This document provides an overview of selling options to generate income. It uses an example of selling options to buy watermelons to illustrate the concept. Selling options provides leverage, as controlling $1 of an asset only requires investing 10 cents. Most options expire worthless, benefiting the seller. The document outlines upcoming lessons that will discuss how time decay benefits option sellers, strategies for profiting from different price movements, managing risk, and generating steady income from options.
Forex trading can seem like a huge challenge at first; there are so many different terms, ideas and strategies that it can feel like learning a foreign language. Even the most successful forex traders had to start somewhere and a good start place is forex trading books. A forex manual written by an experienced trader, who can also explain everything in layman’s terms, can help guide you through the basics of forex trading.
However, the market for forex trading guides is a crowded one. So to help you, we’ve put together a amazing guidelines and advise.
So far, only those attracted by the world of options have been trading options. However, from 2015 onwards, trading options is no longer an option, but a must because of the risks that have evolved. Let's see why.
How To Successfully Use Option Volatility To Trade Binary EventsJoshua Belanger
Contrary to popular investing belief and outdated content, volatility creates opportunities… especially in the options market.
In How To Profit From Option Volatility, I discussed how options theory differs from practice…and how implied volatility plays a factor in that.
One of the points touched in that article, was how uncertainty drives option volatility higher. Sometimes this elevated options volatility is warranted…but many times it’s not.
For example, I know that drug stocks tend to have very high implied volatility levels…however, I also know that they can move a lot (in either direction)…making it hard to justify ever shorting premium in these names.
On September 12th, 2014, there was 20 times usual options volume in Avinir Pharmaceuticals Inc (AVNR). The 30 day implied volatility jumped from 91.9% to 99.19% when the stock was trading around $6.74. The options market was implying around a 29% move in a month.
Insider's guide to forex trading finalSilver225705
In any business or moneymaking venture, preparation and foreknowledge are the keys to success. Without this sort of insight, the attempt to make a profitable financial decision can only end in disaster and failure, regardless of your level of motivation and determination or the amount of money you plan to invest.
Forex trading can seem like a huge challenge at first; there are so many different terms, ideas and strategies that it can feel like learning a foreign language. Even the most successful forex traders had to start somewhere and a good start place is forex trading books. A forex manual written by an experienced trader, who can also explain everything in layman’s terms, can help guide you through the basics of forex trading.
However, the market for forex trading guides is a crowded one. So to help you, we’ve put together a amazing guidelines and advise.
So far, only those attracted by the world of options have been trading options. However, from 2015 onwards, trading options is no longer an option, but a must because of the risks that have evolved. Let's see why.
How To Successfully Use Option Volatility To Trade Binary EventsJoshua Belanger
Contrary to popular investing belief and outdated content, volatility creates opportunities… especially in the options market.
In How To Profit From Option Volatility, I discussed how options theory differs from practice…and how implied volatility plays a factor in that.
One of the points touched in that article, was how uncertainty drives option volatility higher. Sometimes this elevated options volatility is warranted…but many times it’s not.
For example, I know that drug stocks tend to have very high implied volatility levels…however, I also know that they can move a lot (in either direction)…making it hard to justify ever shorting premium in these names.
On September 12th, 2014, there was 20 times usual options volume in Avinir Pharmaceuticals Inc (AVNR). The 30 day implied volatility jumped from 91.9% to 99.19% when the stock was trading around $6.74. The options market was implying around a 29% move in a month.
Insider's guide to forex trading finalSilver225705
In any business or moneymaking venture, preparation and foreknowledge are the keys to success. Without this sort of insight, the attempt to make a profitable financial decision can only end in disaster and failure, regardless of your level of motivation and determination or the amount of money you plan to invest.
You're About To Learn The Secrets To Raking In Massive Amounts Of Cash Forex Trading, No Matter How Much Time You Have Had To Prepare!
It doesn't matter if you've never had any past forex trading experience or education, This guide will tell you everything you need to know, without spending too much brainpower!
Explore the secret of pros to become a successful forex trader. It will take you from nowhere to somewhere. It gives about the details about forex trading and stock market, forex trading trend and how to identify the trend of stock marketing.
The Truth About Unusual Options Trading Activity!Joshua Belanger
Ladies and gentlemen, I’ve got some good news and some bad. You see, there are a lot of investors out there that feel that stock market is rigged…and that the little guy has no chance of succeeding.
What I’m about to share with you might be disturbing…and possibly strengthen those beliefs.
The Ugly Side Of Trading Unusual Options ActivityJoshua Belanger
I’ve said this before, I’ll say it again, there are literally hundreds of thousands of option orders that are reported every trading day. The majority of the option volume conducted is done by large institutions–who have the potential to move a stock with their order flow.
Not only that, institutional option flow is highly regarded as informed traders, a great deal of interest is grown when an aggressive bet is made, followed by speculation on why they put so much money behind their idea.
Now, If you can imagine millions of orders being tracked every day, you can see how there could be a lot of noise in between… even though I believe following the transparency of option market trades provides excellent signals for potential entries.
Lesson BTF116. Binary Options Trading Strategy Orlando G
We have come a long way in this first video lesson series, we have learned all the basic concepts in technical analysis, starting from the information behind candlesticks to chart patterns and breakout and bounce trading.
