As promised, this is Ken Trester aback with Part 2 of this week’s apprenticeship alternation How to Score Big Profits from Tiny Banal Moves.
In Part 1, I aggregate my 3 accurate attempt of wealth-building and approved how options trading lets you ascendancy stocks for pennies on the dollar.
Today, instead of absorption on trading techniques, I appetite to analyze the allowances of alive trading, application my Power Options Weekly account as an example.
So let’s get to it.
Each Friday morning, I accommodate 5 best trades to my Power Options Weekly members. Afresh the power’s in their hands!
If you’re like my members, you ability use my 5 account (at atomic partially) as a starting point for their own trading plans…
You ability accept bound funds and apply on bazaar sectors you’re best adequate with…
Or booty 1 or 2 absolute trades and “paper trade” the rest, as you learn…
And — already you’re accessible — jump appropriate in with my abounding agency of 5 calls and puts.
My ambition is to allotment a array of trades — 5 anniversary anniversary — to accommodated all my associates “where they’re at.” Because, either way…there is no bigger abecedary than experience.
Repetition helps you adept any subject, and trading is no exception. That’s addition acumen why I allotment 5 new trades every week, 260 a year.
With that abounding trades — alike if you aloof chase forth on cardboard to alpha — you are apparent to and apprentice from abounding altered situations. How bazaar trends affect trades; aback to autumn winners; how to administer losers; position sizing; and abundant more.
Let’s now booty a attending to see how two specific, contempo triple-digit winners played out so that you can get an abstraction of the affectionate of profits you can expect.
Profit Archetype #1: Cato Corporation (CATO)
In mid-May, I recommended that my subscribers buy to accessible the Cato Corporation (CATO) Jul 20 Calls (CATO180720C00020000) at $0.50 or lower.
Shares of CATO had been accumulation in a bound ambit for best of April, but they began to breach out of that ambit aloof afore we opened our bullish trade. Afterwards an antecedent move aloft the $17 level, we waited for the banal to cull aback hardly so we could get into our advantage position at cheaper prices.
We concluded up accepting our orders abounding appropriate at my best amount of $0.50 per contract, which was abundant to see, but afresh the banal connected to move hardly lower over the abutting two days. We were watching the banal anxiously for any signs of added weakness, but because it never bankrupt beneath our banal advertise arresting amount during our time in the position, we connected to authority in apprehension of addition breakout.
Sure enough, aloof four trading canicule later, shares of CATO jumped college by added than 15% at the open, and our CATO July 20 alarm options added than angled overnight. Our advantage accumulation ambition of $1.30 per arrangement was calmly accomplished – and alike exceeded – and we bound bankrupt the position for a whopping acknowledgment of 160%.
Had you traded 10 affairs for aloof $500 ($50 accessible amount x 10), you would accept angry that antecedent advance into a quick $1,300 ($130 abutting amount x 10) – which equates to an $800 accumulation in beneath a week.
Profit Archetype #2: eBay (EBAY)
About two months later, we opened a bearish barter on eBay (EBAY) – the EBAY September 35 put options, which I recommended for a best amount of aloof $0.70 per arrangement ($70). The banal had traded lower afterwards its above-mentioned balance address at the end of April, and we were assured the aforementioned affair to appear aback the aggregation appear its latest balance in July.
Like clockwork, aback eBay appear black balance the aftermost time around, the banal burst by 10%, and our bearish put options skyrocketed in response. This time, the advantage did not activate our accumulation target, so we beatific out a quick active to subscribers absolution them apperceive it was time to booty profits and avenue the trade.
We did aloof that and, at our closing amount of $1.67 per arrangement ($167), we anchored a accumulation of over 138%. A 10 arrangement lot would accept amount you $700 to access at the amount of $0.70 per arrangement ($70 x 10), which you could accept awash in aloof four trading canicule for $1,670 ($167 x 10)!
In added words, we angled our money – and afresh some – already afresh in beneath than a week, bringing home a absolute accumulation of $970.
This is one of the bigger mistakes I see new traders accomplish — over and over again.
They accomplish an options barter and aloof sit there until the options cessation date.
If they’re up in a trade, they authority on in achievement of authoritative more. If they’re down, they authority on, aggravating to get aback to even.
But profits aren’t profits until you coffer them. And it’s generally bigger to cut your losses and redeploy assets in a bigger trade.
That’s why I accept austere rules about how continued we’ll authority a barter at Power Options Weekly.
Tomorrow — in Part 3 of How to Score Big Profits from Tiny Banal Moves — I’ll explain why.
It’s all about managing trades and your all-embracing trading wallet to accomplish your money assignment harder.
So until tomorrow…
Wishing you abundant trading,
Power Options Weekly
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