Big Waves Last Week!

Heather Cullen

Heather Cullen

In The Money
The Simple Options Strategy that Always Beats the Market

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Big Waves Last Week

After a new market high on Monday, we then 2 very nasty down days on Tuesday and Wednesday. Thursday opened down – and then climbed and on Friday continued to climb. It ended up within 0.26% of where it opened on Monday although it was almost 2% at one point.

At the moment, the tide seems intact. They were just big waves but if you are watching them as they happen you can get that awful sinking feeling. I have found that the best way to keep my sanity is to not watch the market live when this is happening! I tell myself that I will check tomorrow when the waves have died down and I will look at it with a clear head when everything has calmed down.


I have been getting a lot of queries about trading LEAPS, which is rather awkward because In The Money isn’t about LEAPS and, in fact, doesn’t even mention LEAPs.

LEAPS (Long Term Equity Anticipation Securities) are options with expiration dates longer than one year and up to 3 years. They are not just for ETFs, but also for many stocks. However, they are not part of any ITM Strategy.

ITM goes out to 1 year, but no longer. The main criterion in option selection is that the option is deep in the money (DITM) enough that the effective price is less than 1% above the current price. The effective price is simply the strike plus the premium you pay for the option.

For example, today SPY is trading at $443.36. 1% of this is $4.43 so we have an upper bound of $447.79. That means we look for an option where the strike + premium (the effective price) is less than $447.79. If we look at what options we can buy today:

The shaded cells are the ones where the effective price is within our bound, i.e. is less than $447.79, so you would choose one of these options.

The expiry date that you choose depends on what ITM strategy you are doing. If it is the Lazy ITM, which is a ‘hands-off’ strategy where you only roll out once a year, then you would choose one of the Jun 2022. If you are following Turbo ITM, where you are going to roll up when you get too DITM, then you could choose the Jan or the March ones. Just remember to roll out 30 days before the expiry date, otherwise you will get exercised, and that is a hassle you don’t need.

Not that it is an enormous hassle if you do get exercised. Your broker will automatically exercise your option for you, and if you have enough funds in your account then you will be the proud owner of 100 SPY shares. If you don’t have enough funds (and you shouldn’t have $44,336 sitting in cash, that is not part of the strategy!) then they will exercise and sell them for you, and the funds will land in your account.


SPY is just off its all-time highs, but only by a little. Unless you started the ITM Strategy right on 16th August you will be in profit. At the time of writing the SPY futures look positive and point to a jump up at open. There are several places you can find these figures: is one that I use, here is a link:

Happy Trading!

Heather Cullen Author Signature
Heather Cullen Author Signature