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.
Our experts at Options Money Maker would like to offer to be your personal trading coach. We use our experience and proven techniques to make consistent profits regardless of market direction. In the past 45 days the market has consistently been moving upward but we know with 100% certainty that the market cycles up and down. We just don’t always know when that will happen. In personal trading, it is not important to always but right immediately, but we strive to be correct eventually by building time and buffer into our trades. Many of our investors have opened downward bias positions over the past few weeks. They have not been able to close those positions because of the consistent upward movement of the market. Our experts have coached them on how to “roll out” their positions and keep them in play until the market has an inevitable “pullback.”
What is the logic behind this process…?
The logic of a personal coach is obvious. We hire personal trainers, dietary advisors, golf professionals and any number of experts to improve our chances of success. Why not a personal trading coach? Access to proven techniques, advice on opening, closing and adjusting trades to increase your profits combined with advice on things such as confidence, patience and trusting your technical analysis are all important aspects of a trading coach. What we have recently advised our traders to do is roll out certain positions to buy more time for the market to move down and create a profit. What does the average trader do? They get impatient, don’t know how to manage the positions and close them for losses. An example was an NDX Call Credit Spread at 4670/4675 with the index trading 4620 with 10 days to expiration. We received a credit of $1.50 for this trade. This is a downward bias trade that is 50 points out-of-the-money with a high likelihood of making a quick profit.
What Happened Next…?
Despite all of the technical indicators that suggested a downward bias, the index moved up strongly over the next few days to 4720 placing our position under pressure from our three key questions. Is there a profit…no. Is there price pressure…yes. Is there time pressure…yes. We instructed our clients to buy more time by rolling the position out an additional week. We actually received a $.20 credit for that move, taking our total credit to $1.70.
Over the next few days the market reacted to some news regarding raising interest rates and the steady upward movement hit some areas of anticipated resistance and lost momentum. There was an inevitable movement down of 60 points over two days that allowed out investors who had managed their positions using our expert advice to close positions for a profit. How well would they have managed this on their own? The vast majority would not have performed well with this scenario. Understandably, there are always a select few that would have done just fine on their own. Remember, even the highest achieving people in any profession benefit best from the support and collective wisdom of a great team around them. What about you?
What is Keeping You From Taking Action…?
If you agree with the basic thoughts presented in this case study, what is keeping you from taking action? We help you 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?
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