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- 📩 The Option Premium Weekly Issue – May 4, 2025
📩 The Option Premium Weekly Issue – May 4, 2025
What to Fade, What to Trade and Much, Much, More: Your Weekly Options Guide
📉 Market Snapshot:
Markets have rallied, but cracks are forming under the surface. Despite strong Q1 earnings and a resilient jobs market, GDP slipped negative and Q2 guidance is softening. Tariff concerns and Fed uncertainty are back on the radar—making this a prime setup for premium sellers focused on risk-defined trades.
📊 The Implied Truth:
Breadth remains narrow, but volatility is rising in sectors like energy, biotech, and commodities. IV Rank is climbing, and RSI extremes are flashing in both directions. Top setups this week include iron condors in USO and XOP, bull put spreads in GDX, and tight condors in SMH.
🧠 Mental Capital:
What can Warren Buffett teach options traders? A lot. From temperament over intellect to patience over prediction, this week’s edition breaks down five timeless mental models from Buffett that sharpen decision-making, protect capital, and build long-term trading consistency.
🎓 Educational Corner:
0DTE vs. Earnings Trades: One’s a Gamble. The Other’s a Strategy.
Many traders are selling premium using zero-day options. But without structure, context, or an IV edge, they’re often trading blind. We break down why earnings trades—anchored to implied volatility, expected move, and defined risk—offer a smarter, repeatable approach.
📉 Market Snapshot & Commentary
📉 Market Snapshot: Fundamentals Hold Up, But Tariffs Cloud the Outlook
Markets have bounced back sharply, with the S&P 500 up 8% and the Nasdaq gaining 11% over the past two weeks. The rebound came as first-quarter earnings mostly surprised to the upside, consumer spending remained healthy, and the U.S. administration signaled a more diplomatic tone on trade.
But don’t let the relief rally fool you—beneath the surface, uncertainty lingers. Earnings guidance has weakened, GDP growth slipped negative in Q1, and tariff concerns continue to weigh on the forward outlook. For options traders, that’s a cocktail of volatility, mispricing, and opportunity.
🔑 Key Takeaways
Earnings Resilience: About 76% of S&P 500 companies beat Q1 estimates, above the 10-year average.
Softening Guidance: Q2 earnings growth estimates have dropped from 11.3% to 5.8% as companies flag trade and consumer concerns.
Negative GDP, But Not Recession: Q1 GDP fell -0.3%, largely due to a surge in imports. Consumption and investment remained strong.
Jobs Market Still Firm: April’s nonfarm payrolls added 177,000 jobs, and wage growth slowed slightly—both signs of stability.
Tariffs Remain the Wildcard: Progress on trade deals could boost sentiment. Stalemates could trigger more market stress.
Fed Watch: A rate cut now looks more likely in late 2025 than mid-year, especially as inflation and labor metrics remain sticky.
💡 What This Means for Options Traders
Markets are transitioning from earnings momentum to macro uncertainty—and that’s where premium sellers tend to shine.
1. Focus on Risk-Defined Strategies:
Volatility is creeping back, making this a prime environment for iron condors, credit spreads, and jade lizards on liquid underlyings like SPY, QQQ, and IWM.
2. Use IV Metrics to Guide Trades:
IV Rank and IV Percentile are expanding again across several sectors. Stay selective—look for setups with IV Rank > 50 and clear technical ranges.
3. Watch Consumer and Tariff-Exposed Stocks:
Names like Apple, Amazon, and McDonald’s are showing weakness in forward guidance—potential candidates for bear call spreads or put calendars, especially post-earnings.
4. Expect Event-Driven Premium:
Fed meetings, CPI reports, and any trade policy headlines will drive short-term volatility. Short-duration straddles and strangles (with hedged wings) can offer an edge if priced correctly.
5. Lean Into Sector Rotation:
Financials and health care remain less tariff-sensitive and may outperform if broader consumption weakens. Focus here for directional or delta-neutral PMCC setups.