A Put Spread is an options trading combo strategy where you buy a Put and sell another one at the same time but with different strikes. This option strategy has limited profit and limited loss potential.
YOUR FREE TRADING SYSTEM: http://www.netpicks.com/tjgiveaway1
The way risk is handled by Van Tharp, as I’m sure many of you will already know, is by expectancy. Expectancy is basically your average trade in terms of your initial risk. So if your initial risk on a trade is $500 and the trade goes on to make $1,000, the trade is said to have made a 2R profit. If initial risk is $300 and you lose $450, you’ve lost 1.5R.
The way I see this is that it’s a very good way to compare the quality of trades where the specific $ amounts don’t always align particularly well and it gives you a better idea of what you should expect to make or lose on each trade you take. In my opinion, this analysis is particularly well-suited to people trading across a broader range of products such as a portfolio of stocks and this is how my chance conversation began.
Read more: http://www.netpicks.com/do-you-make-this-huge-trading-mistake/
SIZZLE Mailbag No.1 Unusual Options Activity Part IJoshua Belanger
Not sure if you’ve heard, but I’ve been asking members of the OptionSIZZLE community to send me their hard-hitting questions pertaining to options. Let’s face it, many of us our going through some of the same issues when it comes to options investing.
With that said, I thought by sharing these responses with you here, we all could get something out of it.
Let’s get started with the first question.
You're About To Learn The Secrets To Raking In Massive Amounts Of Cash Forex Trading, No Matter How Much Time You Have Had To Prepare!
It doesn't matter if you've never had any past forex trading experience or education, This guide will tell you everything you need to know, without spending too much brainpower!
Explore the secret of pros to become a successful forex trader. It will take you from nowhere to somewhere. It gives about the details about forex trading and stock market, forex trading trend and how to identify the trend of stock marketing.
The Truth About Unusual Options Trading Activity!Joshua Belanger
Ladies and gentlemen, I’ve got some good news and some bad. You see, there are a lot of investors out there that feel that stock market is rigged…and that the little guy has no chance of succeeding.
What I’m about to share with you might be disturbing…and possibly strengthen those beliefs.
The Ugly Side Of Trading Unusual Options ActivityJoshua Belanger
I’ve said this before, I’ll say it again, there are literally hundreds of thousands of option orders that are reported every trading day. The majority of the option volume conducted is done by large institutions–who have the potential to move a stock with their order flow.
Not only that, institutional option flow is highly regarded as informed traders, a great deal of interest is grown when an aggressive bet is made, followed by speculation on why they put so much money behind their idea.
Now, If you can imagine millions of orders being tracked every day, you can see how there could be a lot of noise in between… even though I believe following the transparency of option market trades provides excellent signals for potential entries.
Lesson BTF116. Binary Options Trading Strategy Orlando G
We have come a long way in this first video lesson series, we have learned all the basic concepts in technical analysis, starting from the information behind candlesticks to chart patterns and breakout and bounce trading.
A Put Spread is an options trading combo strategy where you buy a Put and sell another one at the same time but with different strikes. This option strategy has limited profit and limited loss potential.
YOUR FREE TRADING SYSTEM: http://www.netpicks.com/tjgiveaway1
The way risk is handled by Van Tharp, as I’m sure many of you will already know, is by expectancy. Expectancy is basically your average trade in terms of your initial risk. So if your initial risk on a trade is $500 and the trade goes on to make $1,000, the trade is said to have made a 2R profit. If initial risk is $300 and you lose $450, you’ve lost 1.5R.
The way I see this is that it’s a very good way to compare the quality of trades where the specific $ amounts don’t always align particularly well and it gives you a better idea of what you should expect to make or lose on each trade you take. In my opinion, this analysis is particularly well-suited to people trading across a broader range of products such as a portfolio of stocks and this is how my chance conversation began.
Read more: http://www.netpicks.com/do-you-make-this-huge-trading-mistake/
SIZZLE Mailbag No.1 Unusual Options Activity Part IJoshua Belanger
Not sure if you’ve heard, but I’ve been asking members of the OptionSIZZLE community to send me their hard-hitting questions pertaining to options. Let’s face it, many of us our going through some of the same issues when it comes to options investing.
With that said, I thought by sharing these responses with you here, we all could get something out of it.
Let’s get started with the first question.
every people want to invest money in different financial product like pf,fd,rd,sba. insurance ,mutual fund, bond ,debt,govt. securities and maximise wealth of money but all people are not aware about option trading strategy help you appreciate your investment amount
Stock trading strategy - mind of a successful traderPractice of Law
Stock trading tips on hot stocks to buy now, stock market strategy, picking hot stocks, picking penny stocks, and how to buy cheap stocks. From “How to Find a Home Run Stock” and “How to Pick Hot Reverse Merger Penny Stocks” and also “How the Shorts Raid Your Stock, Destroy Your Company and What to Do About It” all by John Lux.
How Much Money Do You Need To Get Started Trading Options?Joshua Belanger
You see, ever since I started OptionSIZZLE.com back in 2008, a week doesn’t pass by where I receive emails from small investors who want to get involved with options…hoping to have their own TRGP success story.
Now, I understand that we all have to start somewhere, however, trading is very difficult and there is a learning curve involved.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the what'sapp number of my personal pi merchant who i trade pi with.
