Case Study of the Week
This case study is a call to action 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.
This is the case study of managing and profiting from the Yo-Yo effect. We know one thing for sure…the market cycles up and down sometimes in a smaller saw tooth effect and at other times in a more dramatic Yo-Yo effect. Let’s look at the most recent 4 trading days for the SPX index. Last Thursday the SPX had a daily decline of 30 points. Our investors were able to profit from that move downward because of the presence of a strategy that provides profits when the index declines. This is not “taming and profiting from a bear market,” this is simply taking advantage of short term downward cycles which invariably occur.
What happened next…?
The next day on Friday, the SPX had a daily increase of 40 points! What a difference a day makes. Are we now in a bull market? No, we just experienced what is sometimes called a “retracement” effect when the market rebounds or “Yo-Yos” back up after a significant decline. Our investors were able to take advantage of this move because of a second segment of a combination strategy that provides profits when the index increases.
What Happened Next…?
Over the course of the next two trading days the SPX declined again by a total of 35 points. In summary, the SPX went down 30 points, up 40 and down 35 over 4 trading days. How well did you do over the past week? Do you know how to structure a combination strategy that accomplishes the following?
- If the market stays rather stable, time value will allow you to close the entire position for a profit.
- If the market increases, you can close the upward bias side of the combination position for a profit.
- If the market decreases, you can close the downward bias side of the combination position for a profit.
- If point two or three happens rapidly, you might be able to re-open a position and wait for another profitable cycle up or down.
Our investors know how to do this and are profiting every week by mimicking the Masters, but more importantly, learning to think like a trader and control their own destiny.
What is keeping you from taking action?