Swing Trading Options Strategy for Monthly Income (The Lazy Man’s ATM)

Posted on by Robert Johnson

I’m gonna tell you about the strategy that lets me make $8,000-$12,000 per month while checking my phone maybe twice a day. No day trading. No staring at charts for 8 hours. No anxiety attacks when SPY drops 0.5%. No waking up at 4 AM for pre-market.

This is swing trading options, but not the WSB YOLO garbage you’re thinking of. This is systematic, boring, and profitable. It’s the strategy I wish someone had taught me before I lost $67,000 trying to day trade options like a degenerate gambling addict.

Why Swing Trading Options Beats Everything Else

Let me break down why this specific approach crushes other methods:

Day Trading Options: The Account Destroyer

  • You’ll lose. The spread will eat you alive.
  • That SPY call that’s $2.50 bid, $2.55 ask? You’re already down 2% the second you buy
  • Theta decay accelerates in the last week – day traders love weeklies – theta loves eating day traders
  • Pattern Day Trader rule means you need $25K minimum
  • Commission fees add up: 100 trades/month × $1.30 = $130 just in fees
  • Your broker will send you a Christmas card because you paid for his kid’s college

Real numbers from my day trading phase:

  • 6 months day trading options
  • 1,247 total trades
  • Win rate: 52% (not bad right?)
  • Average win: $127
  • Average loss: $198
  • Total loss: $31,000
  • Commissions paid: $1,621
  • Therapy sessions needed: 12

Buy and Hold Options: The Slow Bleed

  • Theta decay is guaranteed to eat 1-5% daily
  • Stock movement isn’t guaranteed at all
  • Time is your enemy from the moment you buy
  • You’re fighting an uphill battle against math itself
  • Even if you’re right about direction, timing kills you

Swing Trading Options: The Sweet Spot

  • Hold for 2-10 days (theta hasn’t accelerated yet)
  • Capture the meat of the move (not trying to time perfect entries/exits)
  • Get out before theta accelerates (final week is death)
  • Actually make money (novel concept, I know)
  • Sleep at night (priceless)

The Complete Setup That Prints Money

Here’s my exact setup that I’ve refined over 3 years and hundreds of trades:

Account Requirements:

  • Minimum $10,000 (you can start with $5,000 but it’s much harder)
  • Margin account (for spreads, not for leverage)
  • Level 3 options approval (for spreads)
  • Cash reserve: Always keep 30% in cash for opportunities

Risk Management Framework:

  • Risk Per Trade: 2% of account ($200 on a $10,000 account)
  • Max Risk at Any Time: 10% (5 trades max)
  • Win Rate Target: 55-60% (nothing special, very achievable)
  • Risk/Reward: 1:2 minimum (risk $200 to make $400)
  • Trades Per Month: 8-12 (quality over quantity)
  • Monthly Return Target: 8-15% (aggressive but realistic)

Real Math Example:
Month of October 2024:

  • 10 trades total
  • 6 wins at average $420 = $2,520
  • 4 losses at average $190 = -$760
  • Net profit: $1,760
  • Account size: $12,000
  • Return: 14.6%
  • Time spent: Maybe 2 hours total

The Three Core Strategies I Rotate

Strategy 1: The Momentum Breakout Play (40% of my trades)

This is bread and butter. When it works, it really works.

The Setup:

  • Stock breaks above major resistance (previous high, round number, etc.)
  • Volume must be 2x average (confirmation of breakout)
  • RSI between 50-70 (momentum but not overbought)
  • Clear trend on daily chart (above 20 and 50 MA)

The Entry:

  • Buy calls 30-45 days out (sweet spot for swing trading)
  • One strike out of the money (better risk/reward than ATM)
  • Enter on first pullback after breakout (better entry, less chase)
  • Position size: Risk 2% of account

Real Example from Last Month:
November 5th – NVDA Breakout

  • NVDA breaks above $480 resistance on 2.5x average volume
  • Stock pulls back to $478 next morning
  • Buy 10 contracts of Dec 20 $485 calls at $8.50
  • Cost: $8,500
  • Stop loss: If NVDA closes below $475 (breakout level)
  • Target: $495 (next resistance)

November 9th – The Exit

  • Stock runs to $495 in 4 days
  • IV expansion helps (went from 42% to 48%)
  • Sell calls at $15.20
  • Profit: $6,700 (78% return)

But here’s what they don’t tell you: This works maybe 60% of the time. The other 40%, you’re cutting losses at 20-30%. That’s why risk management matters.