Message: +12349014282 VIA Whatsapp.
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the what'sapp information for my personal pi vendor.
+12349014282
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the what'sapp contact of my personal pi vendor
+12349014282
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
Managing marketing information to gain customer insights
Cashflow secrets how we generate 6% per month with minimum risk!
1. Lesson 1 - Getting Wealthy By Selling Options
What the heck is an option and why do we want to sell these things?
I like to think of an option as a coupon. Let's say you are thinking of
buying a watermelon in the not too distant future. And you think that the
price of watermelons is going to increase. So you want to lock in today's
price.
In this case, I agree to sell you a coupon (option) to buy a watermelon
from me for $1.00 which is today's price. But I will charge you 10 cents for
this coupon and it expires in 90 days.
Let's say 89 days go by. Your coupon expires tomorrow. If the price of
watermelons is more than $1.00 and you still want your watermelon you
should use the coupon. If the price of watermelons is below $1, you
should forget the coupon and just buy a watermelon at the market price.
This will allow the coupon to expire worthless and I would make a nice
profit of 10 cents.
But what if you didn't want the watermelon but the price went up to $2.
You could either buy the watermelon yourself using the coupon and sell it
to someone else for $2, making you a nice 90 cents profit. (Remember you
paid 10 cents for the coupon.) Or you can sell the coupon to someone
else, for $1, also making you 90 cents. Either way you win, and I lose.
It's the same with stocks. Thousands of stocks, indexes, and futures have
options available to trade. Options are gaining in popularity because of the
immense leverage. In our example, all you have to invest was 10 cents to
2. control $1 worth of watermelon.
Let's look at our example above again. You buy an option for 10 cents,
and you later can sell that option for $1 making you 90 cents. That's a
900% return on your money. If instead you had bought a watermelon at
$1 and sold it later at $2, you would have made $1, or 100% return.
100% is great, but not compared to 900%.
What about me, the option seller?
In this scenario I would have to sell you a watermelon at $1. If I had one,
you could have it. But if I did not have one, I would have to buy one in the
market at $2 and sell it to you for $1.
Let's look at the other side. What if prices went down? Imagine prices
went down to 50 cents. Your option that you bought for 10 cents would be
worthless and you would have a loss of 10 cents. But what if instead, you
had bought the watermelon at $1? You would have a 50 cent loss!
As the option seller, I keep the entire 10 cents you paid me.
As you can see, options are cheaper to invest in, they limit your loss, and
they also provide leverage for higher percentage of profits.
Sounds like the perfect investment right? Let's go out and buy a bunch of
these suckers.
Wait!
In our example prices went way up to $2 and way down to 50 cents. But
what if prices didn't move much at all? What if the price stayed at $1?
Then your option would expire and you would lose your 10 cents.
That would be the perfect scenario for the option seller. And guess what?
This is what happens most of the time. In the news, you hear about the
wild fluctuations of the markets. You hear about the stock that went from
$10 to $100 or the ones that went the other way from $100 to $0. But
3. these are the few exceptions amongst the thousands of stocks that trade
everyday. The majority of stocks move very little at all. Sure they move
up, but then they also move down. Overall the move is measured in small
percentages. If a stock moves 10% in a year it's a big deal.
Options need big moves to make money. That's why according to industry
sources, 80% of all options expire worthless!
In the following lessons, we will cover
Lesson 2 - How options are a decaying asset. As an option gets closer to
expiration, it losses value. So by selling options, everyday that goes by,
makes you money. I call it Selling Time.
Lesson 3 - Making money if the stock goes up, down or sideways. If we
sell a call option (I'll explain what a call option is in this lesson), we make
money if the stock goes down or sideways, but we can also position our
trade to make money if the stock goes up only a little. Making money
three ways is much better than buying a stock and praying it goes up.
Lesson 4- Your Own Casino. Casinos have the odds stacked in their favor.
Some people get lucky and win more than they lose, but casinos know
that over the long term they will make money. That's their edge. Our edge
is the same. As option sellers we can stack the odds in our favor. How
does 80% probability of success sound to you? I'll show you how.
Lesson 5 - Not being glued to the screen all day. Option selling allows you
to have a life, to get out during the day and not have to watch my monitor
all day. You can put on my trades and spend about 15 minutes monitoring
them a day. If you have a job or would like to have a life, my system of
option selling is perfect for you.
Lesson 6 - No guesswork. You don't need to guess which way a stock will
move, or use fancy technical or fundamental analysis. Don't need to know
how to read the MACD or Stochastic or other indicators. I use simple
statistics to figure my probabilities and can manage my positions using
4. concrete math, not voodoo or guesswork.
Lesson 7 - Limiting your risk. In this lesson I will show you how to limit the
risk on every option trade you do. I hate losing money. So every trade I
out on has limited risk. I know what my maximum loss can be on every
trade, and if the trade goes against me, I make adjustments to my
position to protect my profit or myself from the maximum loss. Even with
an 80% probability of success, you will still have 2 out of 10 trades go
against you. I do not believe in putting on a trade and not protecting it.
Lesson 8- Sure, steady, reliable income. In this lesson I will give you
examples of trades that make 10% in a month. It's possible and there are
people, like me, doing it each and every month. You can either leave your
profit in the account and let it grow or withdraw it to live on.
