In This Issue: A Market That No Longer Grants Free Money

For the better part of this year, the market has handed out returns like a casino that forgot to count its chips. But the house is starting to check the books. The past week saw the S&P 500 drop -3.1%, the Dow slip -2.4%, and the Nasdaq plunge -3.5%, officially stepping into correction territory. The easy money—where traders could mindlessly sell premium or buy every dip—is drying up. Now, we’re back to the kind of market that punishes laziness and rewards preparation.

This is where options traders must shift from autopilot to active management. It’s no longer enough to sell volatility and assume the market will stay in a predictable range. The signals are changing: hedging demand is rising, tech leadership is faltering, and rate expectations are shifting. If you don’t adjust your strategies accordingly, the market will do it for you—and not in a way you’ll like.

The Market Is Tired, But Not Broken—Yet

While the week’s declines may feel dramatic, they’re not an outright collapse. What we’re seeing is a natural, if overdue, rebalancing. For months, stocks climbed despite weak breadth, heavy overbought signals, and stretched valuations. Now, those excesses are being unwound.

Options traders should take note of this shift in market character. We’re moving from an environment where short premium strategies like iron condors and strangles worked well to one where directional strategies will likely outperform. If volatility continues to rise, traders may find better opportunities in:

• Credit spreads instead of naked short premium trades

• Ratio spreads to take advantage of skew changes

• Diagonal spreads for a mix of theta decay and directional exposure

This is the kind of market that rewards disciplined traders who consistently manage risk first and chase returns second.

Volatility Isn’t Just a Number, It’s a Mood

The CBOE Volatility Index (VIX) climbed above 23 this past week, signaling that uncertainty is creeping back into the market. But VIX is just a gauge—it tells you what traders are thinking, not what they’re doing.

What matters more is that skew has steepened, meaning traders are placing higher premiums on downside protection. This shift is critical because it tells us that institutions are starting to hedge more aggressively.

For options traders, this means two things:

1. Selling puts is getting more expensive – The market is pricing in greater downside risk. If you’re selling cash-secured puts, expect to get paid more, but also understand that the probability of assignment is rising.

2. Bearish trades are no longer contrarian – A month ago, buying puts was a lonely trade. Now, it’s becoming a crowded one. If you’re going to take on bearish positions, you may need to get creative—buying put ratios, using debit spreads, or waiting for short-term spikes in implied volatility before stepping in.

What’s Happening Beneath the Surface?

Not all stocks are selling off equally. The tech sector, which has been the backbone of this year’s rally, took the hardest hit. Semiconductor stocks, which had been riding the AI wave, saw outsized losses. The VanEck Semiconductor (SMH) dropped -5% on the week, highlighting that high-beta names are losing their leadership.

Broadcom ($AVGO) bucked the trend with an +8.6% rally on strong AI demand, but that was an exception, not the rule. Elsewhere, the damage was clear: Nvidia, Apple, and Microsoft all saw a surge in put buying, with implied volatility rising.

This tells us something important: market participants are shifting from offense to defense.

For traders, this means:

• Covered calls become more attractive – If upside momentum slows, selling calls against long positions can generate extra yield.

• Selling premium on high-IV stocks requires caution – A 50% IV level on a stock means traders expect big moves.

• Iron condors are riskier – Wide ranges work well in stable markets, but when IV starts rising, condors can get steamrolled. If you’re trading them, consider using smaller sizes or staggering expirations.

🚀 Big Changes Are Coming to The Option Premium!

Options trading isn’t about luck—it’s about strategy, discipline, and risk management. Too many traders chase trades without a plan. That’s why I’m launching three specialized trading services to help you turn options into a structured, repeatable system.

Here’s What’s Coming:

✅ Steady Income Strategies – Generate consistent returns with covered strangles, credit spreads, and iron condors.
✅ High-Probability Trades – Take advantage of short strangles, earnings plays, and volatility setups—without reckless risk.
✅ Smarter Portfolio Management – Master hedging, position sizing, and capital allocation for long-term success.
✅ Real-World Market Insights – Get weekly trade setups, risk management strategies, and deep dives into volatility trends.

