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

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 the index SPX.  This technique works equally as well on other indices such as NDX and RUT. Frequently those indices move in the same general direction albeit at various degrees. There is no iron clad rule in how the market will react but in general, RUT has a tendency to be a leader in directional bias. If it appears that SPX, NDX or RUT are positioned for a decline, it is often RUT that makes the first move.  This case involves a Call Credit Spread, which is a downward bias position, on the index RUT in an attempt to take advantage of the tendencies described above.

A vertical call spread was established when RUT was trading at 1260. We opened the position by buying the 1300 Call and selling the 1295 Call 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 higher. By remaining out-of-the-money, this position would still present a profit potential due to time decay.

Here is what happened… RUT declined the next day to 2048 which lowered the mark of our position to $.75.  We closed this position for profit of $.65 which represented an 18% profit on cash at risk in one day.

Take the Money and Run… most all of our clients took the immediate profit and did not hold out for a greater profit by retaining the position and waiting for more time decay or a continuation of a decline in the index. In retrospect, some did hold the position longer and received a higher profit. That is a personal trading decision that varies on the risk tolerance of the trader. We remind our clients that you can never go wrong closing a position for a quick profit and that often traders lose their profits by waiting for a larger one.

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 is a series of actual case studies associated with following the investment strategies of the experts from Options Money Maker.  We take a consistent and conservative approach to utilizing credit spreads, debit spreads and other combination spread protocols to routinely make high percentage returns  at much lower risk than other investment strategies. 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 helpful supplement to your education.

Case Study

A very successful strategy of Options Money Maker is the vertical credit spread.  This case involves a Call Credit Spread, which is a downward bias position, on the index SPX.  The position was established when the index was trading at 2080. It was created by buying to open the 2125 Call with 3 weeks to expiration and selling to open the 2120 Call. This provided a net credit of $1.50 with a total risk of $3.50. This credit spread utilized the classic safeguards of our  techniques. We built in time for the position to make a profit by using expiration dates that were 3 weeks out.  We also built in “forgiveness” in case the index moved upward, by selecting strike prices that were 40 points from the current trading price.

This position was opened on Monday and a Good-Til-Canceled (GTC) order was set on Tuesday to close the position for $.80.

A week and a half later, the SPX had moved up 45 points and was trading at 2125. This move, resulted in a current mark of $2.90 so we had a “paper loss or drawdown” of $1.40.

The three questions that we routinely ask as we evaluate our positions are:

Do we have a profit in the position?- After holding this position for one and a half weeks, the answer is no.

Do we have price pressure on this position?- Very slight because despite a 40 point increase in the index, we had built enough buffer into the position to allow for that type of increase and still be very close to “at the money.”

Do we have time pressure on this position? – Very slight because there are still one and a half weeks until expiration. There is time to develop choices on our continued strategy of managing this position.

Option 1- Patience is a Virtue- Since we were not yet in the expiration week, many of our clients chose to do nothing and waited for the downward bias indicated on the charts.

Option 2- Buy Some Time- Some clients were not inclined to wait but wanted to “buy some additional time.” They rolled the position out two additional weeks to allow for more time for the index to decline, take our position out-of-the-money and create a profit.

Option 3- Roll out and up- In addition to buying more time, some clients also chose to increase the strike points to take the position out-of-the money and increase the likelihood of a timely profit.

Here is what happened… SPX declined to 2015 with a week left until expiration rewarding all clients regardless of which option they chose above. A decline in the index benefits everyone in this example because the vertical call credit spread is a declining bias strategy.

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.

Case Study Of the Week

This is a series of actual case studies associated with following the investment strategies of the experts from Options Money Maker.  We take a consistent and conservative approach to utilizing credit spreads, debit spreads and other combination spread protocols to routinely make high percentage returns  at much lower risk than other investment strategies. 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 helpful supplement to your education.

Case Study

A very successful strategy of Options Money Maker is the vertical credit spread.  This case involves a Call Credit Spread, which is a downward bias position, on the index SPX.  The position was established when the index was trading at 2110. It was created by buying to open the 2145 Call with 3 weeks to expiration and selling to open the 2140 Call. This provided a net credit of $1.40 with a total risk of $3.60. This credit spread utilized the classic safeguards of our  techniques. We built in time for the position to make a profit by using expiration dates that were 3 weeks out.  We also built in “forgiveness” in case the index moved upward, by selecting strike prices that were 30 points from the current trading price.

This position was opened on Wednesday and a Good-Til-Canceled (GTC) order was set on Thursday to close the position for $.70.

On Friday, having been in the position less than 2 days, the SPX had decreased by 10 points. This move, along with a small amount of time decay resulted in a current mark of $1.00 which was $.40 favorable to our original credit of $1.40.  The weekend was looming in front of us with an unstable world financial issue playing out in Greece.  Here is what some of our clients chose to do.

Option 1- Cash is King- Some of our clients chose to cash in the $.40 profit, go to a cash position over the weekend and not give the decision another thought. YOU CAN NEVER GO WRONG BY TAKING A PROFIT.  People who trade on emotions, the news, or hold out for a larger profit lose far more times than they win.

Option 2- Time is on My Side- Some of our clients held the position knowing that they had 3 weeks to expiration of the credit spread. This provided confidence that regardless of what happened on Monday, they had adequate time for the position to create a more favorable return than $.40.

Here is what happened… the US markets declined significantly on Monday including a 42 point decline in the SPX. This moved the mark on our credit spread position to $.60 which resulted in an $.80 profit.

What if the market had moved upward? Those holding the position would have had the peace of mind to know that they had the credit spread structured in a manner relative to the strike prices and expiration dates that would likely result in a profit. They would also be supported by a selection of management techniques that may be deployed when the market moves contrary to the anticipated bias.

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.

 

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

The Hall of Fame New York Yankee catcher Yogi Berra once said, “When you get to the fork in the road…take it!  That is the kind of simple flexibility that we at Options Money Maker like to teach in regards to options trading. An example is a recent position we established using the index RUT.  With 3 weeks to expiration, we believed that there was a downward bias tendency using all of our key charting indicators. For that reason we chose to establish a Long Put Vertical Spread which is a downward bias position.  We wanted to lower our risk, so we chose strikes that were significantly in-the-money.  The selected strikes were the 1145/1150 with the index trading at 1125.  This position had a net debit of $3.50 which meant that the potential profit on the $5 spread was $1.50.  Establishing an in-the-money position lowered our risk in a number of ways. If the index moved upward, we could close out the short Put for a profit and then manage the long Put in a number of ways. If the index moved downward, we can exit the position for a profit and reinvest our capital in a new position.

What happened next…?

RUT made a pretty strong move upward to 1145 allowing our investors to close the short Put of the spread for a nice profit.  We recommended doing this when the various chart indicators seemed to show a downward bias as the next move.  That would provide us with the best chance to benefit from having a long Put since that leg improves at the rate of its Delta as the index moves down.

What Happened Next…?

The next day RUT made a significant move downward as anticipated and was trading at 1132.  This allowed our clients who held the long Put position to close that position for a second, nice profit. In essence, they made money on the move up and then made money on the move down. They saw the fork in the road and took it! Not all of our clients chose to work this position. Many chose to do nothing since there was still nearly 3 weeks to expiration. They were able to close their original spread for a profit. They only received one profit rather than two but were very content to make some money and move on to the next opportunity.

It is great to have choices! There is no right answer.  Do what you think is best for your account and never look back!

Do you have the kind of confidence and comfort that our investors do?

What is Keeping You From Taking Action? Give Yourself a Confident Investment Strategy?

Click Here to Learn How to Trade Like the Masters