Options Trend Following With Donchian Channels – Theta Breakout Video
Overview:
This short video goes over the mechanics of trading the Theta Breakout system. Essentially the system sells out of the money naked options or credit spreads following a Donchian Channel breakout. The Theta Breakout system uses a 50 day breakout with a 3.5 x average true range trailing stop to manage risk.
In this video I look at a specific trade example using TLT the 20+ year Treasury Bond ETF. TLT issued a new short signal on November 21st, 2013 and on December 4th I sold the 106/110 February 2014 call spread with 77 or so days to expiration. It’s worth noting that implied volatility in TLT is pretty depressed right now and that made it more challenging to get much premium. As a result, I chose to sell a higher delta spread closer to the money rather than a low delta naked option with very little premium.
Enjoy and feel free to get in touch on the About Me page if you have any questions . . .