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.

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Case Study

We at Options Money Maker often deploy a vertical credit spread under certain market conditions. This case study involves the index RUT with expiration dates that were 6 weeks into the future. RUT was trading at 1160 when we chose to open a call vertical spread with the short Call at 1200 and the long Call at 1205. We received a credit of $1.30 on this trade. This is a downward bias position with the index trading at a defined point of resistance.  Our goal is to have the index continue to trade below 1200 and wait for the time decay to create a profit. Rarely do we allow these positions to go all the way to expiration but rather, take reasonable profits as soon as they are available. 

What is the logic behind this trade…?

We don’t just establish a downward bias position and “hope” that the market goes down.  That would be hoping for luck or speculation. This trade was established for multiple reasons. A careful review of the chart revealed multiple indicators that favor a downward bias.  Reading the charts correctly is an important skill to learn. We teach you how to read charts like the masters. RUT also has a tendency to be a “leading” indicator which means that it may experience a move downward before other indices such as SPX or NDX. We also established positions that were 6 weeks out so that we had different “waves” of positions creating profits at various times. The significant time to expiration as well as the buffer created in the strike price to balance a move upward, also allows for adequate forgiveness to manage the position in the event that the market moves contrary to the anticipated bias.

What Happened Next…?

Over the next week, RUT declined to 1140 which lowered the credit on the position to $.50. This allowed our investors to buy back the position and close it out for an $.80 profit.

Closing a trade for a profit is never wrong…

Some of our investors chose to remain in the position longer and close out for a profit of $1.00 because of the expected downward bias of the index.  It is never wrong to close out a position a little sooner for a profit. Not only does this increase your “winning percentage” it puts capital back in your hands again to reinvest sooner than later.

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.  Want to make a profit on a high percentage of trades and manage unfavorable trades from a loss to break-even or an eventual profit? We sure do! How about you?

Click Here to Learn How to Trade Like the Masters

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

We at Options Money Maker deploy a variety of tested and proven techniques that have produced consistent returns for us over time.  The specific techniques utilized often depend on the status of the current market. When we have studied the charts and are not sure exactly which way the market might move and the volatility index is reasonable, we often utilize a technique that combines two diagonal spreads, one PUT spread and one CALL spread to realize profits regardless of the directional movement.

What Happened…?

We established two diagonal spreads on SPX with the index trading at 1970. We chose the 1950 Put Spread with expirations of September week 4 for the short leg and October week 1 for the long leg. The Call Spread was established at 1990 with the same expirations as the Put Spread creating a “sweet spot” of 40 points between the two spreads. Ideally we would like the index to stay within that 40 point range which would allow most or all of the credit on the two short legs to expire. The amount of credit received on the two legs was $18.55 all of which was set to decay away over the next 7 trading days. The net debit (what we paid) for the position was $17.30.

What Happened Next…?

The long Put and Call were selected with similar delta values so that they would largely balance each other out regardless of the movement in the market. Over the next week the SPX bounced up and down as usual without any dramatic movements that took the price outside of the “sweet spot” of our position. We had placed a Good-til-Canceled order to close the position at $20.80 which represented a $3.50 profit or 20%.  With only 3 days left to expiration, the short Put and Call went into a rapid decay mode and the long Put and Call canceled each other out fairly well creating the expected 20% profit when our automated trade was executed.

Some Investors Play the See-Saw Game…

Our techniques are not speculative but some investors may choose to close out one of the spreads on a move up or down and then close out the remaining spread when the market reverses. This may make sense if there is enough time buffer built into the position to respond if the market does not move in the desired direction. The more conservative approach is to not “over manage” the positions; leave both spreads in place and make the profit on the natural time decay of the short legs.

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.  Want to make a profit on a high percentage of trades and manage unfavorable trades from a loss to break-even or an eventual profit? We sure do! How about you?

