Weekly Income Alert – January 2, 2026

Happy New Year, everyone. Welcome to Weekly Income Alert. I’m Marc Lichtenfeld. So glad you are with us.

We’ve got a lot of you joining us here on this holiday kind of abbreviated week. We’ve got Frank C. In Somers, Connecticut, Kim H. In South Carolina, Gordon E.

In too cold Vero Beach, and I feel your pain, Gordon E. Because it is freezing here in Florida. It was forty five degrees when I woke up this morning. That was not what I signed up for when I moved here.

I felt bad. My brother was here from Columbus, Ohio with his kids. All they wanted to do was go swimming. It was sixty five degrees at the highs last couple of days.

So, they still want swimming, but glad you’re with us.

Let’s take care of business right away, and then we’ll get to some of the fun stuff. And we do have a lot of fun stuff, plus, of course, your Q and A.

But I know some of you are anxious because right now the Russell is at two thousand four hundred ninety six and we’ve got the two thousand five hundred, two thousand four hundred and ninety spread that is expiring today.

So here’s what I’m going to do. Right now, we’re going to leave this alone.

As we are talking, the midpoint on that spread is at about three point nine zero. So it is at a slight loss for us right now.

I want to give it a little bit of time to see if it can get back out of the money.

The NASDAQ has been pretty strong all day.

It’s up about one point three percent. The Russell is only up about half that much. So I want to see if the NASDAQ stays strong, it can drag the Russell back up with it. I won’t be giving it, most likely, I won’t be giving it all day though, because if it can’t get above two thousand five hundred, then depending on where it is, that loss could get larger.

We could end up in a max loss situation if it dips below two thousand four hundred and ninety. But I do want to give it a little bit more time to see if we can get it back up above two thousand five hundred. And even if we do, I might sell it early or close it out early in order to keep that loss small. Maybe we can get out with a small profit.

We’ll have to see. It was a very frustrating week because, you know, the last about four trading sessions were all lower, but on really, really low volume. I mean, there was really nothing going on in the market, but it just kind of kept ticking lower. There were no upticks.

I was actually on Wednesday, we were actually off on Wednesday here at the Oxford Club, but I was online pretty much all morning just waiting for some kind of an uptick to see if we could get out. And I had the trade loaded, but we never got that uptick. So, I want to give it a little bit more time, but not a ton of time today.

So do keep an eye on your inboxes and your phones, because if we get out early, it could happen at any time. My best guess is it would happen within, let’s say, an hour of us signing off here, probably before lunch. But again, it’ll depend on the market action. But, you know, do keep an eye on your inbox because we may get out early today. I think there’s a decent chance. Although as we speak right now, the Russell is getting closer to two thousand five hundred. So we’ll hope that that happens.

So what I want to do right now is because we will probably be getting out before the end of the day, again, unless the market just starts to rip higher, just want to give you another demonstration of how we get out of a trade, how we close the trade, and then we’ll do the live trade for the new position. So I’m going to share my screen and just show you again. I know most of you are familiar with it at this point because I’ve showed it before, but there are some new people on here every week.

So let me share my screen.

Okay, so if we are going to close out early, and again, this is Schwab, every website’s going be a little bit different, but we would go to the position we want to close, which is the January second, that’s today. You click on this down arrow and close positions, and then you want to make sure you are selecting both legs of the spread. That’s really, really important.

You close selected.

And then it will bring up the trade and it will bring up both legs of the trade here. And then you can see the midpoint right here is four thirty, four forty, and you would select what price you want to get and then hit review and then click the order. So we’re not doing that right now, but again, it may happen fairly quickly at some point. It all depends on the market action, but I do want to give this a chance to get us back out of the money and cut that loss even smaller, maybe even get out with a profit. So we’ll see how that works.

Alright, so now let’s get to the actual trade. I just need to reset my account.

Alright, got the wrong screen. I have order status, that’s not what I want.

Okay So why does it keep doing this? Alright. Schwab is not having a good day. Let me try something else.

Alright if you just bear with me, I’m having a problem with my Schwab account so I can’t oh I think I see what the problem is.

