How to Use Options for Triple Digit Returns
Options have a variety of benefits. They can serve as a great way to hedge exposure to a specific industry, sector, commodity or even the entire market. They can also be used to generate income on long-term stock holdings.
In a bull market, like we are seeing now, they can serve as a great vehicle for trading, especially on stocks that trade above $50 per share. Options, if used correctly can greatly reduce the amount of capital needed to gain exposure to an underlying stock.
However, They don't come without risk.
There are a few things that need to be considered when trading options that make the difference between winning and losing. Here are just a few:
- The time to expiration and how far "out of the money" the option is.
- Implied volatility. The higher the volatility the higher the premium (the price you pay for the option).
- Bid/Ask spreads.
- Having a solid idea of the probability that the underlying (stock) will move in the right direction.
The above list is still missing the most important thing. And that's finding the right stock.
There are certain price patterns that increase the probability of a stock moving or breaking-out with enough velocity to make the options go up in value.
Even if you get it all of the above right, you still have to know when to take profits or sell for a loss.
This is why it helps to have 20 years of experience on your side to guide you through the pitfalls that exist when trading these instruments.
Profit From Trends Premium member's have had a great week trading options in the private twitter feed.
Here are some option trades from the last few days:
- FB Oct9 $260 Call Options 145% in 5 days
- MTCH Oct16 $120 Call Options 200% & counting in 6 days
- OSTK Oct16 $90 Call Options 120% & counting in 3 days
- CSIQ Oct16 $30 Call Options 100% & counting in 4 days
If you are interested in trading or learning more about options you can find out more here.
Don't trade alone.