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Selling expensive options is a great way to make consistent and steady premiums for monthly income. Here are our top 3 market conditions that we look for when selling options:Spike in the VIX

Absolutely ranked number one on our list. Since part of an option’s value is derived in market volatility, a spike in the VIX or Volatility Index makes all options more expensive across the board. With higher premiums you are able to then Sell options MUCH further from the current market and still capture very impressive premiums for income. Here are some of the better spikes we have seen in the past year.

Big company announcement

Major company news naturally creates great opportunities for option sellers. Earnings announcements, FDA drug approval, merger news, etc. can all send stock prices soaring or crashing lower. Either way you want to wait until after the announcement and gap higher/lower in the stock before making your trade. In addition, if you selling options you want to trade in the opposite direction of the gap.

For example, NFLX below gaped higher early in 2010 after a wonderful earnings announcement. In this case, you would want to sell Puts below NFLX and take advantage of the higher run up in stock price to earn monthly income.

High volume hedging trades

Sometimes it’s hard to recognize when mutual funds and/or investment firms are hedging their portfolio versus actually making a directional option trade? But we have found that if you see more than 10X options volume and/or open interest on a strike price that is 10-15% from the market, you can be almost sure that “Smart Money” out there is trying to hedge their investments. Therefore, they don’t really believe that the market will fall that far, but just need some “insurance” in case it does. This is where you come in and sell options at higher prices and collect the hefty premiums.