Alright, just give me one second.

Nope, it’s alright. Know, so I apologize. I’m going to log out of my Schwab account because it is giving me problems. It’s not allowing me to get to the order screen. So let me log out.

I don’t know if you guys have this problem, anybody who is on Schwab, but I find their, I love Thinkorswim, but I find their technology on the website to be really cumbersome. And they send you a mobile notification to confirm that you’re logging in and sometimes that works, sometimes it doesn’t. So it’s a little cumbersome for me. I love Thinkorswim though.

And I know I have promised to show you how to do it on thinkorswim. I still am planning to do that. Just apologize it hasn’t happened yet. All right, so let me see if we can get this going.

Yeah, this is still so when I’m bringing up my Schwab account, wonder if anybody else is having this problem. For those of you who are on Schwab and on trading on the website, when I’m bringing up to open a new trade, it keeps going to order status. I’m not getting a new trade. Anybody else having that problem?

People are saying no. So it’s just me. I’m the lucky one. Let me see what else I can try.

Okay. So I’m I’m doing I’ll be doing this from a different screen today. So I’m just trying to get this set up to make it easier so you don’t have to well, actually let me I guess I can show you what I’m doing in case any of you run to the same problem. Let me share this.

Okay, so what I did is I went to trade and then options.

Wait, let’s see now, maybe that’s working. Let’s see. So I’m going to dollar sign RUT, all right.

That time it worked, great. So we go to dollar sign RUT in Schwab. Again, is .RUT.

So we’re going to vertical put and if you’re new, vertical put is what we’re trading pretty much always. If we’re in a bear market, we’re expecting the market to turn lower, then we do vertical call, but we’re doing vertical put and that’s a credit. So really important down here, order type, net credit. That’s what we need to have.

Again, if you’re new, every trade that we enter, an opening trade is a credit. We’re receiving money. If we close a trade early, then that’s a debit. Money comes out of our account.

But a new trade credit is a credit trade and money comes into the account. So let me see where we’re trading right now. So we’re at twenty four point nine four. Let me just do a little quick math.

I think I know what we’re doing here.

Okay.

We are gonna do so we’ve got Oh, really important here. So again, if you’re new, where it says RUT and you scroll down, this only shows us the monthly options. These are the third Friday of the month.

We want to have this expiration January twenty third, which is not a choice here. So to get that choice, we have to go to this dropdown and select RUTW.

And that will give us lots of choices. So we’re going to take the January twenty third. And when you change one, it changes the other automatically because we are entering this as a spread trade together.

Now we are going to move the price to the twenty four point two zero and the twenty four point one zero dollars and that gives us a credit of two dollars right now. The midpoint is one point nine five dollars Again, you’re new, never, never, never sell at the market. You can see there’s a huge difference here. If you were selling this trade at the spread at the market, you get about one point four zero one point five zero dollars If you’re doing it at the midpoint, you would get two dollars That’s a huge difference. Talking about fifty cents more, a third more. Never, never trade at the market. You’re always going to put in a limit price at or near the midpoint.

So I’m going to put it right at two dollars see if we can get it. If we don’t, we can always lower it later.

So net credit, I’m going to review the order.

Okay.

So you can go ahead and place that order. I’m going to send out the trade to everyone.

And again, the limit price is two dollars if we don’t get filled.

Last week it took a little while to get filled, so don’t panic if you don’t get filled. I think it took, if I remember correctly, over an hour, maybe even a little bit more.

So we’ll be patient. We can always lower it later.

All right, so I am sending this out to everyone.

Now I’m gonna place my order.

Alright.

Let’s just see if I got filled.

Nope, still open. That’s all right. We’ll give it a little bit of time. And last week, I did see some people were getting filled. My order was still out there and I’m sure that happened to some other people too. So it can take a little while occasionally. Very often we all get filled right off the bat, but sometimes it does take a while.

So we’re seeing lots of people getting filled here at two.

I’m just going to refresh and see if I got filled. Yep, I got filled at two dollars So a lot of people should be getting filled here.

