Case Study of the Week
This case study is based on actual trades using the strategies taught by the team at Options Money Maker. Our focus is to teach traders a consistent and conservative approach to trading credit spreads, debit spreads and other combination spread strategies to earn higher than average returns.
We believe that there is no better manager of your money than you, armed with the education and experience to create great returns and do it with peace of mind. We also believe that there is no better way to learn than to “mimic the masters” and then actually do it yourself! These case studies are designed to be a supplement to your education and show you real examples of the trades we open, close and adjust while minimizing risk, eliminating fear and growing a big account.
Take a close look at the sign and the road pictured above. There seems to be confusion on what to do. That is what many traders feel like when the market is up and down, has knee jerk reactions to the news and provides a lot of uncertainty. The beauty of what we teach our clients at Options Money Maker is that we don’t trade on emotion, we place positions based on the indicators and that we build plenty of “forgiveness” into the positions. A case in point is the NDX which has been moving in pretty dramatic 50-100 point moves in a day recently. We coached many of our investors to create a recent Put Calendar Spread on NDX. With this type of spread, the strike prices are the same but the expiration dates are different. We chose expiration dates that were 3 weeks out on the short Put and 4 weeks out on the long Put. This debit spread by nature is a downward bias position but having the strike prices the same and factoring in the delta values on both legs will sometimes create a profit with a short term movement.
What happened next…?
The market reacted to more news and the NDX moved up 62 points over a short period of time. Our investors had opened the position for a net debit of $17.00. Because of the quick movement up and the delta of the short leg being slightly higher than the long leg, the value of the spread increased to $18.70 after just one day. We were able to close that position for a profit of $1.70 or 10% and had our cash back in our account to create the next trade.
For the same reason we don’t want our doctor confused when we go to see them, we don’t want to be confused regarding our investment strategies in a market that can create confusion. Do you want to “practice” with your hard earned money or do you want to trade with confidence and success?
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