📩 The Option Premium Weekly Issue – June 22, 2025

📉 Market Snapshot and Commentary

The Fed's Poker Face: What Options Traders Need to Know

The Federal Reserve just dealt another hand of "wait and see," keeping rates pinned at 4.25%-4.5% for the fourth straight meeting. But here's the kicker: seven Fed officials think we're done cutting rates this year, while eight still see two cuts coming. That's not consensus, that's a coin flip masquerading as monetary policy.

The Real Game Behind the Curtain

While economists debate GDP growth rates, smart money is watching the tariff time bomb. Companies have been playing inventory games, stockpiling goods before tariffs hit. But those cushions are running thin, and price hikes are already trickling through starting this month. Translation: volatility is coming whether the Fed cuts or not.

Why This Matters for Your Puts and Calls

The market's already up 20% from April's lows, but summer could get messy. The Fed's caught between stubborn inflation and a slowing economy, the kind of environment that makes single-direction bets dangerous. Bond yields are stuck in a range despite all the drama, and international markets are quietly outperforming (MSCI EAFE is up 15% year-to-date while the S&P 500 sits at a measly 1.5%).

Weekly Market Scorecard

The Smart Play

Forget picking sides between bulls and bears. This environment screams for strategies that profit from volatility itself, including iron condors, short strangles and other high-probability approaches. And don't sleep on international exposure; while everyone's obsessing over Fed tea leaves, foreign markets are actually delivering returns.

The Fed may be patient, but markets rarely are. With oil prices jumpy from Middle East tensions and tariff effects building steam, the second half of 2025 looks ripe for the kind of price swings that separate option traders from option donors.

Bottom line: Position for chaos, not clarity.

📰 Weekly In-Depth Articles 

🗓️ Tuesday, June 17th: The Complete Iron Condor Trading Guide: Master This Low-Risk Options Strategy

🗓️ Thursday, June 19th: YieldMax vs. PMCC: Understanding the Trade-Offs Between Income Innovation and Strategy Control

🎓 Options 101: The First Steps to Trading

Time Decay (Theta): The Silent Drain on Your Options

Why Options Lose Value Even When the Stock Doesn’t Move

Time decay, known as theta, is one of the most overlooked forces in options trading. It reduces an option’s value each day, regardless of whether the underlying stock moves.

This article explains:

• What theta is and how it impacts option pricing

• Why options decay faster as expiration approaches

• How sellers use time decay to generate consistent income

• Why buyers often lose money even with the right directional call

• How to factor time into every trade you place

If you're trading options without a clear understanding of theta, you're likely misjudging your risk and returns.

👉 Read the full article here

🧠 Mental Capital

Train not just your trading system, but your trading self.

Conviction Over Confirmation: Why the Best Options Trades Still Feel Uncomfortable

Some of the best trades you’ll ever place won’t feel good when you enter them. They’ll feel early. Risky. Uncomfortable. But that discomfort often signals you’re ahead of the crowd, not behind it.

This week’s issue looks at why the trades that feel worst are often the most profitable, and why waiting for confirmation can cost you both premium and opportunity.

We break down:

• Why comfort can be a sign you’re late

• How to build conviction through process, not emotion

• A framework for trading high-IV setups when the market looks unstable

• A journaling habit that sharpens your decision-making over time

• What experienced traders know about hesitation and edge

Discomfort isn’t a flaw in your system. It’s often a sign it’s working.
Read the full article → Mental Capital – Conviction Over Confirmation

📊 The Implied Truth: Weekly Table Overview

Unlock the Full Picture – Upgrade to access the complete table, including all 100 equities (AAPL, META, AMZN, NVDA and more)

The Volatility Mirage Most Traders Fall For

Consider two scenarios that crossed my desk this week: The Oil ETF (USO) trading with 64.69% implied volatility, while the Semiconductor ETF (SMH) sits at 38.65%. The average trader sees USO as "more expensive" due to its higher absolute volatility.

They're missing the forest for the trees.

USO's IV percentile sits at 99.6%, meaning current volatility is more expensive than 99.6% of the time over the past year, essentially at maximum historical premium. Meanwhile, SMH's 38.65% IV represents just the 42.8th percentile, suggesting relatively normal volatility for this sector despite recent tech turbulence.

This is why professionals focus on IV rank and percentiles rather than absolute numbers. Context is everything in volatility trading.

When Sector Sentiment Reaches Extremes

Healthcare ETF (XLV) has become Wall Street's whipping boy, and the put/call ratio of 3.024 proves it. For every call option purchased, traders are buying three puts—a level of bearish conviction that typically marks sector capitulation rather than prescience.

The technical picture supports a contrarian view. XLV's RSI(14) sits at 43.67, suggesting the selling pressure hasn't reached technically oversold levels yet. But RSI(7) at 34.77 shows accelerating weakness, while RSI(2) at 3.35 screams that short-term selling has reached extreme levels.

This creates an interesting entry dynamic: the intermediate-term momentum suggests more downside is possible, but the short-term panic suggests any entry should wait for a brief bounce before establishing sector positions.