Good to hear. All right, So that’s our trade for today. So nice to see that the credit’s a little bit higher than we’ve been getting in the past. The one that’s expiring today was one point seven zero Next week’s expiration was one point eight zero dollars The trade we put on last week was one point six one dollars That was the lowest that we’ve ever had. So, you know, as the VIX was really, really low, we were getting lower and lower credits.

So this time it’s nice to see that it bumped up a little bit. So that’s good to see.

Yeah, lots of people getting filled at two. Good news.

So, DAR says any action to take on today’s position must have come in a little bit late. So, we’re waiting to see how the market behaves. But I don’t want to say probably. There’s a good chance that I’ll be closing out the position, let’s say, within roughly an hour.

It could be a little bit later if the market’s cooperating. We’re going to see. But I’m not closing it right now. But keep an eye on your inbox and your phones because there’s a decent chance we will be closing it early to either take a smaller loss or capture a little bit of a gain. At this point, it doesn’t well, I don’t want to say anything.

It’s possible that the market rips higher and we can let it expire worthless at the end of the day, but I’m not counting on that. So I think this is a position we may have to manage today, but I will be sending out the trade if we close out early sometime today. So just do keep an eye on your inbox.

So we’ll get to the Q and A in a minute, but first I want to get to some fun stuff. You may remember that was it last week, I think we talked about the bling, this hat that I was awarded for having the best track record at the Oxford Club. There are so many people that love the hat and they wanted to figure out a way that they could get their hands on the hat. So, we decided to have a contest to give away the hat, giving away a copy of Get Rich With Dividends and some other fabulous prizes. So I’m happy to announce that the winner is John St. Pete, Florida.

So John, you’ll be getting your package fairly soon.

So John’s going to get this hat, this exact hat, not a replica. It will be this hat that has been on my head and I will be signing it. I’ll sign a copy of the book, send that out to you. And because John St.

Pete is a Chairman Circle member already, his annual maintenance fee for twenty twenty six will be waived. So congratulations, John St. Pete. So good stuff there.

And this was so popular that I think we’re going to try to figure out ways to have other contests, other prizes throughout the year. So definitely, you know, stay tuned for all of that. Make sure you’re tuning in every week. All right.

So great job, John St. Pete.

So let’s get to some questions.

R and B says, what math do you use to pick the strike prices? So generally speaking, we are looking at three percent away from the strike price. Now I will move things a little bit depending on open interest and volume in the options. So for example, if the three percent number, very often in the strike price, the strike that ends in a five rather than the zero, those options very often have much lower open interest.

And so when that happens, I’ll usually take it down one more strike price. So another five points lower to a strike price that has more volume just makes it a little bit easier to get in and out of trades. But generally speaking, we’re looking at three percent away from the strike price each week. Again, there could be a little bit of variation here and there, but that’s generally what we’re doing.

So it’s three weeks and three percent. And the reason for that is that’s what worked best in the backtest that gave us an eighty six percent win rate. That’s what’s been in so far in real life. We started in May and we’re at an eighty six percent win rate on closed positions.

So it’s worked exactly as advertised so far. And that’s why we’re sticking with those numbers. We tested a lot of different variables and that’s what worked. So we’ll stick with that until it doesn’t work.

Okay, so D Doug says, this is my first time trading this trade. When I preview the order on Fidelity, I’m getting the error message. Your order will leave your account with an uncovered options position in cash. Please review your order.

It will not allow me to place the order. So I’m guessing that you only have the sell order and not the buy order. Remember, you have to have two legs of a spread. You have to sell to open and buy to open.

And that buy to open is ten points below the sell to open and that’s your insurance. And that’s what makes basically makes it covered. So if you have only the sell to open, then that means you have unlimited risk. So if the market tanks and you only have the sell open, then you could be on the hook for a lot of money.

That buy to open, the put that you’re buying beneath the sell is your insurance. That if the market totally tanks, that’s your insurance and it ensures that you cannot lose more than one thousand dollars minus the credit that you get. But the one thousand dollars out of your account per contract would be the maximum you could lose. So it’s really important.

