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.

Case Study

This case study is about dramatic moves in the market and how our investors “respond with confidence” rather than “react with panic.”  We have seen recent unprecedented moves in the various indices that no singular investor can predict or control.  It is not what the market does that is important because we cannot control that.  But rather, how we establish our positions with a “forgiveness factor” and then respond with appropriate management techniques if there is an unanticipated or dramatic move. This is what separates the Options Money Maker traders from the rest of the anxious trading world.

 

What Happened…?

Just recently we saw a day where the NASDAQ100 was down 400 points on the open and the S&P 500 was down 110 points in the first hour of trading. These are HUGE moves! Many traders panic, trade on emotion and exit positions immediately for a loss because they are afraid of “going over the cliff” with a massive sell off.  There are some very specific reasons why Options Money Maker traders do not get caught up in the panic game.

We are Well Positioned…

Comfort number one is that we anticipate the directional bias of the market with a high percentage of accuracy.  So if the market moves dramatically in one direction or another, it is likely that we have trades established that take advantage of that move and allow us to close positions in a short time frame for a profit.

Comfort number two is that we build adequate time into our positions so that if an unanticipated move occurs in the market, it is very likely the market will retrace a significant portion of the movement over the next few weeks. This allows us to ignore the “draw down” in our account which is only a negative on paper and allows the position to get back to break even or a profit.  Remember, it is only a paper loss or paper gain and not realized until the investor chooses to close the position. Panic causes many investors to prematurely realize a loss when time and confidence allows our investors to turn paper losses into realized gains.

Comfort level number three is that many of our strategies involve positions that have a “sweet spot” that is neutral in regards to whether the market goes up or down.  In stable trading periods, having this type of position allows both sides of our position to be profitable.  When volatility is high, the investor can often take advantage of closing half of the position on a dramatic move up or down and then closing the other have on the retracement of the previous move. This can create a very nice double profit when others have closed out of positions for big losses.

How Have Our Techniques Performed With High Volatility…?

The short answer is we have performed in an excellent fashion!  While others panic we know that we have management techniques that allow us to turn losses into profits.  Since the beginning of last quarter we have earned profits in our Profit Builder account of $18,120 starting with just $5,000 of risk.   How have you done?

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