Happy Friday, Evolvers!

Unsurprisingly, the week is closing out red with the S&P 500 ETF Trust (NYSEARCA: SPY) down another 1.6% at the time of this writing.

It may sound like bad news, but that’s only true if you’re holding stocks long-term.

For traders like me with near-term game plans, this price action is perfect.

The higher the volume and volatility, the better it is for my personal trading style. (If you’d like more details on the trading strategy I’ve been designing for more than a decade, check out my brand-new ebook right here!)

Massive price swings that you wouldn’t normally see are what make market panics so juicy for experienced traders, 

If you’re holding directionally correct options during one of these big swings, you can potentially make several multiples on your principal in a single day. 

Opportunities like this don’t come along every year. It’s important to focus on your best setups only. Then, strike while the iron is hot.

Anyway, it’s time to get to the Friday Q&A!

Keep reading to hear my answers to a few of your burning questions…

“How do you pick which strike price and expiration date to trade?”

The beauty of options trading is the ability to create trades tailor-made to your specific setup.

With stocks, you essentially have two choices … buy or sell, long or short.

With options, the possibilities are endless. Puts, calls, covered contracts, vertical spreads, iron condors … the list goes on.

But even if you’re just trading simple puts and calls, you have choices about strike price and expiration date.

You may find a setup where you’re confident in the direction of the move but have no idea when it’s gonna happen.

In cases such as this, you’ll wanna buy longer-dated contracts to give yourself ample time for the pattern to play out.

Other times, you might be extremely confident in a big near-term swing.

In these instances, you’ll probably wanna lean into your conviction and get aggressive with some short-dated weekly contracts.

But to answer your question, my choices around strikes and expiration dates are usually pretty straightforward…

When it comes to choosing strikes, I usually buy out-of-the-money (OTM) contracts that are very close to the money.

For example, the ProShares Bitcoin Strategy ETF (NYSEARCA: BITO) is trading for $11.96 at the time of writing. 

Meanwhile, I’m holding BITO 9/23/2022 $11.50 Puts (because that’s the strike that’s currently closest to the money).

And when I’m choosing expiration dates, I tend to lean towards short-dated contracts. Why?

Because I have strong conviction in my trades and my timing is usually pretty good. 

But for anyone just starting to trade options, I’d recommend buying yourself a little more time on your contracts than I do.

That said, every trader is unique. You’ll probably need to experiment a bit to find the combination of contracts, strikes, and expiration dates that work best for your personality, account size, and risk tolerance.

“I’m struggling with the price swings in this market, everything is happening so fast and I’m leaving money on the table. How can I maximize my gains in such a crazy environment?”

First of all, I sympathize with your struggles.

It’s easy for me to say that this volatility is a gift because I have 10+ years of trading experience under my belt.

But if I was trying to learn to trade in this environment, I’m not sure I’d love it as much as I do now.

That said, I think the key to your problem is this — adaptability. 

If you wanna win in the stock market, you must be ready to adjust your strategy WHENEVER necessary.

In other words, you’ve gotta be nimble … ready to shift your setups, your patterns — and most of all, your mindset — any time the market changes pace.

Trust me, this is a lot easier said than done. 

I’m a naturally stubborn trader. I want to nail every setup to the absolute maximum. 

In other words, I’m a perfectionist. And this part of my personality has its pros and cons. 

I’ll always recommend that you strive to be the absolute best trader you can be. But there’s a fine line between steadfastness and inflexibility…

If you think you’ve found the one-and-only strategy that will work in every market condition — you’re wrong.

I’ll let you in on a hard truth: One day, that pattern will fail to deliver. 

And in those moments, if you don’t adapt to the changing tides, you’ll be left in the dust by other traders who do.

So, to summarize … Be nimble, don’t get tunnel vision on any one pattern, and get ready to switch your strategy up whenever the market calls for it. 

Final Thoughts

This volatility can bring about some incredible opportunities, but it can also lead to some dangerous situations for traders.

Be very careful when you enter a position. Adjust your strategy if your current game plan isn’t working. Focus on the best setups only. 

And if you’re trading options — be picky about which strike prices and expiration dates you trade.