📩 Who is this for?
🔹 Beginners who want a step-by-step approach to learning options the right way.
🔹 Intermediate traders refining their strategy and risk management.
🔹 Advanced traders optimizing capital efficiency and portfolio construction.

This isn’t just another options newsletter—it’s a strategy-driven service built for traders who want clarity, consistency, and confidence in their trades.

📢 Details are rolling out this week—stay tuned!

📈 Market Snapshot & Commentary

🔹 Market Meter:

📜 Investment Quote of the Week

Discomfort is the Price of Opportunity

Options traders often seek certainty—an edge that feels safe, strategies that provide immediate gratification. But as Arnott reminds us, comfort is the enemy of returns.

Take the classic iron condor: it thrives in stability, yet the most lucrative moments arise when fear is highest and implied volatility is elevated. The short strangle? It feels reckless—until you realize that overpriced options, not direction, are your real edge. Even the wheel strategy tests your conviction, forcing you to sell puts when stocks look uninvestable and sell calls when optimism peaks.

The best trades are the ones that feel just uncomfortable enough—when volatility is stretched, risk is priced irrationally, and the market hands you asymmetric opportunities disguised as fear. If a position feels too easy, too obvious, chances are, the premium is too thin and the probability of success isn’t in your favor.

In options, the path to profitability isn’t paved with comfort. It’s found in leaning into discomfort, extracting premium when others are panicked, and embracing the uncertainty that drives the very mispricings we seek.

📰 Weekly In-Depth Articles

🗓️ Tuesday, March 4th: Is Inflation Here to Stay? How to Profit with Poor Man’s Covered Calls on Gold
🗓️ Thursday, March 6th: Delta Hedging: How Professional Traders Manage Risk Without Picking a Side

📊 Weekly Table Overview: The Implied Truth

This table provides a comprehensive snapshot of key options, volatility and momentum indicators for major ETFs, helping you identify trading opportunities in options markets. It’s designed to highlight where the market is offering rich premiums, potential trend reversals, and overbought/oversold conditions—all critical for options strategies.

Markets are a battle between realized and implied expectations. Price action whispers the market’s short-term fears and hopes, but options pricing shouts the collective anxiety of traders hedging their bets. Understanding where volatility is mispriced—relative to history, sentiment, and reality—is what separates profitable options traders from those who think they’re just making "smart bets."

Let's break down this week's key volatility trends, premium-selling setups, and momentum shifts. 🚀

1️⃣ Best Premium-Selling Candidates (Rich Options Pricing)

When uncertainty reigns, option premiums expand—and that’s where we step in. Selling options in high IV environments lets us capitalize on overpriced risk assumptions, banking on reality proving less extreme than fear suggests.

Key Factors for Premium Selling:

✅ IV Rank > 50 → IV is high relative to the past year.
✅ IV Percentile > 50 → Ensures IV is elevated beyond a short-term spike.
✅ Liquid Options → An edge is useless if you can’t get in and out. We only use our watchlist of ETFs with highly-li

🔍 Key Insight:

• With VIX at 23.37, the market remains in a controlled volatility regime—high enough to sell premium, but not yet in full panic mode.

• Sector volatility dispersion is creating target-rich environments for premium sellers.

Top Premium-Selling Plays:

📌 QQQ (IV Rank 53.7, IV Percentile 98.0) → Tech remains volatile; iron condors or credit spreads make sense here.
📌 IWM (IV Rank 45.2, IV Percentile 94.4) → Small caps remain fragile, making them prime strangle and condor candidates.
📌 XLF (IV Rank 68.9, IV Percentile 93.0) → Financials are weak but not collapsing, great for short call spreads.
📌 XOP (IV Rank 69.7, IV Percentile 96.9) → Energy is in flux, presenting elevated IV for premium capture.
📌 URA (IV Rank 81.9, IV Percentile 83.7) → Uranium volatility is elevated, making it a great short-vol play.

2️⃣ Overbought & Oversold Extremes (Momentum & Mean Reversion Setups – RSI(7))

Momentum can mislead the impatient and reward the patient. RSI(7) helps us spot short-term exhaustion—where fear or euphoria has gone too far and is about to reverse.

📉 Overbought (Potential Pullback Trades – Caution for New Longs)

RSI(7) > 80 → The crowd has bid prices too far, too fast.

Examples:

• EFA (RSI 7: 70.96) → International markets getting stretched.

• FXI (RSI 7: 67.83) → China overheated short term, a pullback may be looming.

📈 Oversold (Bounce or Reversal Candidates – Mean Reversion Plays)

RSI(7) < 20 → Too much selling pressure, buyers likely to step in.

Examples:

• KRE (RSI 7: 17.58) → Regional banks battered—potential short put candidate.

• XLF (RSI 7: 27.62) → Financials under pressure, but nearing bounce zone.

• URA (RSI 7: 31.38) → Uranium still weak, but a reversal could be forming.

🔍 Key Insight:

• Oversold plays (KRE, XLF, IWM) are potential bounce candidates.

• Overbought sectors (EFA, FXI) may face near-term cooling.

3️⃣ What the VIX is Telling Us About Market Volatility

The VIX at 23.37 (IV Rank 59.4%) tells us one thing: uncertainty is rising, but the market isn’t panicking.

🔹 Above 25 → Expect sharper swings and larger downside hedges.
🔹 Below 20 → The market breathes easy, making premium selling less attractive.

🔍 Key Insight:

• Volatility is in the “ideal” range for premium sellers—high enough for juicy options, low enough to avoid tail risk.

• If VIX spikes above 25, adjust exposures—market-wide swings could accelerate.

4️⃣ Sector Strength & Weakness – Where’s the Money Flowing?

Knowing where volatility is accumulating vs. dissipating is critical for structuring the right options trades.

📈 Strongest ETFs (Momentum & Bullish Setups – RSI(7) Stability)

• XLV (RSI 7: 59.76, IV Rank 24.4) → Healthcare is steady, capital continues to flow in.

• XLP (RSI 7: 59.05, IV Rank 62.9) → Defensive staples holding strong.

• IYR (RSI 7: 47.25, IV Rank 23.7) → Real estate showing strength.

📉 Weakest ETFs (Bearish Setups & High IV – RSI(7) Depressed + High IV)

• IWM (RSI 7: 25.78, IV Rank 45.2) → Small caps remain under siege.

• XOP (RSI 7: 28.03, IV Rank 69.7) → Energy remains in high IV territory.

• KRE (RSI 7: 17.58, IV Rank 70.6) → Regional banks are struggling.

• QQQ (RSI 7: 31.95, IV Rank 53.7) → Tech remains fragile.

🔍 Key Insight:

• Defensive plays (XLV, XLP, IYR) are still holding up.

• High-beta names (IWM, XOP, KRE, QQQ) remain weak.

5️⃣ Smart Options Trades Based on Market Data

🔹 Premium Selling (High IV & Strong Trend)

• QQQ (IV Rank 53.7, IV Percentile 98.0) → Iron condors or credit spreads work well.

• XLF (IV Rank 68.9, IV Percentile 93.0) → Financial sector premium remains juicy.

• XOP (IV Rank 69.7, IV Percentile 96.9) → Energy IV still elevated—good for put spreads.

🔹 Directional Trades (Momentum & Sector Strength)

• Long XLV, XLP, IYR Calls → Momentum-based continuation trades.

• Short Puts on KRE, XLF, IWM → Oversold conditions suggest a bounce.

🔹 Hedge Trades (If Market Reverses)

• Long VIX Calls if VIX Breaks 25.

