8:55am (EST)
 
Well, time to open up the playbook.
 
It may be preseason in the NFL but in option trading we are in the game every day.  I’ve been pretty limited with our playbook because I have been feeding you a lot of information lately on how to use options but I’m excited.
 
We all know I have been putting in tight stops on some plays and loose stops on other trades.  The reason I do that is beacuse I want each and every single one of you to make a ton of money.  I get emails daily and as you would imagine most are good and some are bad.  That is the nature of the game when you run a trading service and I know that.
 
The most important thing I want you to know is that if you are beginner option trader, don’t jump into this whole option trading thing blindfolded.  Take some of the trades and follow them on paper.  When my trading manual is ready, you will see how everything works in a better picture.  And realize some of the trades I do are based how I manage money.  All right, enough rambling…
 
I am looking at Citigroup (C, $5.05, up $0.42) once again and here is the deal.  If you made 114% and 80% like you should have on the Citigroup trade then why not take that money and double down?  The break above $5 was huge yesterday and that changes the ballgame because the stock becomes “marginable” again. 
 
Buying on margin is like a double-edged sword.  Margin buying is when you buy a stock with cash borrowed from your brokerage account using other stocks as collateral.  By doing this, it will have a huge effect on any profit or loss you may have.
 
I have profiled the Citigroup January 7.50 calls (CAQ, $0.29, up $0.09) and the January (2011) 10 calls (VRNAB, $0.58, up $0.15) and they are a BUY today.  We are going to do a “layered’ trade on Citigroup and here is what it will cost.
 
I always buy 10 contracts or more of an option and I’ve explained this because of brokerage fees.  I usually do 20 lot trades and “half’ trades are normally 10 option contracts and sometimes even 5 contracts if the options are expensive.
 
If you buy 30 contracts of the January 7.50’s it’s gonna cost you $700.  If you buy 20 of the 2011 January 10’s it’s gonna run you about $1,200.  That is $2,000 in a layered Citigroup trade at current prices and that is usually how I manage each trade in my trading account.  Sometimes when I say “do a half position” that means buying only 10 or even 5 contracts which means I’m only putting up $500 or $1,000.  I have stuck to this plan for years and I never go outside of this comfort zone no matter how much I like a position.  It is consistant with my overall trading strategies and it is what has kept my trading account growing year in and year out.
 
Back to Citigroup.  Let’s just say the stock is at $10 by January 2010 and $20 by 2011.
 
You want numbers?  The $700 you invested on the 7.50’s will be worth $7,500 (30 contracts x $2.50) because the stock is at $10 and the 2011 10’s would be worth $5 or $10,000 (20 contracts x $5) if Citigroup is at $15.  So, your 2g’s is now worth $17,500.
 
That is how I’m approaching this trade from here on out.  The risk is that this is all fluff and Citigroup’s numbers aren’t going to be as strong as many people feel they are going to be over the next few quarters.
 
Again, I like these call options and would “buy to open” today for a shot at having a huge payday in the future.
 
Update on MomentumOptionsTrading.com initial launch.  Here are the introductory prices:
 
  • Monthly Recurring Subscription – $97 per month
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  • Members Area:

    Each week we will be introducing a new “Watch List” as a way to build and learn the different sectors of the market.  The are dozens and dozens of sectors that have three or four stocks that really define their market.  We show you how to follow them and create Watch Lists so that you will see where the money is flowing.

    All of the current trades you see or that have been profiled will only be available in the Members Area.

    We are expecting to launch by Monday but may do so over the weekend.  Remember, we may limit the number of subscribers if the dmand is over subscribed.