Lesson 9 - We couldn't do this a couple years ago. Up until recently only
market makers and very large traders could do these trades. The reason:
commissions. As soon as three to four years ago you would have to pay
$30-$40 to buy or sell a single option. Now you can to the same trade for
less than $1. Online trading and lower commissions have allowed regular
people like you and me the opportunity to trade for a living.
Lesson 2 - Options Are A Decaying Asset.
5. As an option gets closer to expiration, it losses value. So by selling options,
everyday that goes by, makes you money. I call it Selling Time.
Have you ever heard the song, Time is On My Side by The Rolling Stones?
If yes, then you know what it feels like to be an option seller. Everyday
that goes by, the options I sell lose value. And that means I am making
money.
Let's use an example:
IBM stock is at $80. I sell you an option that expires in 30 days that allows
you to buy IBM at $100 ($100 is the strike price of the option.). I charge
you $1 for this option.
Now each option controls 100 shares, so this option worth $1 actually
costs you $100. The only way you will make money is if IBM goes above
$101 ($100 plus the $1 cost of the option) within 30 days. If IBM stays
below $101, I make money.
The clock is ticking. Tick tock. Time is on my side. By the way, even
though the markets are closed Saturdays, Sundays, and Holidays, options
still lose value on those days. So the 30 days until expiration is 30 calendar
days, not 30 trading days. Cool huh?
The seller of an option attempts to benefit from the decay of the option's
time value. Time value captures the possibility, however remote, that the
option may increase in value due to the changing value of the underlying
stock. This value depends on the time until the expiration date and the
volatility of the underlying stock's price.
If the underlying stock's price has not been reached by the strike price of
the option, the option is considered to be out of the money. As time
passes, if the option remains out of the money, the option gradually loses
its time value.
6. The time value of an option is always positive and declines exponentially
with time, reaching zero at the expiration date. Upon expiration, if the
option is still out of the money, the option will have no value left, and it
will expire worthless. Its holder will simply abandon the option leaving the
option seller with the premium. (Premium is jargon for amount paid for the
option.)
The entire premium for which I sold the option will be in your account, less
commissions and fees. At that time, your position closes out
automatically.
The graph above illustrates the accelerated decline of time value as
expiration draws near. The graph allows you to see why an option is
considered a "wasting asset". Time value erodes as each day passes. The
rate at which the time value is eroding increases as the option's expiration
nears. Notice that the time value decays the fastest during the last days of
the option's life.
7. Notice how the option loses value fastest in the last 30 days. Because of
this, we sell options no longer than 50 days left to expiration. We want our
options to expire 50 days from now or sooner. The amount depends on
the strategy used. Sometimes we can make 20% in a couple weeks, other
times we make 10% in 40 days. It depends on the market and strategy
used. But it is best to sell options 60 days or less to expiration to get as
high a theta as possible. Theta is jargon for the amount an option loses
value each day. So if an option has a theta of 10, that means that option
will decline in value $10 each day.
In many cases, we don't even need to wait until the option expires to get
out of the trade. Let's say we sell an option for $1, and 21 days later the
option is worth 10 cents. We just made 90 cents. We should just buy back
the option we sold for 10 cents and move on to the next trade. Even
though we can make another 10 cents, it might not be worth it. We might
find another trade that we can better use our money for. Getting out also
locks in our profit.
So let's say we do a trade that has a maximum return of 12% in 50 days.
If after 30 days we are up 9% it might be best to take the money and run.
Instead of making another 3% in 20 days, we can probably find another
trade that can generate a better return in the same amount of time.
In our next lesson we are going to learn how to make money on a stock
whether it goes up, down, or sideways.
Lesson 3 - Making Money if the Stock Goes Up,
Down or Sideways.
8. If we sell a call option (I'll explain what a call option is in this lesson), we
make money if the stock goes down or sideways, but we can also position
our trade to make money if the stock goes up only a little. Making money
three ways is much better than buying a stock and praying it goes up.
When you buy a stock you make money when it goes up. If it goes down
you lose money. And if it just sits there like a lazy dog, your money is just
tied up, unless you get dividends. Normally if a stock you own moves
sideways, it is called "dead money" because not only are you not making
money, but you are not making the interest you could be making if the
money was invested somewhere else. You lose twice.
But what if you could make money no matter which way the stock
went? Interested?
Let's use Google for our example. Let's say Google is at $300. If you think
Google is going up you can buy it for $300 a share. Or you can buy a
"Call" option for $30. A "Call" option is the option you buy when you think
a stock will go up in value. The other type of option is the "Put" option,
which goes up in value if the stock goes down.
By buying a Call, we need GOOG to move up. Instead of that let's sell
some options.
We can sell a "Put" option. This means we will sell an option to someone
who thinks GOOG is going down. Let's sell the put at the $250 strike price
for $2. This mean we get $200 for the option and the option will expire
worthless if GOOG stays above $250. We think GOOG is going up so we
are fine with that. The option will expire in 30 days.
Now if GOOG goes up, or sideways, and even down to $250 we still make
money. This type of strategy works great when stocks are trending,
meaning they continue to go in the same direction.
9. But sometimes we don't know which way a stock is going to go. What do
we do then?