• SPY Put Spreads if Market Weakens Further.

🚀 Final Takeaways

✅ Best Premium-Selling Trades → QQQ, XLF, XOP, IWM, URA
✅ Best Mean Reversion Trades → KRE, XLF, IWM
✅ Sector Strength → XLV, XLP, IYR
✅ Sector Weakness → IWM, XOP, KRE, QQQ

🔍 Are you aligning your trades with IV, RSI, and price action?

🚀 Sell premium where it’s overpriced. Fade momentum when fear spikes. The edge is always in the mispricing.

📊 Quick Reference: The Implied Truth Table

• Symbol: ETF ticker (e.g., SPY, QQQ, IWM).

• Last: Latest closing price.

• P/C Ratio: Put/Call ratio—>1 = bearish, <1 = bullish; extremes can signal contrarian setups.

• Impl Vol: Implied Volatility—higher IV = richer premiums, more expected movement.

• IV Rank: IV vs. past year’s range—0% = lowest, 100% = highest; >35% favors premium-selling.

• IV Percentile: % of time IV was below current level—adds context to IV Rank for volatility shifts.

• RSI (2/7/14): Momentum indicator—>80 = overbought, <20 = oversold; shorter RSIs react faster.

• High/Low Graph: Shows price vs. 52-week range—+% = near highs, -% = near lows.

Use this to spot volatility trends, premium opportunities, and momentum shifts at a glance. 🚀

📚 Educational Corner: Options Deep Dive

🎓 Topic of the Week: Selling Options Without Regret: How to Avoid the Most Common Premium Selling Mistakes

At first glance, selling options looks like free money.

You collect a premium upfront, and as long as the market doesn’t move too much, you keep the profits. You’re playing the role of the “house” in a casino, and the odds seem stacked in your favor.

Until they’re not.

Too many traders fall into the illusion of safety with premium selling—until a sudden volatility spike or an unexpected market move wipes out months of steady gains in a few days.

But the problem isn’t premium selling itself—it’s how most traders approach it.

This article will break down:
✅ The most common mistakes premium sellers make (and how to avoid them)
✅ How to structure safer trades that maximize premium while minimizing risk
✅ How to use IV Rank (IVR), Expected Move, and Delta to improve trade selection
✅ The right way to manage risk without blowing up your account

If you want to sell options profitably without regrets, let’s get started. 🚀

1️⃣ Why Many Traders Fail at Selling Premium

🔹 Mistake #1: Selling Too Close to the Money

Many traders sell options that are too close to the stock price because the premiums look juicier.

For example, suppose SPY is trading at $575, and a 575 strike short put (going out 40 days until expiration) pays $14.00 in premium, while a 550 strike put only pays $6.50.

The delta of the 575 put strike is 50, while the delta of the 550 put strike is 25. A probability of success of 50.7% versus 73.1%, respectively.

Many beginner traders instinctively choose the 575 strike or a nearby at-the-money option because it offers a higher premium, without fully considering the probability of success, the role of the law of large numbers, and how statistical probabilities shape long-term outcomes.

How to Avoid It:
✅ Use Delta to control risk. A delta of 15-30 is ideal for high-probability premium selling.
✅ Sell options outside the Expected Move to increase the likelihood of profit.

💡 A smarter approach: With SPY trading at 575 and an expected move of 35, focus on selling strikes below 540. For example, selling the 540 put instead of a strike closer to the current price offers a lower premium but significantly increases the probability of profit by staying outside the expected move. The SPY April 17, 2025 540 put strike is worth $5.05. The delta is 19 and the probability of success, a healthy 78.5%.

🔹 Mistake #2: Selling Premium in Low IV Environments

Selling options works best when IV is high—because you collect more premium and benefit from IV contraction.

The problem? Many traders sell options when IV is low and wonder why their trades aren’t making money.

For example, if IV Rank (IVR) is below 20%, option premiums are cheap, and there’s little room for IV to drop further—meaning theta decay is your only edge.