Click Here to Learn How to Trade Like the Masters

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

We at Options Money Maker are not speculators or day traders. When you have a sharp movement in the market one direction or the other there is a natural tendency to expect a rebound or a “retracement.”  Speculators might buy a call or a put depending on the anticipated direction to leverage the anticipated move and make a quick and dramatic profit.  That works if you are sure you can predict what the market will do. We don’t attempt to do that. We take what the market gives us in a defined, methodical approach to investing that includes multiple options and management scenarios. When the market had decreased sharply, we chose to initiate a Put Credit Spread on RUT for two reasons. We felt that the next significant move could be upward and this is an upward bias positions and RUT has a tendency to be a leading indicator and might move in that direction in advance of some of the other indices. We opened an 1145/1150 Put Credit Spread on RUT with the index trading at 1160.

What Happened…?

All indications were that the RUT would rebound or increase but instead the global selloff resulted in another significant decline to around 1100.  If we had bought a speculative Call as opposed to establishing a Put Credit Spread we would have experienced a significant paper “draw down” on that position. Because we hedged our bet by using a tried and true Put Credit Spread with significant time buffer built in, we experienced minimal draw down, did not panic and waited for the next move.

What Happened Next…?

The market did not cooperate for the speculative day traders. Rather than conduct the anticipated retracement, the index continued down to just above 1100 but our investors had a position that “hedged” their draw down with built in time to wait for a correction. Three days later, the index had rebounded to 1155 which created a profit in the position. We closed the position for a profit and had the peace of mind of not being enticed to create speculative positions.

Greed is the Downfall of Many Investors…

Our techniques are not speculative and we do not have a “get rich quick “mentality. We establish solid positions based on directional bias and build in strike prices and expiration dates that allow for forgiveness.

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.  Want to make a profit on a high percentage of trades and manage unfavorable trades from a loss to break-even or an eventual profit? We sure do! How about you?

Click Here to Learn How to Trade Like the Masters

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

A number of our previous case studies have focused on the use of credit spreads; either Put or Call spreads depending on the anticipated bias of the market. This is a great strategy that brings cash into your account and provides a defined maximum gain as well as risk. This case describes the use of a debit spread which the investor buys as opposed to selling the credit spread.  Debit spreads use different expiration dates for the long and short legs and requires expending cash from your account.  A Put Debit Spread was opened on SPX at a time when the directional bias was down. We opened a long put with 4 weeks to expiration at 1190 and opened a short put with 2 weeks to expiration at 1160. The net debit was $19.50 which represented a cash expenditure.

 

What Happened…?

Over the next week the SPX drifted downward and we began to see a profit on the Put debit spread.  Now that the market was moving in the anticipated direction, the next question was, when do we decide to close the position for a profit?  We used the Good-til-Closed process (GTC) to establish an automated order. A 20% profit on $19.50 is roughly $4.00. We therefore placed our order to sell to close the position at $23.50.

What Happened Next…?

As SPX continued to decline, we observed that we could sell to close the position one morning at $22.50 which represented a $3.00 profit on the position or a 15% gain in less than a week.  Since there were some technical indicators showing a point of support for SPX, there was a high likelihood that the index would begin to retrace to a higher level.  If this were to occur, this would wipe out our current profit and make the position more difficult to manage. Many of our investors chose to cancel the GTC order and close the position for a great 15% gain.

Greed is the Downfall of Many Investors…

Some of our investors decided to hold the position because there was still plenty of time prior to the expiration periods for SPX to cycle up and back down creating an even greater profit.

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.  Want to make a profit on a high percentage of trades and manage unfavorable trades from a loss to break-even or an eventual profit? We sure do! How about you?

Click Here to Learn How to Trade Like the Masters

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

A number of our previous case studies have focused on the use of credit spreads; either Put or Call spreads depending on the anticipated bias of the market. This is a great strategy that brings cash into your account and provides a defined maximum gain as well as risk. This case describes the use of a debit spread which the investor buys as opposed to selling the credit spread.  Debit spreads use different expiration dates for the long and short legs and requires expending cash from your account.  A Put Debit Spread was opened on SPX at a time when the directional bias was down. We opened a long put with 4 weeks to expiration at 1190 and opened a short put with 2 weeks to expiration at 1160. The net debit was $19.50 which represented a cash expenditure.