We can sell Calls and Puts at the same time.
Ok so GOOG is at $300. In 30 days we think GOOG is going to move up
and down but we don't know where it will stop exactly. But are pretty sure
it is going to be in a $100 range, so either up to $350 or down to $250.
We can figure this out by technical analysis or using statistics and
probabilities. (I'll show you more in a future lesson.)
So what we do in this case is we sell the $240 Put for $1.50 and we sell
the $360 Call for $1.25. So we get a total of $2.75 or $275. Now as long
as GOOG stays in between $240 and $360 we profit on both sides. Where
it gets tricky is when GOOG breaks out of the range. That is the only way
you can get hurt and if that happens I have advanced strategies that can
save our money. I share these strategies only with members of my
newsletter.
Considering the fact that stocks move in a sideways direction about 75%
of the time, this strategy can make you some nice dough on a stock that is
just bouncing up and down in its range. I personally wouldn't do this
strategy on GOOG because it moves up and down too much, but it is
easily done on indexes and ETFs.
In fact, this is one of the strategies we use every month. It's called the
Iron Condor. We do basically what I described above but add in some risk
and loss management. This one strategy brings in on average 10% every
30-45 days. So if you take just one trade a month, remember I try to
come up with 3-5, but if you just trade this one strategy every month, you
can bring home at least 50% for the year. We don't win every month, but
we limit our losses in the months we do lose. In a future lesson I will walk
you through an actual Iron Condor trade that I have done.
The best part is that you can start with as little at $2-3,000 in your
account. If you do a Condor with one option, it will cost you, depending on
10. the stock or ETF, for example, $1,000 in margin, and you can make
around $100 per month. With an 80% probability of success, this is one of
my members' favorite strategies.
In our next lesson I will show you can have your own casino where people
pay you to play.
Lesson 4- Own Your Own Casino
Casinos have the odds stacked in their favor. Some people get lucky and
win more than they lose, but casinos know that over the long term they
will make money. That's their edge. Our edge is the same. As option
sellers we can stack the odds in our favor. How does 80% probability of
success sound to you? I'll show you how.
I view myself as a casino owner. Well, maybe not the owner because I
don't own the stock exchange. But I do play the role of the "house". With
close to 80% of all options expiring worthless, option buyers are basically
gamblers looking to buy a lottery ticket. And I don't mind selling it to
them.
Now keep in mind, that sophisticated traders also use options to protect
their other investments but we can sell options to these guys too. That's
why I say you can own a casino.
What I like to do is sell out of the money options. There are three types
of options when it comes to price. In the Money, At the Money, and Out of
11. the Money. An example will help clarify things.
IBM is at $50. An At the Money Call option would be the one with the $50
strike price because that is where IBM is right now. If IBM expires today,
this option would be the closest to making money.
All of the Call options with strike prices above $50 are Out of the Money.
So the 55, 60, 65, 75, and 100 are all out of the money. These have no
value except for time value (because they have time before they expire).
All of the Call options below $50 are said to be In the Money. Such as the
45, 40, 35, etc. If IBM expired today, the people owning these options
would exercise them to buy IBM stock at lower than market price.
In the last lesson, I mention the Iron Condor trade. With the Iron Condor
we sell options that are way out of the money. I use my statistics and
probability calculations to decide exactly which options I want to sell.
Because the options we sell are Out of the Money we receive less premium
(money) for selling these options because the risk is less. You can also sell
At the Money and In the Money options for a lot more money, but you
would also lose a lot more often. Selling Out of the Money is the way to go
in most cases.
The people who buy the options I write are gambling that IBM will get to
the strike price I sold. If it does, good for them, I will just adjust my trade
to protect my profit. It if doesn't I keep the entire amount I was paid for
the option.
Choosing the right option to sell is the tricky part of option selling.
Sell the wrong one and you could lose a bundle. Anyone can understand
how options work and start selling them, but knowing which ones to sell
and then how to adjust the trade when it goes against you is what I help
you with. Since I have my own money doing the same trades I advise you
to do, I stay on top of things and let you know as soon as any trade is in
trouble and what to do about it. That's one of the reasons my members
pay me: to watch over their trades so they don't have to.
12. It's great to have someone on your team that knows what he is doing in
good and bad markets. When I first started this, I didn't know what I was
doing. I lost over $5,000 on just one trade selling options. If I had
someone with me whose shoulder I could watch over or bounce trading
ideas off of, I would not have lost so much money.
At first I thought I just got unlucky, so I sold more options, but then lost
another $6,000. I lost on other trades too, until I figured out what I was
doing wrong. It was a very expensive education. Putting on the trades is
the easy part. Adjusting the trade when it is in trouble is where the
professional traders separate themselves from the amateurs.
I have seen an amateur trader and a professional trade put on the
same exact trade on the same day, but in the end, the amateur trader
lost money on the trade while the professional made money.
In our next lesson I will show you how you can do the trades I do in just
15 minutes a day and I go through I real life trade that we made.
Lesson 5 - Not Being Glued to the Screen All
Day.
Option selling allows me to have a life, to get out during the day and not
have to watch my monitor all day. I can put on my trades and spend about
15 minutes monitoring them a day. If you have a job or would like to have
13. a life, my system of option selling is perfect for you.
