A straightforward options trading strategy to return 3-6% per month (almost every month)

Options trading can be complex; one can look at it as the biggest video game in the world!

But some relatively simple strategies can produce reliable income without a lot of effort and without requiring moment-to-moment monitoring of a position.

The one I'll discuss today is the Iron Condor:

Basically, you:

• Buy a put, strike price A
• Sell a put, strike price B
• Sell a call, strike price C
• Buy a call, strike price D

This is essentially the combination of a put credit spread and a call credit spread. You make a profit if the price of the underlying stock (or ETF or index fund) remains roughly between B and C at expiration.

The return on capital one can make with this trade depends on several factors, but the one we're going to focus on today is the width between strikes B and C. Basically we're going to choose these strikes such that there is about an 87% chance that the stock will finish between these strikes when the options expire. But we plan to close this spread before expiration, when it's achieved about 50% of its maximum credit. This makes the chance for profit more like 95 to 96%.

How do we figure this initial 87%? We use the normal curve:

See where the 1.5 and -1.5 marks are? That's where we want to choose the short strikes.

Let's look at an example ETF: SPY, the S&P 500 index ETF. If you set up the main trade screen to show %OTM (percentage out of the money), you're looking for something in the range of 92 to 93% probability:

This is the short put we started with; now we need to buy the same number of puts at least one strike away. Let's choose 5 wide, as this gives us more credit (in Thinkorswim, one holds down the CTRL key to build up a multi-leg spread one leg at a time.)

Now we look for the same 92 to 93% probability on the call side:

And choose the long strike 5 points away on that side too:

Here's where we calculate the yield:

300 / 4660 = 6.4% ... so if we close the trade when we get 1/2 that, that's 3.7%.

Suggestions for beginning this: start small! Use 1 contract SPY (instead of the 10 I'm using here). Your max loss would then be $466 instead of $4660. Try this for a couple of months. Then move to 5 contracts, then 10 ...

When you're comfortable trading 10 SPY's, try 2 SPX. SPX is 10 times larger than SPY, and trading it is a little different in that it's not (currently) automated. It's "open outcry," meaning humans are still involved in the trades. You'll have to move 25 to 75 cents away from the midpoint to get SPX condors executed.

How big do you go with this? Just decide how much income you want to make and size accordingly. Using this example ... if you want to make $3000 per month you'll need a 20X larger trade, which means 20 contracts of SPX.

Happy trading!

How to get a remote job

There's a recent trend of widely dispersed teams working with the help of the Internet and communication technologies that run on top of it.

A couple of books have been published on this topic: The Year without Pants and Remote. The former is a narrative of a former Microsoft manager's work for Wordpress, which has a globally distributed workforce. The latter is a justification that could be used to try and sell remote work as a concept to management or a work team.

I'm currently working mostly-remotely for a Silicon Valley employer. Here's how I did it.

First, I used the Modern Job Hunting Hacks techniques I describe elsewhere on this blog. Often this is all that's required; in particular many recruiters ignore the 'I am only looking near Seattle' flag and send job listings from other places. For jobs that look interesting I reply "I can't move but could go for a month and then work remotely" and sometimes this works, as in this case. It's always worth a try.

Until I got this job I also started scanning two job listing sites: We Work Remotely and StackOverflow. StackOverflow has a very useful allows remote checkbox and generally more listings than We Work Remotely, though the latter is growing and has (currently) a higher proportion of non-programmer jobs than does the other site.

There are also niche sites for specific skills/interests, for example Django Gigs.

Caveats about remote jobs: you have to create your own structure and your own opportunities to socialize. For an extrovert this can be like being sentenced to solitary confinement! Get out there and have lunch with a friend!

Interesting Tech Roundup

Heat your home with other people's computers for free: nerdalize.com.

A worldwide network of virtual pilots exists, some flying the same routes on
the same schedule as the real airlines.

A price war in cell phone plans is currently going on, mainly due to T-Mobile. This is a good time to renegotiate your current cell phone deal.

A company onlycoin is rolling out a single card that pretends to be all of your credit cards at once. But how are they going to adapt to the chip-and-pin cards coming to the U.S. (finally) in the wake of Target's little problem?

The 50 smartest companies? MIT Technology Review has a list.

Redox Power Systems' PowerSerg 2-80

Affordable fuel cells are coming, finally, in the next couple of years.

That's it for now ... comment on your suggestions for this feature please!

A selfie you'll never forget

... from superstar political cartoonist Mike Luckovich: