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A Go-To Options Strategy for Limiting Risk in Uncertain Times

by | Oct 4, 2024

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It’s a 1-2 punch Wednesday with the FOMC and Mag 7 earnings. We’re tracking key S&P levels (7,400–7,600) to see if we push positive into month-end or fail [tap to join us for the Daily Profit Plan]

 

Navigating volatile markets is about more than picking the right stocks…

It’s about managing risk, protecting profits and maintaining flexibility. One of my go-to methods in these conditions is using options spreads, especially credit spreads like the bull put spread.

By setting up trades that take advantage of price movements while limiting downside risk, spreads allow you to stay in the game without taking on excessive exposure.

Let’s break down an example where I used a bull put spread on Ralph Lauren (RL).

Why a Bull Put Spread?

At the time, I was eyeing RL as a potential play based on its technical setup if it pulls back to support. The stock had recently hit all-time highs, and I’m not looking to buy at those elevated levels. 

Instead, I’d prefer to catch a dip to a solid support level around $165. Here’s where the bull put spread comes in — it allows me to profit from the stock staying above that key support without requiring me to buy shares outright.

I set up a $160 by $165 bull put spread for both November 2024 and January 2025 expirations. This spread involved selling a $165 put and buying a $160 put, collecting a premium up front. As long as RL stayed above $165 by expiration, I kept the full credit — which in this case was $2.25 per contract. 

My max risk was about $275 if RL dropped below $160, but this setup gave me a solid balance of risk-reward.

The Benefit of Staggering Expirations

By staggering the expiration dates — Nov. 15 and Jan. 17 — I gave myself flexibility. If RL dropped to that support level, I had a chance to profit from both time frames. But even if only one filled, I still stood to make a nice return.

This is the beauty of options spreads — they give you flexibility and control in volatile markets. 

Whether it’s waiting for the right pullback or setting a line in the sand with a spread, you can still generate income while limiting risk. It’s not always about hitting a home run…

Sometimes, it’s about collecting steady profits while staying nimble.

If you’re not using options spreads in your trading, you’re leaving a powerful tool on the table.

I’ll see you in the markets. 

Chris Pulver
Chris Pulver Trading

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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. 

P.S. Tap Into the Zoom BeFore SEC Filings Force the Next Move

Lance and I are hitting the broadcast button for our August Earnings Blitz Roundtable at 11 a.m. ET today…

If you’re holding big tech positions, trading options or sitting in broad market index funds this month, you simply cannot afford to sit on the sidelines today.

Wall Street is getting ready to reprice dozens of major stocks overnight as earnings roll in…

And the best part? It doesn’t matter if companies beat or miss expectations… or whether their stocks jump or plunge.

As long as the market moves, we have a way to target big post-earnings payouts without having to guess direction.

Here’s what is waiting for you today: 

  • Our Mag 7 Power Rankings: Get our exact ranked list showing which tech giants offer the largest post-earnings profit setups… and which ones are toxic trap doors.
  • The August Market Catalyst: Find out which single earnings report on the calendar carries enough weight to move the entire broad market.
  • The AI Spending Verdict: Learn what hundreds of billions in capital spending really mean for the next leg of the AI trade.
  • The Two-Way Trade Strategy: Discover a clever setup I use to target big post-earnings swings without having to predict whether a stock goes up or down.
  • Your Complete August Roadmap: Walk away with an exact plan for this entire earnings blitz so you know precisely what to do when news hits the wire.

The room is filling up fast, and we are starting any moment now… Don’t leave your portfolio to a coin flip this earnings season.

Join Us at 11 AM ET 

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