The Energy Sector Paradox

Energy Select SPDR (XLE) presents the mirror image setup. The sector shows RSI(14) at 67.32, approaching overbought but not extreme. RSI(7) at 76.53 suggests recent momentum is getting stretched, while RSI(2) at 79.36 indicates short-term buying exhaustion approaching.

The volatility story adds nuance: XLE's implied volatility sits at 29.65% with an IV percentile of 74.7%, expensive relative to the sector's own history, but not at extreme levels like oil futures.

Here's the insight most miss: when sector momentum is extended across multiple timeframes but hasn't reached technical extremes, you often get brief pullbacks that offer better entry points for the prevailing energy trend.

The Week's Featured Opportunity: Financial Sector's Hidden Setup

The Financial Select SPDR (XLF) presents this week's most compelling sector play, a masterclass in how volatility, sentiment, and technical analysis align across an entire industry.

The Technical Picture:

• RSI(14): 49.20 (perfectly neutral-no directional bias)

• RSI(7): 43.98 (slight weakness, but not oversold)

• RSI(2): 58.71 (neutral short-term positioning)

The Volatility Story:

• Implied Volatility: 20.79%

• IV Percentile: 67.7% (moderately expensive for financials)

• IV Rank: 24.0 (below average historical volatility)

• Put/Call Ratio: 2.313 (bearish sentiment)

The Setup: Here's what makes this fascinating: completely neutral technical readings across all RSI timeframes, yet traders are buying more than two puts for every call. This disconnect between price action and sentiment creates asymmetric opportunity.

The 20.79% IV trading at the 67.7th percentile suggests options are moderately expensive, but the extreme bearish sentiment (P/C ratio of 2.313) indicates this premium might be justified by fear rather than mathematical probability.

The Strategy: This setup favors a bull put spread or cash-secured puts, even a bullish-skewed iron condor, selling puts below the expected move to capture both the sentiment mean reversion and modest volatility contraction. The neutral RSI readings across all timeframes suggest no immediate directional catalyst, making time decay our ally.

The key insight: when sentiment is extreme but technicals are neutral, you're often seeing emotion-driven option pricing that creates systematic edges.

The Sector Rotation Wisdom Wall Street Won't Share

Here's what decades of ETF options trading has taught me: sector rotations create the market's most reliable volatility opportunities. When one sector reaches technical extremes while another shows neutral readings with sentiment dislocations, you're seeing the setup for capital rotation.

This week's data reveals exactly this pattern: Energy (XLE) approaching overbought with elevated volatility, Healthcare (XLV) in panic-selling mode, and Financials (XLF) sitting neutral with extreme bearish sentiment.

The mathematical reality is that sector volatility, like individual stock volatility, is mean-reverting. When IV percentiles hit extreme levels, whether in USO at 99.6% or even moderately stretched levels in sector ETFs, the odds favor reversion over continuation.

The Triple Timeframe Secret

The RSI timeframe hierarchy becomes even more powerful with ETFs because sectors move differently than individual stocks. RSI(14) captures the sector's intermediate trend and rotation potential. RSI(7) shows whether institutional money is accelerating into or out of the sector. RSI(2) provides the tactical timing for entries within the broader sector thesis.

When all three align, as they do in XLE's overbought readings, the signal is clear. When they diverge, as in XLF's neutral readings amid extreme sentiment, the opportunity often lies in fading the emotion.

My premium subscribers receive complete ETF sector strategies, including exact option structures, entry timing based on RSI(2) signals, and portfolio allocation guidelines for sector rotation plays like the XLF opportunity detailed above.

If you want the specific trade setups, how I structure the entries, and what I avoid, that’s all covered in my premium services.

📊 Quick Reference: The Implied Truth Table

📚 Educational Corner: Options Deep Dive

Why Delta Matters: The Hidden Role of Delta in Options Income Strategies

This week, we go beyond the textbook definition of delta to show how it actually drives every meaningful decision in income-based options trading.

Delta isn’t just a measure of how much an option price moves, it’s a probability filter, a directional gauge, and a risk management signal all in one. Whether you’re selling puts, managing a Poor Man’s Covered Call, or adjusting spreads, understanding delta means knowing your real exposure.

In this article, we break down:

• How delta helps define your probability of profit

• Why it determines your net directional risk in trades like PMCCs

• When high delta leads to early assignment (especially in dividend stocks)

• How to select the right delta for each strategy, from condors to covered calls

• The role of gamma as expiration nears

• And how to track portfolio-level delta to avoid hidden directional exposure

Delta isn’t just another Greek. It’s the foundation of strategic, confident, probability-driven trading. If you trade options for income, you can’t afford to ignore it.

👉 Read the full article here

🔗 Let’s Stay Connected

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Thanks again for reading. I hope you found today’s insights valuable and worth your time.

Trade Smart. Trade Thoughtfully.
Andy Crowder
Founder | Editor-in-Chief | Chief Options Strategist
The Option Premium