As promised, this is Ken Trester back with Part 2 of this week’s coaching series How to Score Big Profits from Tiny Stock Moves.
In Part 1, I shared my 3 proven principles of wealth-building and demonstrated how options trading lets you control stocks for pennies on the dollar.
Today, instead of focusing on trading techniques, I want to explore the benefits of active trading, using my Power Options Weekly service as an example.
So let’s get to it.
Each Friday morning, I provide 5 hand-picked trades to my Power Options Weekly members. Then the power’s in their hands!
If you’re like my members, you might use my 5 ideas (at least partially) as a starting point for their own trading plans…
You might have limited funds and concentrate on market sectors you’re most comfortable with…
Or take 1 or 2 real trades and “paper trade” the rest, as you learn…
And — once you’re ready — jump right in with my full line-up of 5 calls and puts.
My goal is to share a variety of trades — 5 each week — to meet all my members “where they’re at.” Because, either way…there is no better teacher than experience.
Repetition helps you master any subject, and trading is no exception. That’s another reason why I share 5 new trades every week, 260 a year.
With that many trades — even if you just follow along on paper to start — you are exposed to and learn from many different situations. How market trends affect trades; when to harvest winners; how to manage losers; position sizing; and much more.
Let’s now take a look to see how two specific, recent triple-digit winners played out so that you can get an idea of the kind of profits you can expect.
Profit Example #1: Cato Corporation (CATO)
In mid-May, I recommended that my subscribers buy to open the Cato Corporation (CATO) Jul 20 Calls (CATO180720C00020000) at $0.50 or lower.
Shares of CATO had been consolidating in a tight range for most of April, but they began to break out of that range just before we opened our bullish trade. After an initial move above the $17 level, we waited for the stock to pull back slightly so we could get into our option position at cheaper prices.
We ended up getting our orders filled right at my maximum price of $0.50 per contract, which was great to see, but then the stock continued to move slightly lower over the next two days. We were watching the stock carefully for any signs of further weakness, but because it never closed below our stock sell signal price during our time in the position, we continued to hold in anticipation of another breakout.
Sure enough, just four trading days later, shares of CATO jumped higher by more than 15% at the open, and our CATO July 20 call options more than doubled overnight. Our option profit target of $1.30 per contract was easily reached – and even exceeded – and we quickly closed the position for a whopping return of 160%.
Had you traded 10 contracts for just $500 ($50 open price x 10), you would have turned that initial investment into a quick $1,300 ($130 close price x 10) – which equates to an $800 profit in under a week.
Profit Example #2: eBay (EBAY)
About two months later, we opened a bearish trade on eBay (EBAY) – the EBAY September 35 put options, which I recommended for a maximum price of just $0.70 per contract ($70). The stock had traded lower after its prior earnings report at the end of April, and we were expecting the same thing to happen when the company reported its latest earnings in July.
Like clockwork, when eBay reported disappointing earnings the last time around, the stock collapsed by 10%, and our bearish put options skyrocketed in response. This time, the option did not trigger our profit target, so we sent out a quick alert to subscribers letting them know it was time to take profits and exit the trade.
We did just that and, at our closing price of $1.67 per contract ($167), we secured a profit of over 138%. A 10 contract lot would have cost you $700 to enter at the price of $0.70 per contract ($70 x 10), which you could have sold in just four trading days for $1,670 ($167 x 10)!
In other words, we doubled our money – and then some – once again in less than a week, bringing home a total profit of $970.
This is one of the biggest mistakes I see new traders make — over and over again.
They make an options trade and just sit there until the options expiration date.
If they’re up in a trade, they hold on in hope of making more. If they’re down, they hold on, trying to get back to even.
But profits aren’t profits until you bank them. And it’s often better to cut your losses and redeploy assets in a better trade.
That’s why I have strict rules about how long we’ll hold a trade at Power Options Weekly.
Tomorrow — in Part 3 of How to Score Big Profits from Tiny Stock Moves — I’ll explain why.
It’s all about managing trades and your overall trading wallet to make your money work harder.
So until tomorrow…
Wishing you great trading,
Power Options Weekly