Failed Trade Example:
November 12th – TSLA False Breakout

  • TSLA breaks $225 on volume
  • Buy Dec $230 calls at $7.00
  • Next day: Elon tweets something stupid
  • Stock reverses to $218
  • Cut loss at $4.90
  • Loss: $2,100 (30% loss on position, 2% on account)

Strategy 2: The Mean Reversion Put Play (35% of my trades)

Everyone’s euphoric? Time for puts. But timing is everything.

The Perfect Setup:

  • Stock up 15-30% in under a week (unsustainable move)
  • RSI over 70 on daily chart (overbought)
  • Declining volume on recent up days (momentum dying)
  • First red day after the run (confirmation of reversal)
  • News-driven pump (even better for reversal)

Entry Rules:

  • Never try to catch the top (impossible and expensive)
  • Wait for first red day close
  • Buy puts 30-40 days out
  • Two strikes out of the money
  • Risk 2% of account maximum

Detailed Example – ROKU Reversal:
October 28th – The Setup

  • ROKU runs from $62 to $79 in 5 days (27% move)
  • Earnings beat causes the spike
  • RSI hits 78 (extremely overbought)
  • Volume declining for 2 days

October 30th – Entry Signal

  • First red day, closes at $77
  • Buy November 29 $75 puts at $3.20
  • Position: 20 contracts = $6,400 cost
  • Stop: If ROKU closes above $80
  • Target: $70 (mean reversion to 20-day MA)

November 6th – The Result

  • ROKU drops to $68 over next week
  • Broader market weakness helps
  • IV stays elevated (good for us)
  • Sell puts at $7.80
  • Profit: $9,200 (143% return)

When This Strategy Fails:

  • Stock continues higher (happens 35% of the time)
  • You entered too early (no confirmation)
  • News changes the story (buyout, upgrade, etc.)

Warning: Don’t try to catch falling knives. Wait for confirmation. One red day after a run, not during. The difference between success and failure.

Strategy 3: The Earnings Volatility Crush (25% of my trades)

This is the closest thing to free money in options – if done right.

The Concept:

  • Before earnings, implied volatility (IV) increases
  • After earnings, IV crashes (regardless of result)
  • We sell premium before, buy it back after
  • Profit from volatility crush, not direction

The Setup Requirements:

  • Stock with liquid options (tight spreads)
  • IV rank above 70% (elevated volatility)
  • Clear support/resistance levels
  • No binary events (biotech trials, FDA approvals)
  • Earnings after market close (more time to adjust)

The Trade Structure:
Iron Condor or Strangle depending on IV levels:

  • Sell options 5-7% out of the money
  • 1-2 days before earnings
  • Buy back morning after earnings
  • Target: 30-50% of credit received

Detailed Example – Apple Earnings Play:
October 30th – Day Before Earnings

  • AAPL at $190
  • IV at 45% (usually 25%)
  • Historic move: ±4% on earnings

The Trade:

  • Sell 10 call spreads $195/$200
  • Sell 10 put spreads $185/$180
  • Collect $150 per spread = $1,500 total
  • Max risk: $3,500
  • Probability of profit: 68%

October 31st – Morning After

  • AAPL moves to $193 (within range)
  • IV drops to 25%
  • Buy back spreads for $50 each
  • Profit: $1,000 on $3,500 risk
  • Return: 28% in one day

When to Skip Earnings Plays:

  • Binary events (drug trials, court cases)
  • Meme stocks (too unpredictable)
  • Low IV rank (no crush to profit from)
  • Wide bid/ask spreads (can’t exit profitably)

The Advanced Scanning Process That Finds Winners

Every Sunday night, I spend exactly 30 minutes running these scans:

For Call Opportunities:

Technical Scan:

- Price > 20-day MA AND > 50-day MA
- RSI between 40-60 (room to run)
- Average Volume > 1 million shares
- Option Volume > 1,000 contracts/day
- Market Cap > $10 billion (no penny stock BS)
- ATR > 2% (needs to move)

Fundamental Scan:

- Earnings beat last quarter
- Positive analyst revisions last 30 days
- No earnings in next 2 weeks
- Sector showing relative strength

Unusual Options Activity:

- Call volume > 2x put volume
- Large block trades (>500 contracts)
- Out of money calls being bought
- Smart money indicators positive

This typically gives me 10-15 candidates.

For Put Opportunities:

Overbought Scan:

- RSI > 70 on daily
- Up > 15% in past week
- Declining volume last 2 days
- At or above resistance
- Trading > 2 standard deviations above 20-day MA

Weakness Scan:

- Failed breakout attempt
- Rejected at resistance twice
- Below 20-day MA
- Sector showing weakness
- High short interest (> 20%)

This gives me 5-10 put candidates.