📊 Weekly Market Stats
Index | Close | Weekly | YTD |
|---|---|---|---|
Dow Jones | 41,317 | +3.0% | -2.9% |
S&P 500 | 5,687 | +2.9% | -3.3% |
Nasdaq | 17,978 | +3.4% | -6.9% |
MSCI EAFE | 2,481 | +0.9% | +9.7% |
10-Yr Treasury | 4.31% | 0.0% | +0.4% |
Oil ($/bbl) | $58.55 | -7.1% | -18.4% |
Aggregate Bonds | $97.95 | -0.7% | +2.9% |
This Monday marks an important milestone — both for The Option Premium and for me personally. I’ll be rolling out new trades, launching fresh portfolios, and sharing some exciting updates that reflect everything I’ve been building behind the scenes.
I’ve spent over 23 years as a professional options trader, developing and refining the exact strategies now powering these premium services. This launch represents decades of real-world experience, risk management, and helping traders—just like you—navigate markets with discipline and edge.
The response since opening the doors has been nothing short of humbling. I’ve heard from traders who’ve followed my work for 10, 15, even 20+ years—and the loyalty, encouragement, and trust have been overwhelming. Thank you for being part of this journey.
If you’ve been thinking about joining, now’s a great time.
If you’ve been enjoying the free weekly newsletter, consider supporting my work by subscribing to the The Income Foundation service (my Wheel Strategy service) — just $9/month. It’s a straightforward, rules-based approach to consistent income, with a few twists I think you’ll appreciate. Every subscription helps as I continue to build this business from the ground up. Thanks for being part of it.
💥 Here’s what’s included:
✅ The Income Foundation Service — Just $9/month, a full-featured income portfolio built on proven, repeatable trades. Others charge $49–$99/month for far less.
✅ Wealth Without Shares — A capital-efficient system using PMCCs across five model portfolios—each with its own focus.
✅ The Implied Perspective — High-probability trades like iron condors, jade lizards, and earnings plays, all structured around IV rank, expected move, and clean risk parameters.
And one more thing…
🔕 I’m not a marketer. I’m a trader.
As many of you have heard me say in past webinars, articles, and live sessions:
I will never flood your inbox with hype, spam, or endless zero-value promos.
That’s not how I run my business—and it’s not how I treat my readers. I run this business with the same mindset I bring to trading—disciplined, transparent, and above all, respectful. Respectful of your time, your intelligence, and your trust.
I’ll only send you emails when there’s genuine value: trade ideas, portfolio updates, deep-dive lessons, and market context that matters. That’s my promise—and I intend to keep it.
🎯 Portfolios go live Monday. I’d love to have you trading alongside me.
Let’s build something long-term, transparent, and trader-first—together.
🔹 Market Meter:
📰 Weekly In-Depth Articles
🗓️ Tuesday, April 29th: Delta, Gamma, Vega, Theta: The Only Greeks You Actually Need to Know
🗓️ Thursday, May 1st: Why Expected Move Is the Most Underrated Tool in an Options Trader’s Playbook
🧠 Mental Capital
Train not just your trading system, but your trading self.
What Warren Buffett Can Teach Options Traders About Mental Capital
“The most important quality for an investor is temperament, not intellect.”
– Warren Buffett
Introduction: The Trader's Edge Isn’t IQ—It’s EQ
Warren Buffett doesn’t trade options. He doesn’t follow the VIX. He doesn’t watch every tick on SPY.
And yet, he’s one of the most psychologically disciplined investors in market history—arguably the original master of mental capital.
So what can options traders learn from a man who’s famous for buying entire businesses, not bear call spreads?
Plenty.
Because while the mechanics of your trades differ, the mindset required for success is nearly identical. In this issue of Mental Capital, we’ll explore the timeless lessons from Buffett’s shareholder letters—insights that can sharpen your thinking, calm your impulses, and improve your odds over thousands of trades.
Lesson 1: Temperament Beats Intelligence
Buffett has said it over and over: success in markets doesn’t require a genius IQ. It requires emotional steadiness.
“Success in investing doesn’t correlate with IQ... what you need is the temperament to control the urges that get other people into trouble.”
For options traders, those urges show up as:
Entering trades too large during volatility spikes.
Chasing IV crush setups after the move.
Deviating from your plan after a loss.
Abandoning high-probability strategies because they feel “too boring”.
The edge isn’t knowing more than everyone else—it’s staying grounded while everyone else loses composure.
Lesson 2: Avoiding Stupidity Beats Seeking Brilliance
Buffett isn’t obsessed with finding the “next big thing.” Instead, he focuses on avoiding big, stupid mistakes. That’s a perfect mindset for options traders.