So if you’re having that problem, make sure that you’re trading the spread together so you’re not going in and selling to open the trade, selling to open the spread, and then a separate order to buy the put. You need to do it together to avoid that problem. I’m guessing that’s what the issue is. And if not, then call Fidelity and find out what’s going on.

So Don R. Says, Marc, can you please react to a losing trade quick enough? So I totally get the frustration there.

The issue is these are, you know, these options, first of all, options, prices move very fast. And when we enter a position, if the position goes against us, especially early on in the trade, it happens very quickly. And because the market’s going down, the VIX increases, volatility increases, which increases option prices. So we have two things going against us when it moves against us. We have price, but then also volatility.

If in a world of options, if volatility was not a factor and it was simply price, that would be one thing. And we could potentially, you you could potentially react to it simply based on price. But because volatility exacerbates the issue when it goes against us, it increases the price that much more.

So very often it’s the volatility component that is hurting us more than the actual price when a position goes against us, especially early on in the trade.

We want to give the trade time to work out. So the minute, if we enter a trade and it immediately goes ten points against us, we don’t want to just blow out of it immediately because we know historically these trades work out over the three week period.

That again, eighty six percent in the backtest, eighty six percent so far in real life. So we want to give it time for the market to recover, but also for those options to deteriorate because options decay and that’s in our favor. So again, talking about volatility, it also works in our favor when the trade is going in our direction, then volatility is decreasing. And so those prices decay even more because option prices increase as volatility increases, it decreases as volatility decreases.

So we want to give the options time to decay based on price, but also based on time. So again, let’s pretend the the Russell never moves. We enter the trade and the Russell just stays flat for the entire three weeks. That option price is going to decay and it’s going to start to decay more rapidly as we get closer to expiration.

So when a trade moves against us, we don’t typically want to jump out of it as soon as it goes against us. Yes, it could keep our losses much smaller rather than waiting to see what happens. But we would get shaken out of probably every trade except for the trades that just go straight up, you know, where the Russell just goes straight up. We would definitely get shaken out.

I mean, if you’ve been trading this for a while, you’ll notice that usually at some point the trade is against us because there’s a little bit of market noise. You know, if we enter a trade and the Russell was at twenty four point nine zero and now we can see it’s down a bit to twenty four point eight three, you know, just even in one day that trade is against us already. So if you’re just like, nope, I’m out.

Can’t, basically you can’t trade options that way. You can’t be shaken out by market noise when you’re trading options. And that goes for really any strategy, whether you’re just simply buying calls, speculating on the long side, whether you’re doing something like this, if you’re selling covered calls, anything like that, you can’t be shaken out by a little bit of market noise because the options are very, very volatile. And so what we need to do and the way this strategy works, we enter the trade and then we give it time to work out.

As we get closer to expiration, if it’s not working out, then we’ll try to manage the trade and make it cut our loss and what have you.

But you can’t get out of it too early. You have to give it time in order for this strategy to work.

Let’s see.

Okay. So Joe says, the January second spread max loss is one thousand dollars minus one hundred and seventy dollars credit received, which is an eight thirty dollars loss. So even if, for example, we had to pay a net debit of nine dollars nine hundred dollars minus one hundred seventy dollars for a seven thirty loss, so he’s talking about closing it early, which is better than an eight thirty loss. Why wouldn’t we close this trade to minimize our loss? In fact, closing the trade for anything less than nine ninety nine would reduce our loss. Is this some stinking thinking or am I missing something?

You’re not missing something. It’s just we want to see if we can get out with a smaller loss.

When we’re talking earlier, the Russell had rallied. It was up over twenty four point nine zero.

The midpoint at that point was below five. So we want to see if we can get out with a smaller loss or perhaps even a gain if the market continued to rally. So, you know, it’s your money. You do what is comfortable for you.

But I do want to give it some time today to see if we can get out with a smaller loss and or even a gain. But, you know, it will depend on the market. Right now, the Russell is retreating, which is not great.