The Final Filter:

From these 20-25 candidates, I pick the best 2-3 based on:

  1. Cleanest technical pattern
  2. Best risk/reward setup
  3. Most liquid options
  4. Clear catalyst or story
  5. Gut feeling (yes, this matters)

Entry Rules That Keep You Alive

Never enter a trade without ALL of these conditions:

1. Clear Stop Loss Level

  • Must identify exact price where thesis is wrong
  • Usually previous support/resistance
  • If I can’t identify where I’m wrong, I don’t trade
  • Mental stops don’t work – use alerts

Example: Long AAPL calls at $190. Stop if closes below $187 (previous support). Clear, defined, no emotion.

2. Minimum 2:1 Reward/Risk

  • Risk $1 to make $2 minimum
  • Many trades I target 3:1 or 4:1
  • If R/R isn’t there, pass on the trade
  • Better to miss opportunities than take bad trades

3. Liquid Options

  • Spread less than 10% of option price
  • Minimum 500 open interest
  • Volume today > 100 contracts
  • Can get filled at mid-price

Bad liquidity example: Option bid $2.00, ask $2.50. That’s a 25% spread. You’re already down 12.5% on entry. Pass.

4. Time Value Management

  • At least 30 days to expiration (theta is manageable)
  • Never buy less than 21 DTE for swings
  • Sweet spot: 35-45 days
  • Gives time for move to develop

5. Position Sizing Discipline

  • Never more than 5% of account in one trade
  • Usually 2-3% per trade
  • Scale in if high conviction
  • No “YOLO” trades ever

Exit Rules That Lock in Profits

This is where most people fuck up completely. They have no exit plan.

Take Profit Rules:

The Quick Winner:

  • Up 50% in 2 days or less: Sell half
  • Let remaining half ride with stop at breakeven
  • Often catches bigger moves

The Home Run:

  • Up 100%: Sell another 25%, trail stop on remaining 25%
  • Up 200%: Sell everything, no exceptions
  • Greed kills more accounts than stops

The Time Stop:

  • 10 days passed, up less than 20%: Exit
  • Opportunity cost is real
  • Dead money is death by a thousand cuts

Stop Loss Rules:

The Hard Stop:

  • Down 30%: Cut the position, no questions asked
  • Down 50%: Full exit, something’s very wrong
  • Never average down on options (time decay kills you)

The Thesis Change:

  • News breaks that changes story: Exit immediately
  • Analyst downgrade from firm you respect: Consider exit
  • Sector rotation away from your trade: Exit

The Expiration Approach:

  • Under 10 days to expiration: Exit regardless of P&L
  • Theta acceleration isn’t worth the risk
  • Final week is where options go to die

The Weekend Rule:

If I’m up 30%+ on a Friday, I sell. Weekends are where good trades go to die. Too much can happen in 48 hours. Take the profit, enjoy your weekend.

Advanced Trade Management Techniques

The Delta Hedge

Position getting too big? Here’s how to manage:

  • Long 10 calls with 0.50 delta = 500 delta exposure
  • Stock runs, calls now 0.70 delta = 700 delta (too much)
  • Sell 2 calls against position (poor man’s covered call)
  • Reduces risk, caps gain, protects profit

Real example: Long NVDA $500 calls, stock at $520. Sell $530 calls against position. Lock in $10 spread profit minimum.

The Roll Strategy

Trade working but need more time? Roll it:

  • Close current position
  • Open same strike, next expiration
  • Usually costs 10-20% premium
  • Keeps you in winning trades longer

Example: AAPL $190 calls expiring in 10 days, up 40%. Roll to next month, same strike. Pay $0.50 to roll, capture another 50% gain.

The Reverse

Trade goes against you immediately? Don’t average down. Reverse:

  • Long calls not working? Close them, buy puts
  • Market sentiment changed? Follow it
  • Be flexible, not stubborn
  • Pride doesn’t pay bills

The Scale Method

High conviction trade? Scale in:

  • Enter 1/3 position initially
  • Add 1/3 on first pullback
  • Final 1/3 on confirmation
  • Better average price, controlled risk

Common Mistakes That Kill Accounts

1. Buying Weekly Options

“But they’re so cheap!” Yeah, because they expire worthless 90% of the time.

  • Theta decay: -20% per day in final week
  • Need perfect timing (impossible)
  • Gamma risk enormous
  • One bad day = 100% loss

2. Holding Through Earnings

“I’m already up 100%, might as well gamble.”

  • Earnings are coin flips
  • IV crush kills you even if right
  • Binary events = binary outcomes
  • Take profits before earnings, always

3. Revenge Trading

Lost on calls? Immediately buy puts. Lost on those? Buy more calls.

