) puts and will ride the calls to Dec. 17 expiration. Check out the latest video here.  
      • PetroBras SA (Ticker: PBR) recovered all of its dividend in one day, which is pretty bullish in my view. I will look to sell some put spreads for CG today.


Other stocks currently in the CAPITOL GAINS portfolio:


      • Mandiant Inc. (Ticker: MNDT) long Cybersecurity
      • PetroBras SA (Ticker: PBR) long oil
      • SPDR Oil and Gas Explorers (Ticker: XOP) long oil
      • Intel Corp (Ticker: INTC) long chip shortage
      • Powershares QQQ Trust (Ticker: QQQ) portfolio hedge
      • Canejo Corp (CCJ) long Uranium Play
      • Ford Motor Company (F)
      • Palantir Technologies Inc (PLTR)


Power Income Trader:

Power Income Trader is a systematic approach to trading inflation.  By pulling real-time data from the Fed, US Treasury and Gov’t, Power Income Trader alerts users on changes in money flow driven by Fed policy. Bill’s system puts you out in front of the most powerful money flow in the world.


      • Bill added more iShares 20 Plus Year Treasury Bond ETF (Ticker: TLT) put spreads on what he sees as a weak bond auction coming next week.


Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session. 


The Pro Room liked my Apple Inc. (Ticker: AAPL) trade and it was an easy homerun..



Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Gamma Radar to find order flow in active MEME  names.

      • Mark jumped on some Uber Inc. (Ticker: UBER) calls yesterday.

Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle/calendar trading vehicle. The goal is to teach students the best times to buy options.


      • I closed all the Apple Inc. (Ticker: AAPL) puts in my funky straddle and am holding the AAPL Dec. 10 175-strike calls. So far, a 40% credit to hold the position.


Big Money Flow

Each week, Option Pit CEO Mark Sebastian looks at size institutional option buying with a twist.  He mostly buys calls or puts to ride the large momentum trades.


      • Mark closed half of the United Microelectronics Group (Ticker: UMC) calls up 80%. Still holding the rest.


Volatility Edge & Volatility Trading Club:

Volatility Edge is run by Mark and uses the proprietary Option Pit VIX Light indicator to guide volatility trading. The Vol Trade Club is run by me (AG), and employs a long strangle strategy that seeks to use VIX future decay to pay for upside Cboe Volatility Index VIX, iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) and ProShares Ultra S&P Short Term VIX Futures ETN (UVXY) options.

The Option Pit VIX Light Is Still Green, but the curve overall is very unstable. That means VIX can move quite a bit in a short period of time. Stocks just dont sell off considering how high the VIX is.  We have “orbiting volatility” — not straight down or straight up volatility.


For the Volatility Trading Club, I sold some contracts this week, but will need a drop in VIX to make real money by Dec. 22 expiration


Mark added some ProShares Ultra S&P Short Term VIX Futures ETN (Ticker: UVXY) options and sees a 22 VIX next, which I think is very likely.


Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!

To Your Trading Success,



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