But it’s only ten thirty in the morning Eastern time.

You know, the NASDAQ has come down a bit. So again, I want to give it a little bit of time. I’m not going to give it all day necessarily if it’s not behaving, but I do want to give it at least an hour so that the first hour of trading and very often the ten to ten thirty time can be a bit volatile. One of the reasons that we actually trade it during this time because that volatility does increase a little bit very often during this ten to ten thirty time. So, that’s in our favor. We can get a higher credit.

So, basically, that’s it.

If you’re really concerned that we’re not going be able to get out of this on time and you wanna save in your example, hundred bucks, then you should do it. But I do wanna give us a little bit of time, see if we can get a little bit of a rally and recover some more of that.

So MAG says part of a management trade, would you buy a call? No, absolutely not. This strategy does not do that. We are not hedging.

If you buy a call, that’s going to cost you money. And then if the overall trade is in your favor, well, that cuts your credit by a significant amount. And right now, because the market generally has been strong, the VIX has been very low, you know, we’re not getting a huge credit. So if you’re buying the calls ahead, then you’re really cutting into any potential gain or increasing the loss if it goes against you because you’re adding a cost.

So we don’t hedge these trades. I’m not a big fan of hedging in general. If I’m in a trade, let’s say I’m in a long trade, if I bought a call, if I bought a stock, generally speaking, I’m not buying a put as a hedge. If it’s not working, if I don’t like it, I’m just out.

I’m not a big fan of hedges just because they add to the cost of the trade and they lower your gains and increase your costs. So that’s my personal stance on hedges.

You know, if it’s a yeah, I’ll just leave it there. I’m not a big fan of hedging a trade.

So JBLR says, how do you pick the best limit price when closing an option? Your thoughts, please. That’s a great question, JBLR.

So generally speaking, I’ll do it the way that I do it when I open the trade. I’ll look at the midpoint, but then I will, because there’s a debit now, I’ll put it a little bit higher because we’re paying money because I want to make sure I can get out. Now, market is moving really, really quickly, then maybe I would make it a bit higher than the normal zero five dollars that I’ll do. But basically, what you want to do is you want to ensure that you’re going to get filled. So when we’re opening the trade, I’ll usually put it in about zero five dollars lower than the midpoint or right at the midpoint if the market is moving in our direction.

Opposite is true when we’re getting out of a trade because we’re paying money. So basically I’m telling the market makers I’ll pay a little bit more than that midpoint in order to make sure that I get out. So usually five cents, maybe ten cents if the market is moving pretty quickly.

Damian says playing the odds, you need a very high win rate to make it profitable. Unfortunately, the past two months, the win rate is not great, which is why many folks here are losing money unless you got in at the start. Yeah, that’s a valid point. Like I said, in real time, since May, we’re at an eighty six percent win rate.

Last couple of months have been a bit choppy as the market has come down a little bit. I mean, we’re still near all time highs this week, like I said, was a lot of noise in the market. The market just kind of ticked lower every day for a few days on no volume, which was maddening. But that’s the reality of it.

And so that hasn’t worked out. But really since October, the market has just been in a trading range. In end of October to end of November, the market came down, then it bounced, then it came back down again between beginning mid December now, then it rose again. Then like I said, last week it fell.

So it’s been stuck in a little bit of a trading range, which hasn’t helped us.

But so far over the long term, and remember, this strategy is a long term strategy. In the backtest, we had losing sessions as well, of course.

Again, going back to this eighty six percent win rate.

And look, as they always say, future or past performance is no guarantee of future results. But so far, over seven months, it has done exactly what the back test showed that it would do or that it had done in the past. So this is a long term strategy. If you’re expecting to make money, you know, this week, next week and the following week and you’re going to base your entire opinion on just a few weeks, that’s not going to work. The way this strategy works is we make money over the long term week after week. We are going to have weeks where there are losses, and those losses will chew up the gains of some of those wins several weeks, usually because as of right now, with the VIX so low, our credits are low.