“You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
That’s risk management in one sentence.
Every trade doesn’t have to be a masterpiece. What matters is:
Defining your maximum loss before entering.
Sizing trades small enough to stay in the game.
Never letting one bad decision cascade into portfolio damage.
The best traders aren’t trying to outsmart the market every day. They’re simply avoiding the decisions that destroy mental and financial capital.
Lesson 3: Patience is the Real Leverage
Buffett’s wealth didn’t grow linearly—it compounded slowly, then rapidly. The power of time is exponential.
“The stock market is designed to transfer money from the impatient to the patient.”
Options traders often feel the opposite: everything is short-term. 7-day spreads. 30-day condors. Fast decisions.
But the strategy is short-term—the mindset must be long-term.
Your edge shows up over hundreds of similar trades.
Your system improves through iterations, not epiphanies.
Your real growth comes from compounding good habits, not chasing big wins.
Stay patient. Let the law of large numbers do its work.
Lesson 4: Boring Can Be Beautiful
Buffett is famously boring. He buys Coca-Cola. Holds it. Collects dividends. Doesn’t tweet his moves.
“Lethargy, bordering on sloth, remains the cornerstone of our investment style.”
That’s not laziness—it’s discipline. And for options traders, it’s a reminder:
You don’t need to trade every day
You don’t need a new strategy every month
You don’t need adrenaline—just consistency
Boring doesn’t mean passive. It means repeatable. The quiet trades—wide iron condors, credit spreads outside expected move, laddered PMCCs—often compound the most.
Lesson 5: Stay in Your Circle of Competence
Buffett never pretends to understand tech he doesn’t grasp. He sticks to businesses he can explain in one sentence.
“The size of that circle is not very important; knowing its boundaries, however, is vital.”
The same goes for your trading strategy:
Are you selling premium in environments you understand?
Are you avoiding setups that lure you outside your edge?
Are you trading the strategy—or the story?
Your circle of competence doesn’t have to be large. It just has to be consistent. That’s how you preserve mental capital—by not draining it trying to be someone you’re not.
Final Thought: Warren Would Approve of Your Process (If You Let It Work)
You don’t have to be Buffett to benefit from Buffett.
If you trade defined-risk spreads, manage position size, ignore the noise, and focus on process—you’re already applying his principles in your own way.
The irony? The more you trade like a calm, probability-based options trader… the more your results start to resemble the long-term, steady compounding Buffett spent his life preaching.
Because mental capital isn’t about doing more—it’s about doing the right things long enough to let them work.
📊 Weekly Table Overview: The Implied Truth
🧭 Market Breadth: Still Narrow, Still Fragile
Despite strong index levels, breadth remains unimpressive:
$SPXA50R: 54.87% — just over half of S&P 500 stocks are above their 50-day.
$SPXA200R: 40.95% — fewer than half above their 200-day.
This tells us something clear: the rally is concentrated. Participation is selective, and that makes the market vulnerable to reversals or sharp rotations. When this happens, neutral strategies outperform, especially those that don’t rely on strong directional trends.
These ETFs offer the best raw premium and trade structure potential this week:
Symbol | IV Rank | IV Percentile | Notes |
|---|---|---|---|
USO | 81.5 | 97.8 | Commodities are rich in premium — great for wide condors or short verticals |
GDX | 42.3 | 54.4 | Vol elevated, RSI deeply oversold — look for reversion trades |
XBI | 33.6 | 69.3 | Biotech offers rangebound setups with enough juice |
XOP | 47.7 | 98.3 | Oil sector vol remains inflated — ideal for condors and credit spreads |
SMH | 24.8 | 58.0 | High IV but momentum is stretched — defined risk only |
🎯 Sweet Spot: Look for IV Rank > 30 and IV Percentile > 65. These ETFs offer the most favorable blend of premium and risk asymmetry.
📉 RSI Extremes: Mean Reversion on Deck?