I've tried day trading. I've tried jumping in and out of the market trying to
make $1 on this stock, and 50 cents on that one, only to have my head
handed to me on a silver platter. The most I made on a day trade was
$800. I bought 100 shares of a stock and was waiting for it to move up.
What I didn't know what the market was only open for half the day
because it was the day before a holiday and the market closed while I still
owned the stock. When the market reopened, the stock opened up $8 and
I got out. It could just as easily gone down $8. Pure luck. I don't day trade
anymore.
My trading style does not require you to be at the computer all day. You
don't jump in and out. You don't have to pay thousands in commissions.
You don't even have to be home all day. Nowadays you can take your
laptop with you. I will email you when it is time to adjust a trade. You can
then adjust the trade on your laptop or when you get home. My broker
even allows customers to place trades using cell phones. Don't even need
the laptop anymore.
Here is a real life trade we did so you can see how much time it will take
you to implement my system.
On February 20, we did an Iron Condor trade using the RUT (index). Here
is the trade:
Sell 1 MAR 660 Call at $1.98
Buy 1 MAR 670 Call at $1.58
Sell 1 MAR 380 Put at $4.05
Buy 1 MAR 370 Put at $3.50
The total credit we received was 95 cents per option. Our maximum loss
was $9.05 per option. So our max return would be 10.5%.
For 7 days we didn't have to do anything. But the RUT was trending
down. On the 28th we made an adjustment. The RUT was too close to our
Puts.
14. Buy 1 MAR 380 Put at 14.43
Sell 1 MAR 370 Put at 12.33
Total debit of $2.10
Sell 2 MAR 310 Put at 4.53
Buy 2 MAR 290 Put at 3.18
Credit of $2.70
Also, our Calls had gone done a lot in value so I decided to buy them back
to protect our profit. We could have bought these back and sold calls with
a lower strike for more credit but we did not.
Buy 1 MAR 660 Call at .18
Sell 1 MAR 670 Call at .10
Total debit of .08
Again, several days go by without us having to do anything. In fact, we
could have left the trade alone and our Puts would have expired worthless.
But on March 5, We exited the trade.
Buy 2 MAR 310 Put at .22
Sell 2 MAR 290 Put at .12
Total debit of .20
We were in the trade from February 20 until March 5. That's 14 days
including weekends. We made a profit of $127. That is more than we
originally were going to make. Because of the adjustment, we had to
increase our risk. If we had not adjusted, we would have lost around
$200. Our adjustment not only saved us from losing money but made
us more than we expected.
Members of our program that did this trade, actually had to do three
trades: 1. Put on the trade Total time: 10 minutes (until you know what
you are doing) 2. Make adjustment on 28/2 Total time: 10 minutes 3. Exit
trade on 05/03 Total time: 10 minutes
Here's how it would work. On 20/02, you would get an email that a new
15. trade is on. You log into the members area to see the trade and any notes
we have made about how to get in. You go to your broker's website (or if
on auto trading this is done for you) and enter the trade either during the
day for immediate fill or after hours to be filled the next morning.
On 28/02, you get an email saying we need to adjust and the exact
adjustments to make. You log into your broker's website and enter the
adjustment trade.
On 05/03, you get an email to get out of the trade. If you choose to do so
you log into your broker's website and enter the trade to exit.
During this trade, RUT went from 546 all the way down to 448. That's an
18% move. For an index, that is HUGE. But members did not worry. We
had our protection in place. We knew when we were going to make
adjustments. And we were watching the situation for them.
So even though I say on the website that my trades will take you 15
minutes a day, it's more like 15 minutes a week.
In our next lesson I will show you how you can do the trades I do using
concrete mathematics and statistics so you don't have to guess which way
a stock will move or which options to sell.
Lesson 6 - No Guesswork.
16. We don't need to guess which way a stock will move, or use fancy
technical or fundamental analysis. Don't need to know how to read the
MACD or Stochastic or other indicators. We use simple statistics to figure
our probabilities and can manage my positions using concrete math, not
voodoo or guesswork
Do you understand support and resistance? If yes, good. If not, no
problem. We don't use support and resistance much to choose which
options to sell. Instead we use statistics.
In statistics there is a term called standard deviation. I am not going to get
too technical here. If you need more info on standard deviation you can
look it up.
Basically you do a mathematical calculation to find the standard deviation
of a stock or index based on how much its price has moved up and down
in the past.
So let's say IBM is trading at 50, and it has a standard deviation of 5.
Using what I know about statistics I call tell you that for the next 30 days
there is a 68.27% probability that IBM will stay between 45 and 55. I can
also tell you that there is a 95.45% probability IBM will stay between 40
and 60. And that 99.73% of the time IBM will stay between 35 and 65.
Once I know the standard deviation I can determine a range of options
that I would like to sell. I then look at the delta of the various options
along with the credit I would receive from each one. I like to have a very
high probability of success on my trades. So I will choose options about
1.5 standard deviations away from the current price. This puts my
probability of success at 75-85% in most trades.
Pretty cool huh?
Do you think you could make more money, if you were right 75% of
the time?