How to Avoid It:
✅ Only sell premium when IV Rank is above 35% (ideally above 50%).
✅ Check IV Percentile to confirm IV is at a historically high level.

💡 Better Trade: If IV is low, consider debit spreads or wait for a volatility spike before selling premium.

🔹 Mistake #3: Ignoring Position Sizing and Portfolio Exposure

Many traders sell too many contracts relative to their account size, leaving them overexposed.

For example:
🔴 Selling 10 naked puts on SPY in a $50,000 account exposes you to a potential $500,000 notional position—which is insane risk given the account size.

How to Avoid It:
✅ Keep total premium selling exposure under 30% of account capital.
✅ Use defined-risk strategies like Iron Condors and Jade Lizards when sizing up.
✅ Use a diversified approach by incorporating multiple, non-correlated options strategies that capitalize on different market conditions and varying timeframes.

💡 Better Trade: Instead of 10 naked puts, trade risk-defined strategies like a put credit spread or iron condor to limit downside risk.

2️⃣ How to Structure Safer Premium Selling Trades

🔹 Use IV Rank (IVR) to Find the Best Trades

Why it matters: IV Rank tells you where today’s IV sits compared to the past year.

• IV Rank above 35% → Good for selling premium

• IV Rank above 75% → Great for selling premium

• IV Rank below 30% → Avoid premium selling

🔹 Use Expected Move (EM) for Smarter Strike Selection

The Expected Move tells you how much the market expects a stock to move.

For example:

• If SPY’s expected move is ±$20, selling a put within that range typically corresponds to a one standard deviation move or less.

• Selling a put outside the Expected Move increases your probability of success, typically 75%+.

💡 Best practice: Sell options beyond the Expected Move for high-probability trades.

3️⃣ Risk Management: The Right Way to Manage Premium Selling Trades

🔹 Set Stop-Losses and Profit Targets

Too many traders hold onto short premium trades until expiration, letting winners turn into losers.

The right approach?
✅ Start taking profits at 50% max profit.
✅ Cut losses if a short option doubles in value.

💡 Example: If you sell a put for $5.00, start taking profits at $2.50 and cut losses if it reaches $10.00.

🔹 Roll and Adjust When Necessary

If a trade moves against you, what’s better—taking a loss or adjusting?

✅ Rolling out and down extends trade duration and increases the probability of profit. Use delta as a guide to determine the optimal time to roll.
✅ Hedging with spreads or futures can reduce directional risk by delta hedging.

💡 Want to read more about delta hedging?

Final Thoughts: How to Sell Options Without Regret

Selling premium can be one of the most consistent ways to make money in options trading—but only if done correctly.

✅ Avoid common mistakes like selling too close to the money, trading in low IV, and overexposing your portfolio.
✅ Use IV Rank, Expected Move, and Delta to structure smarter trades.
✅ Manage risk proactively with stop-losses, adjustments, and proper sizing.

🔗 Stay Connected with Us: Navigating a Market That No Longer Grants Free Money

For much of the past year or so, traders thrived on simple, lazy strategies—sell premium, buy the dip, repeat. But last week’s decline signaled a shift. The S&P 500 pulled back, tech stocks lost momentum, and volatility is creeping higher.

This market no longer hands out easy profits. Selling premium without considering IV shifts and risk management is a recipe for regret. But for disciplined traders, new opportunities are emerging.

Strategy matters more than ever. Those who adapt, size trades correctly, and manage risk proactively will thrive. Those who don’t will quickly learn—the market no longer hands out free money.

📢 Want to trade smarter in this environment? Stay tuned—The Option Premium is launching specialized trading services designed for this market shift. More details dropping soon! 🚀

Have questions or thoughts? Don’t hesitate to reach out—I’d love to hear from you. Email me at [email protected].

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Thanks again for your attention! I hope you found some, if not all, of the aforementioned info worthy of your time.

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