  • Emotional trading = losing trading
  • Market doesn’t care about your loss
  • Revenge trades have 20% win rate
  • Walk away after 2 losses in a day

4. Ignoring Theta

That option loses value every single day:

  • Weekend theta: -3 days of decay for holding 2 days
  • Holidays even worse
  • Final week: -15-20% daily
  • Time decay is guaranteed, price movement isn’t

5. Trading Too Many Positions

You’re not a hedge fund:

  • Maximum 3 positions for sub-$25K accounts
  • 5 positions for $25K-100K
  • Focus beats diversification in options
  • Can’t manage 10 positions properly

The Psychology That Makes or Breaks You

Options swing trading will test every emotional weakness you have:

When You’re Winning:

  • Take profits. Nobody went broke taking profits
  • That 100% gain becomes 50% loss in an hour
  • Market gives and takes away faster than you think
  • Book the win, feel good, move on

When You’re Losing:

  • Cut quickly. The market doesn’t care about your feelings
  • That loss won’t “come back” just because you need it to
  • Hope is not a strategy
  • Small losses are tuition, big losses are destruction

When You’re Confused:

  • Don’t trade. Confusion is a position
  • Cash is a position
  • Sometimes the best trade is no trade
  • Clarity comes from sitting out, not forcing trades

When You’re Emotional:

  • Close the laptop
  • Go for a walk
  • The market will be there tomorrow
  • Your capital might not be if you trade emotional

Realistic Expectations by Experience Level

Year 1: The Learning Phase

  • You’ll probably break even or lose a little
  • Focus on process, not profits
  • Journal every single trade
  • Expected return: -10% to +10%
  • Goal: Don’t blow up, learn the ropes

Year 2: The Consistency Phase

  • 5-10% monthly returns if you follow rules
  • Starting to recognize patterns
  • Emotional control improving
  • Expected return: 30-60% annually
  • Goal: Prove the strategy works

Year 3+: The Scaling Phase

  • 10-15% monthly achievable with experience
  • Can size up positions
  • Multiple strategies working
  • Expected return: 60-100% annually
  • Goal: Consistent income generation

Anyone promising more is lying or about to blow up. I’ve seen “50% monthly” traders become Uber drivers.

The Complete Tool Stack

Essential (Must Have):

ThinkorSwim by TD Ameritrade

  • Best options platform, period
  • Free with account
  • Paper trading available
  • Advanced analytics built in

Options Profit Calculator

  • Know your Greeks before entering
  • Understand profit/loss scenarios
  • Free online versions work fine

Trading Journal (Excel or TraderSync)

  • Track every trade
  • Review weekly
  • Identify patterns in wins/losses
  • Worth more than any course

Valuable Additions ($50-200/month):

Market Chameleon ($99/month)

  • Unusual options activity
  • IV rank and percentile
  • Earnings calendar with expected moves
  • Worth every penny

Barchart ($30/month)

  • Options screener
  • Technical rankings
  • Signal strength indicators

TrendSpider ($40/month)

  • Automated technical analysis
  • Multi-timeframe analysis
  • Backtesting capabilities

Don’t Need:

  • $5,000 courses (everything’s on YouTube)
  • Chat rooms (full of bagholders)
  • Signal services (they’re selling to you, not trading)
  • Complex indicators (price and volume are enough)

The Monthly Income Reality

With a $50,000 account, here’s what’s actually achievable:

Conservative Approach (5-8% monthly):

  • Risk 1% per trade
  • 8-10 trades per month
  • Win rate: 60%
  • Monthly income: $2,500-4,000

Moderate Approach (8-12% monthly):

  • Risk 2% per trade
  • 10-12 trades per month
  • Win rate: 55%
  • Monthly income: $4,000-6,000

Aggressive Approach (12-20% monthly):

  • Risk 3% per trade
  • 12-15 trades per month
  • Win rate: 55%
  • Monthly income: $6,000-10,000
  • Higher chance of significant drawdowns

The Bottom Line

Swing trading options isn’t sexy. It’s not gonna make you rich overnight. But it can realistically generate $5,000-$15,000 per month with a $50,000 account once you know what you’re doing.

The key is consistency, not home runs. Base hits win games. Home run swings cause strikeouts.

Start small. Paper trade for a month. Then trade one contract at a time. Build up slowly. The market isn’t going anywhere, but your account might if you rush.

After three years of refining this approach, I can tell you: The goal isn’t to hit home runs. It’s to hit singles and doubles consistently while avoiding strikeouts. Do that for a year and you’ll be shocked at how much money you’ve made.

The market will always be there tomorrow. Your capital might not be if you don’t follow the rules. Trade small, trade smart, and let compound gains do the heavy lifting.

Remember: In options, time is always against you. Make it count.

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