17. When I first learned that you could have such a high probability of
success, I thought I had found the Holy Grail. But there is a catch. With
less risk, there is also less reward. So on an Iron Condor trade you can
only make about 10%. On a butterfly trade we aim for 20%. If you just
buy options, you can double, triple, or more your money in a few days.
But that is a very rare occurrence and the odds are against you. I'd rather
be the casino letting people gamble and making money consistently month
after month. Plus, 10% a month is not too shabby. Warren Buffet
averages only 2% a month.
In our next lesson I will show you how we limit our risk. You might have
heard that selling options is very risky. Not the way we do it.
Lesson 7 - Limiting Your Risk.
In this lesson I will show you how to limit the risk on every option trade
you do. I hate losing money. So every trade I out on has limited risk. I
know what my maximum loss can be on every trade, and if the trade goes
against me, I make adjustments to my position to protect my profit or
myself from the maximum loss. Even with a 80% probability of success,
you will still have 2 out of 10 trades go against you. I do not believe in
putting on a trade and not protecting it.
Before I make a trade, I want to know what is the most I can lose, the
most I can make, and when I need to adjust my trade to protect myself.
18. Figuring out the most I can make is easy. It's usually the amount of the
credit we receive from selling our options.
Figuring out the most I can lose is easy too. I always limit my losses by
buying options at the same time I sell them. Huh?
Let's say I want to sell a call option on IBM with a 50 strike price. For this
option I will get 2.00 in credit. To limit my risk I buy an option further out
of the money. In this case I can buy the 55 strike price option for a debit
of 1.25.
Here's how it works. I sell one option at 2. I buy one 5 points away for
1.25. So my total credit is .75 (2-1.25). That is my max profit. To figure
my max loss, I subtract .75 from 5 to get 4.25. (We bought the option 5
points away).
So if IBM stays below 50 we make the max profit. But what if IBM shoots
up and goes to 60?
We would have to sell 100 shares of stock at $50. But we bought an
option at 55, so we can buy 100 shares at $55. Plus we got .75 for each
share so we would only lose $4.25 per share. Even if IBM goes to 300, we
still only lose $4.25 a share.
In option terms, this is a called a spread. You sell one, and you buy one to
limit your risk. You make less money because you have to spend some of
your credit but less money made is a lot better than a whole lot lost.
But what about the adjustment?
Let's look at the Iron Condor trade. A lot of people lose money on these
trades because they do them incorrectly. I have even heard option
"experts" and newsletter writers advise clients to put on a condor trade
and never touch it. If you lose, you lose.
Here is the problem with that thinking.
19. Let's say we do 10 condor trades, 1 a month for 10 months. Each has a
10% max profit and 80% probability of success. When we win, we make
10%, but when we lose we can lose 90%.
Let's look at the trade we discussed earlier on the RUT:
Sell 1 MAR 660 Call at $1.98
Buy 1 MAR 670 Call at $1.58
Sell 1 MAR 380 Put at $4.05
Buy 1 MAR 370 Put at $3.50
The total credit we received was 95 cents per option. Our maximum loss
was $9.05 per option. So our max return would be 10.5%.
The total margin we have to put up for this trade is $1,000. If we win we
will make $95. If we lose the max, we will lose $905.
So let's begin. We trade the RUT in this way for one month, and we win.
We also win in the 2nd, 3rd, 4th, 5th, 6th, 7th, and 8th months. Wow, we
are hot!
8 months of profit for about $100 each month gives us a profit of
$800.
But then in month 9, we lose. And we don't adjust so we lose the max. -
$900. Now we are in the hole $100. After nine months of work we are
negative. That sucks. But wait, we are not done yet. In month 10, we lose
again. We lose another $900. Ouch! Now we are down $1,000.
What happened? Even with an 80% probability of success we still lost a
boatload of money. In this case 100% of our margin. Let's stay away from
these Iron Condors, right?
If you don't know how to adjust, you should stay away from them.
Because you will lose your shirt. And if you come across a newsletter
or teacher that tells you not to adjust your condors, RUN away from
them. Trust me, in the long run you will lose, unless you adjust.
20. Remember the RUT trade we revisited above. We made a profit on that
trade. But only because we adjusted. If we had not adjusted we would
have lost the max amount.
We need to treat our trading as a business. If you were running your own
business would it be ok if you could lose your whole year's profits in one
month? Hell no! You want profit every month. And if that's not possible
then you want to keep your monthly loss to be about the same as the gain
of an average month. So if you make 10% in a good month, you don't
want to lose much more than 10% in a bad month.
To recap, we limit our max loss by using spreads. And we limit our losses
even further by adjusting our trades. This works with all our trade
strategies, the condors, butterflies, calendars, credit spreads, covered
calls, and all the rest.
In our next lesson I will show you some of the trades we do and how we
can make 10% a month.
Lesson 8- Sure, Steady, Reliable Monthly
Income.
In this lesson I will give you examples of trades that make 10% in a
month. It's possible and there are people, like me, doing it each and every
month. You can either leave your profit in the account and let it grow, or
withdraw it to live on. I like reliable monthly income
21. In previous lessons I already walked you through a real life Iron Condor
trade that we did. Let's look at some others.
On November 11, 2008, SDS closed at 95.59. SDS has been trading in a
range and is coming back from the bottom of the range. The closing price
for the November 95 Call was $7.3. This option has ten days to expiration.