 

What Happened…?

Over the next week the SPX drifted downward and we began to see a profit on the Put debit spread.  Now that the market was moving in the anticipated direction, the next question was, when do we decide to close the position for a profit?  We used the Good-til-Closed process (GTC) to establish an automated order. A 20% profit on $19.50 is roughly $4.00. We therefore placed our order to sell to close the position at $23.50.

What Happened Next…?

As SPX continued to decline, we observed that we could sell to close the position one morning at $22.50 which represented a $3.00 profit on the position or a 15% gain in less than a week.  Since there were some technical indicators showing a point of support for SPX, there was a high likelihood that the index would begin to retrace to a higher level.  If this were to occur, this would wipe out our current profit and make the position more difficult to manage. Many of our investors chose to cancel the GTC order and close the position for a great 15% gain.

Greed is the Downfall of Many Investors…

Some of our investors decided to hold the position because there was still plenty of time prior to the expiration periods for SPX to cycle up and back down creating an even greater profit.

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.  Want to make a profit on a high percentage of trades and manage unfavorable trades from a loss to break-even or an eventual profit? We sure do! How about you?

Click Here to Learn How to Trade Like the Masters

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

Many investors head for shore at the first sign of waves out of fear and others like those who follow the principles of Options Money Maker grab a board and ride the waves with confidence!  We have seen some very volatile moves in the market over the past few weeks that have created some great opportunities for profits for our investors.  If you were one of the investors that closed positions for losses during the most recent turn down in the market, you now have two reasons to feel bad.  One is the loss and the second is that the market has cycled back up.  We know the market cycles up and down…it just does.  The unknown of course is exactly how much and exactly when.  We use technical indicators to predict market movement but combine that with strategies that build in “forgiveness” in the event that the market moves contrary to the anticipated directional bias. The following graph illustrates a typical cycle.

What Happened…?

Despite what feels like chaos, if you analyze the chart for SPX above you will see that it actually has been oscillating very regularly within a 96 point channel. The low on the 2nd was 1903 with a high of 1974 the next day. Four days later (actually one trading day due to a three day holiday weekend) the low was back down to 1911 followed the next day with a high back to 1970. Even after a 60 point run up on the 8th, the SPX still opened higher on the 9th by 12 points. Later in that same trading day, SPX began moving downward and actually was minus 15 around mid day.  The point is that all of this happened in a pretty predictable pattern within our defined 96 point channel.

What Did We Do…?

Our investors simply stayed on the course that allows us to take profits on whatever the market chooses to give us. Some of our techniques involve specific directional bias.  If our prediction is correct, we make money immediately. If the market moves contrary, we build time into the position to allow the market to cycle in the opposite direction and create a profit.  We have additional combination strategies that allow our investors to prosper regardless of the direction of market movement. Management techniques provide yet another layer of confidence.

Which Picture Fits Your Level of Trading Confidence in a Volatile Market?

      

 

Are you pleased with your current results?

Click Here to Learn How to Trade Like the Masters

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?

Click Here to Learn How to Trade Like the Masters

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

An Iron Condor consists of two credit spreads, one Put spread and one Call spread. The position is designed to have a “sweet spot” with the desire that both positions would remain out of the money. This allows the time decay to create a profit on both spreads. This strategy is deployed when there is uncertainty on market direction and allows for profit regardless of how the market moves.

This case describes an Iron Condor on SPX with the index trading at 2106.  The Call strikes were 2135/2140 ( downward bias position) with a credit of $1.75 and the Put strikes were 2075/2080 (Upward bias position) with a credit of $1.20.  Total credit was $2.95 with 4 weeks to expiration.  There was time built into the position as well to provide buffer for market movement either direction through the selection of the strike prices.

What Happened…

The next day the SPX decreased by 25 points which lowered the credit on the Call spread to $.85.  Many investors chose to close the Call spread for a profit of $.90 which represented a 44% profit on cash at risk. This left those investors with a Put spread with 4 weeks to expiration. Closing the Call spread was performed with confidence because no matter what happened there were good options. If the market increased, the Put spread could be closed for a profit and the investors make a profit on both spreads. If the market decreases or remains flat, investors could choose to add a Call spread back with lower strike prices to complete the Iron Condor once again.  All of these options are made available because of the time built into the positions.

