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.
Two distinctly different characters in history came to the same conclusion but verbalized it differently. Yogi Berra stated, “It’s Déjà vu all over again.” Albert Einstein stated, “The definition of insanity is to keep doing the same thing and expect different results.” How have you been doing with your own investing? Take action now by engaging the expert team from Options Money Maker to create a new strategy with different outcomes.
Let’s take the example of an Iron Condor that we used to our investor group’s advantage this past week. This position was initiated using the RUT index when it was trading at 1170. We established a Put Credit Spread (upward bias position) with 3 weeks to installation at strikes of 1145/1150 and received a credit of $1.50. We added a Call Credit Spread (downward bias position) with the same expiration at strikes of 1200/1205 and received a credit of $1.40.
What is the logic behind this process…?
The Iron Condor creates a “sweet spot” that takes advantage of the time decay of positions that are out-of-the-money. It is possible to make a profit on both spreads, create a profit by closing one side of the Iron Condor at a time based on market movement and there are also opportunities to re-establish closed positions at different strikes.
What Happened Next…?
Two days later RUT moved down sharply from 1170 to 1145. This movement created a profit on the Call Credit Spread. Many of our investors closed the position for $.90 which was a $.50 profit. We chose to advise our investors to keep the Put Credit Spread in place even though the position was at-the-money. There was adequate time to expiration so there was no need to close the position for a loss. There was a reasonable chance of a retracement pull back which would eventually create a profit in that position as well. In addition, there could be an opportunity to re-open the Call Credit Spread at lower strikes to lock in profits and create additional premium. It is great to have multiple options.
What is Keeping You From Taking Action?