When the markets start getting hairier and the VIX gets higher, we’re going to see our credits get a lot higher, right? If we’re in a downturn and the VIX is higher, we’re going to start earning three dollars four dollars at a time rather than two dollars But like I said, any loss, especially a maximum loss will absolutely, it will chew up several of those weeks worth of wins.

But if we’re winning eighty six percent of the time, even if we’re winning eighty percent of the time, over the long term, you’re going make money. So as someone pointed out, if you did start with us early, you’re doing really, really well. I mean, I was going to give my account results next week once this trade is closed out, even though the trade is closed out on January second, I’ll consider kind of the full year’s results from the time that we started.

But the numbers are excellent. Anybody who has started is definitely up if they’ve traded every single week and traded according to our instructions.

So it is a long term strategy. So yes, the market hasn’t been great in the last couple of months, but we’re still in an uptrend. There’s no sign at all that we have topped out. Doesn’t mean that that’s guaranteed that we can’t have topped out already and that the market can’t turn lower. And all those things can’t be a crash and can’t be a bear market. But there are no signs of that anywhere right now. I don’t know any strategists right now looking at the market that are saying, yeah, things look pretty hairy right now.

And I’m not a huge fan of group think like that, but there’s just no reason right now to believe that the market has topped out and that we’re entering a rough period.

So Alexander N. B. Says, can you please go over how the buy is used to cover potential losses? So I showed at the beginning the session how to close out the account.

But basically when we enter the trade, remember, we sell to open the higher strike price and buy to open the lower strike price. We’re going to flip that. When you close a position, you’re going to buy to close the higher strike price and sell to close the lower strike price. Because remember, when we opened it, we sold to open that higher strike price.

So in order to close a what’s essentially a short sale, you need to buy it. So you buy it to close. And then because you’re long a put on the lower strike price, you simply sell it to close. And you do those together just like you opened the trade together.

All right, let’s get to one more question.

SKG says, how do you find the midpoint of a trade? So you can either do that you know, eyeballing it where you are looking at the spreads.

That’s a little bit hard because they’re fluid and they’re going to move and you’d have to kind of be calculating, all right, well, the two thousand four hundred ten strike is, you know, fifteen fifty and the two thousand four hundred strike is thirteen fifty and that midpoint. And you have to do the math. When you enter the trade, though, it shows you what the midpoint is. So I can show you again.

Let me see if I can get this working again.

All right, it’s going back to my problem where I had the order status.

Alright. So let me, let me try this.

I’ll pretend that I’m closing a trade.

Just give me one second and I’ll show you where that midpoint is.

Yeah. Schwab is not really great today.

Okay, so this is setting up. Let me share the screen.

All right, so this is the trade right here on the right.

So you can see the first leg, this is the midpoint. The second leg, this is the midpoint.

But the midpoint for the entire trade is right here. And so they’ll show that if you have a spread loaded to trade, whether you’re opening it or closing it, it will show you the bid and the ask just like in a regular stock. If you’re looking at a stock trade, you’d the bid and the ask. But the difference is because it’s a spread, it will show you what that midpoint is right here.

You can see it will fluctuate depending on the prices of the two options, but that will move up and down. And then if you’re placing the trade, you could put your limit price, you could decide what that where you want to put it, how close you want to put it to the midpoint. So that’s how you would do that.

So yeah, so it’s really, really important to always be trading at or around the midpoint. All right, so with that said, we’re going to leave it here. Do keep an eye on your inbox. I’m going to be watching obviously this spread all day, and hopefully we’ll get out.

Well, actually it would be best. Hopefully the market rips higher and we can let it expire. But I do think we’ll probably be getting out at some point today. My best guess will be, you know, before noon.

So do keep an eye on your inbox and your phones. And with that said, next week, Anthony most likely will be driving the bus. I’m going to be at a conference, a technical analysis conference, and I don’t believe I’ll be available to run the session next week. But those of you who have not met Anthony, you’ll be in extremely capable hands.

He’s done this several times before. He is intimately familiar with the system, so you’ll be in absolutely great shape. So with that said, have a very, very happy new year, and I will talk to you guys very, very soon.