A covered call would work like this: We feel this ETF will continue to go up.
So we buy 100 shares at $95.59 and sell 1, 95 Call at $7.3. If SDS is above
95 on expiration day, our option will be exercised and we will have to give
away our 100 shares. But we will have a profit of $671.
100 shares at 95.59 = debit of $9559 option sold = credit of $730 100
shares sold at 95 = credit of $9500
9559-730-9500= profit of $671 in 10 days.
671 divided by 9559 = 7% return in 10 days.
We also do other types of trades such as butterflies, calendars, and credit
spreads. Which strategy I choose depends on market conditions. When
volatility is very high, it's great to do covered calls because you get more
money for the calls. When volatility is medium we can do well with
condors and butterflies. When volatility is in the low range I look at
calendars for nice profits.
The Iron Condor is a staple though. This is a strategy we put on every
month. That's the best way to make money with it. Every month, around a
certain amount of days to expiration, we put on the trade and watch it. It's
one strategy for reliable monthly income. Most months we win without any
adjustments. Some months we have to make adjustments or else I just
decide to get out with a small lose.
October 2008 was a wild time. Never before has volatility in the markets
been so high. It was a dangerous time for all traders and it was a month
that our strategies would not have worked very well because the market
was moving too much. The DOW was up 500 points one day, down 900
22. points the next day. And so in October, we were lucky enough to stay out
of the market. The market did not act "normal" in September and I
decided to stay out in October.
How did I know? Well I watch the markets everyday. I stay on top of my
trades. I talk to other professional traders and we share notes and
thoughts on a regular basis. After you have been doing these trades for a
while, you get a "feel" for the market. You know when something is not
right. It's like driving your car. When you hear a new noise or the steering
wheel doesn't respond they way it should, you know. So you stop the car
to see what's wrong or you take it to the shop. In this game, we just stay
out of the market until things gets better.
The good part is, things usually settle down in a few days. But in October
things never settled down. But I want to make something clear. October
was very, very different. It was something option traders and all traders
for that matter, had never seen before. October was not a normal
occurrence.
Steady, Reliable, Monthly Income
My style of trading is not for people who want to hit a grand slam and
make a million dollars overnight. It's not for people who want to sit at the
screen all day. It's not for those of you who are addicted to action. You
won't have any stock picks to give away at parties. If you have to make
trades everyday, this is not for you. It's also not for someone with multi-
millions to invest.
The trades we do are designed to make a steady, consistent income. We
want a few percentage points a month. At the end of the year our results
are impressive, but look at any one month and they are not so flashy.
Some people ask me, if my system is so great, why don't people like
Warren Buffet do these trades. Actually, he does. It is known that Warren
is a seller of puts. But he does it for a different reason, and in a different
way. He chooses a company that he wants to buy more stock in. Then he
23. decides on a price he would like to get in at. If there are Puts at that price,
he will sell those Puts and get a credit.
If the stock price stays above his strike price, his options expire and he
keeps the credit. Then sells more Puts. If the stock price drops to his strike
price or lower, he buys the stock at that price - which is what he wanted
to do anyway. Plus, he keeps the credit giving him a discount on the stock.
We don't want to buy stock, so we don't use that strategy. We want
income and regular returns. Even though we can earn 10% a month, I
would be happy with 5% a month. That's still 60% a year.
The reason Warren and his billionaire friends do not use our strategies is
because they have too much money. If they tried to do our trades using a
million dollars at once, they would mess up the trade. They would not get
the right price from the market to make it worthwhile. They could do the
trade with a couple hundred thousand. But 10% on 200,000 is only
20,000. And to someone with billions to invest, that is just not worth the
time.
This is also the reason I limit memberships to my site. I don't want too
many people doing the same trades or else it will mess it up for everyone,
including me. That's why I don't just offer one trade a month, I try to offer
3 to 5. If a trade is too "crowded", you can wait a day or two to put it on,
or you can just wait for the next trade.
You don't have to do every trade I release.
By limiting the number of subscribers and by choosing liquid trades I make
sure that everyone who wants to put on the trade can.
Very large traders do these trades as well. But why would they advertise
or teach others how to do it? If you could do what other people think is
impossible, would you teach others? Probably not. If too many people start
doing these trades, it can ruin it for everyone.
24. In our next lesson I will show you why what we do is relatively new and
why many people don't know about it.
Lesson 9 - We Couldn't Do This A Couple Years
Ago.
Up until recently only market makers and very large traders could do these
trades. The reason: commissions. As soon as three to four years ago you
would have to pay $30-$40 to buy or sell a single option. Now you can to
the same trade for less than $1. Online trading and lower commissions
have allowed regular people like you and me the opportunity to trade for a
living.
Market makers are the guys or companies that keep stocks liquid. Their
job is to buy and sell the stock all day so everyone gets their orders filled.
They are the ones that get to keep the spread between the ask and the
bid prices.
The current trend is moving more and more to electronic trading.
Computers are the new market makers. And this has lowered the cost of
trading. Commissions that used to be $30 per option are now $1 or less
per option traded. Before, it only made sense for the big boys to do these
trades. Now us little guys can do them too.
Not only that, but brokers are now giving away trading tools that used to
cost thousands of dollars to buy and use. For example, my broker gives