Around the office, everyone’s abuzz with how their fantasy baseball teams are performing, and many have already taken in a few “real” games. The 162-game season will undoubtedly be full of highs and lows for the players — both real and fantasy — which is a lot like options trading.
The old Wall Street adage “never be afraid to take a profit” does not exactly apply to options. Even though, particularly in volatile markets, we sometimes need to take the money and run, my overarching goal for you is to hit home runs — not singles.
In general, you can’t afford to nickel-and-dime your way to profits with options.
Like any good coach, I tell it like it is. I don’t think you’ll hear this from many other professional options traders: Most options expire or lose most of their value.
My winning average (and my subscribers’) is about 50% (compare that to the worldwide average percentage of winning options trades, which is only about 10%), and my goal is to never take more than a 50% loss on any individual position.
But, we’re not here to take losses, and there is a silver lining — no, make that a golden lining. Trading options can be highly lucrative, but you need to use my strategy.
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HIT ‘EM LIKE BABE RUTH
Your need to be a slugger — you need to hit home runs in order to stay in the game through, and beyond, the playoffs. And those types of trades are best defined as options that return 150% to 1,000% profits.
When you buy cheaper options ($2 or less), you have the ability to hit home runs. And if you take a loss, it’s a minor-league loss.
My portfolio is full of prime lessons on how home runs are our salvation and the route to big profits over time. It’s the type of trade to aim for — that’s why you have to play your heart out in the options-trading game. You never know which opportunity is going to land you in the options trading Hall of Fame.
Banking a triple-digit profit means that the next several option positions could expire worthless and you still would have a profit. Heck, you could trade for almost a year — losing every trade and, depending on how many contracts you played, you may still have money in the bank.
That’s exactly why you need to hit home runs. You see just one or two can pay for a lot of strikeouts, mistakes and market whims that can crush a good position.
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BECOME AN OPTIONS TRADING MVP
Many options analysts say they have winning trades all of the time. They don’t. I don’t. But what I have is an uncanny knack for spotting cheap and undervalued options that have home run potential.
But an important question is: Are cheap options always good?
It’s easy to find cheap options. There are hundreds and thousands of them that are priced under $2 ($200 per contract). However, to be successful, you must buy options that are not only cheap, but also bargains or underpriced options.
The vast majority of cheap options are overpriced or really just worthless.
My way and your way to success is to find cheap options that are also undervalued or bargains that should really be going for higher prices. When I find such bargains, the ability to predict what the underlying stock will do is not as important because the risk-versus-reward picture is so incredibly attractive.
The biggest part of my job is to identify options that are both cheap and underpriced or bargain-priced. Then I do my technical homework.
So what’s the single key to options profits? Buy cheap AND undervalued options — with home run potential.
You’re going to take small losses, but the homers more than make up for them. Sure, slow and steady may win the proverbial race, but it’s the spectacular plays that are going to earn us a one-way ticket to major-league profits.
I’ve got plenty of stellar pitches up my sleeves that I’m sending to my Maximum Options subscribers — join us in this service for active options traders and get up to 10 trades per week! Click here and start making options home runs of your own!
Don’t let great trades get away. If you enjoyed this article, check out Ken Trester’s “Generate Substantial Returns with Smart Bets.”