Then What Happened…

In this case there was a market retracement upward 2 days later that allowed the Put spread to be closed for a $.30 profit.  Total profit in this case was $1.20 in 2.5 trading days which represented a 59% profit on cash at risk.

 

It is Great to Have Choices…

It is interesting to note that some investors chose to simply hold the Iron Condor as originally constructed.  Five days later they were able to close the entire position for a profit of $.80.  This only resulted in a profit of 39% on cash at risk.  Although this was a lower profit than described above, it only required a little patience combined with one order to close the position to create a profit that anyone would be happy with.

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.

Click Here to Learn How to Trade Like the Masters

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

A very successful strategy of Options Money Maker is the vertical credit spread. Previous case studies have described positions using either a Call vertical credit spread or a Put vertical credit spread depending on the directional bias of the market. We have also discussed that these techniques work well on a variety of indices such as SPX, NDX and RUT.  There are different characteristics of each index which allows the investor to choose a position that fits their strategy. For example, the NDX has a tendency to trade in a wider range and make more dramatic up and down moves than SPX. RUT has a tendency to be a “leading indicator” and move in a certain direction before the SPX or NDX.

This case study illustrates the strategy of varying your expiration periods of your positions when you have multiple trades in play. We established a Put vertical credit spread on RUT which is an upward bias position.  The index was trading at 1218 and we bought the 1195 Put and sold the 1200 Put with an expiration 3 weeks out and received a credit of $1.30. We also already had a Put vertical credit spread in play on SPX with 4 weeks to expiration.

Here is what happened… RUT moved up four days later to 1236 which lowered the mark of our position to $.65.  We closed this position for profit of $.65 which represented an 18% profit on cash at risk in only four days.

Variety is the Spice of Life… There is a variety of reasons for choosing variety with your trading process. By choosing to establish trades with both SPX and RUT you diversify your approach in the event that the market does not move as anticipated. These indices do not necessarily move in “lock step” together. Even if they follow the same general bias, one may move sooner or more dramatically than the other. Varying the expiration date avoids any confusion on the part of your trading platform when you have multiple positions.  It also allows you to take profits at different time intervals which allows you to cycle positions faster, reinvest and take advantage of compounding.

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.

Click Here to Learn How to Trade Like the Masters

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

A very successful strategy of Options Money Maker is the vertical credit spread. Previous case studies have described positions using a Call vertical credit spread which is downward bias position.  The same success can be accomplished when the bias for the market is to move upward by using a Put vertical credit spread.

A vertical Put spread was established when SPX was trading at 2065. We opened the position by buying the 2035 Put and selling the 2040 Put with 4 weeks to expiration and received a credit of $1.40.  We built in forgiveness into the strike prices in the event that the index moved lower. By remaining out-of-the-money, this position would still present a profit potential due to time decay.  Through a detailed analysis of the chart we documented that SPX was trading at a point of support which provided the bias for a potential move to the up side.

Here is what happened… SPX moved up the next day to 2090 which lowered the mark of our position to $.85.  We closed this position for profit of $.55 which represented a 15% profit on cash at risk in one day.

It is a beautiful thing… it is always fun when the market moves as anticipated and you are able to make a nice profit in one day. It is also nice to know that you can make a profit regardless of the direction of the market by choosing a Call or Put strategy that favors the directional bias based on a careful review of the charts. This allows you to continuously have positions in play to take advantage of compounding as opposed to always waiting for the market to increase. Could the market have moved against us…yes. That is why we build in forgiveness in regards to time and strike prices. Could we have waited longer and perhaps gained more profit due to time decay…yes.   We like the strategy of taking a nice profit and moving on…how about you?

There was no one right answer in this case.  The decision each trader makes is based on their personal views and attitude towards risk.  This case study points out the need to learn how to think like a trader versus just following a set of rules.

Click Here to Learn How to Trade Like the Masters