The RSI(2) readings this week are flashing overbought across major indices and sectors:
Symbol | RSI(2) | Notes |
|---|---|---|
SPY | 99.72 | Market-wide exhaustion. Caution is warranted |
QQQ | 99.52 | Tech overbought — great for bear call spreads |
VTI | 99.73 | Broader market too hot, too fast |
IYR, XLI, DIA | >99 | Sectors running hot — time to fade strength |
GDX | 13.74 | Contrarian bullish opportunity — especially with high IV |
SLV | 3.47 | Deeply oversold — low risk, short-delta premium setups |
🧠 Actionable Insight: When RSI(2) is >95 with elevated IV, fade with tight bear call spreads. When <10 with high IV, favor bullish put spreads or short puts in defined-risk portfolios.
📊 Sentiment Signals: Put/Call Ratios Worth Watching
Symbol | P/C Ratio | Notes |
|---|---|---|
XLI | 4.066 | Extreme pessimism — contrarian bull setups possible |
XRT | 4.576 | Retail extremely bearish — tight neutral trades favored |
KRE | 2.238 | Financials defensive but bearish bias is priced in |
HYG | 2.229 | Junk bond caution rising — macro fear building? |
Elevated put/call ratios signal skewed sentiment — not always predictive, but often supportive of neutral-to-contrarian setups when paired with high IV.
Symbol | Strategy | Why It Works |
|---|---|---|
USO | Wide Iron Condor | Massive IV rank and percentile — premium is rich |
XOP | Credit Spread or Condor | Sector hot, RSI high, vol overpriced |
XBI | Short Strangle | Rangebound and rich IV, ideal theta decay setup |
GDX | Put Spread or Short Put | Oversold, vol high — reversion trade |
SMH | Tight Iron Condor | High beta but fading momentum — range compression likely |
⚠️ Caution Zones: Tread Carefully
These names look strong but lack meaningful premium — or are simply too hot to handle without defined risk:
TLT (IV: 18.87%), XLP (IV: 17.17%), XLV (IV: 23.34%) — too low to justify naked premium.
IBIT (IV: 53.36%, IV Percentile: 1.4) — high raw vol but no edge historically.
XLK, XLF, XLI, IYR — all have RSI(2) > 95. Best to fade, not chase.
🛑 If you’re placing short premium trades in low IV environments, you’re not being paid enough to take the risk.
🧾 Final Takeaways from The Implied Truth
✅ Breadth is weak and rally is narrow — stay cautious with direction.
✅ Premium remains elevated in commodities, biotech, and energy — exploit it.
✅ RSI extremes across broad market and sectors — mean reversion likely.
✅ Top trades: iron condors, jade lizards, bear call spreads.
✅ Avoid naked short premium where IV is low and trends are extended.
This week’s message is simple:
Structure beats prediction. Let volatility and sentiment do the heavy lifting — and let time decay work in your favor.
📊 Quick Reference: The Implied Truth Table
Field | Meaning |
|---|---|
Symbol | ETF ticker (e.g., SPY, QQQ, IWM) |
Last | Latest closing price |
P/C Ratio | Put/Call ratio: >1 = bearish skew, <1 = bullish bias — extremes may signal contrarian trades |
Impl Vol | Implied Volatility: higher IV = richer premiums, more expected movement |
IV Rank | IV vs. past year’s range (0–100%) — >35% often favors premium-selling |
IV Percentile | % of time IV has been below current level — helps confirm if volatility is elevated |
RSI (2/7/14) | Momentum reading: >80 = overbought, <20 = oversold — shorter RSIs react faster |
High/Low Graph | Shows where price sits relative to its 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: ODTE vs. Earnings Trades: One’s a Gamble. The Other’s a Strategy.
Zero-day options (0DTE) have taken the options world by storm—especially among traders trying to sell premium for quick hits of income. But here’s the truth: without structure, a catalyst, or context, even the best-intentioned 0DTE strategies often amount to controlled chaos. You’re selling time in a market with no edge, no volatility cushion, and nowhere to hide when things break down.
In this week’s featured article, I break down why earnings trades—when built around implied volatility, expected move, and risk-defined setups—offer a more sustainable path. We’re not just selling premium for the sake of it. We’re selling mispriced fear around known events with elevated volatility, all while managing risk through smarter strategy design. If you’re serious about trading with edge—not adrenaline—you’ll want to read this one.
🔗 Let’s Stay Connected
Have questions, feedback, or just want to say hello? I’d love to hear from you.
📩 Email me anytime at [email protected]
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
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