1:10pm (EST)
We are going o be long-winded this afternoon and hopefully we get a lot of questions answered. Folks, this is the “most excited” we have been in 2 years! How can we say that you ask after the Dow just lost 500 points on Thursday and is down another 120 after starting the day 170 points higher this morning? Because, these are the times that options will return you an enormous amount of money.
We know why investors panic and you may be one of them but the number one reason people get out of the market during these times and sell everything is because they are afraid of seeing their portfolio go to zero. Truth is, 90% of investors don’t know how to short stocks or buy put options. Most investors don’t understand you can use puts to “bet” on a stock price going lower.
It is the same as betting the over/under on sports games, or taking the “tri-factor” and points on a 3-play. Option trading is no different and you can play the downside and like we said yesterday, options offer the most powerful way to make money on the planet. Hands down.
We often get asked why our returns were so superior in 2008 and 2009 when compared to 2010. Long story short, the trades in 2008 and 2009 were happening when the market was making parabolic moves – much the same as it is now. Those of you who have been with us for years remember in 2008 when the Dow was falling 777 points in a day (one of our headlines back then) or the Lehman Brothers debacle, the AIG blowup, Merrill Lynch’s fall from grace, Bear Sterns and on. The action was to the downside.
In 2009, everything rebounded. Banks stocks were cheap, casino stocks were going for single-digit prices and Tech was a screaming buy. These sectors had a lot of action to the upside.
The year 2010 was a tough year to trade because the market was range bound but we still made a small profit for the portfolio. Aftet two years of whipsaw action, there needed to be consolidation.
We were up in 2010 early then down until August. In September of last year we went on a hell-of-a-run to get back into the green and had nearly an 80% win rate for our trades for the rest of the year. We told you a bull market was coming from September 2010 until April 2011. We called it, we wrote it, and we preached it.
On our 2008 and 2009 Track Records you will see option returns of 400% on Chipotle Mexican Grill put options, 308% on Citigroup, 1057% on Google calls, 491% on Massey Energy, 221% on IBM, 567% on Bank of America, 1150% on RIMM, 700% on Imclone call options, and 867% on AIG puts.
In 2010 our biggest recommendation was 525% return on Adobe put options but the trade was part as a strangle play. The call options lost 100%, but overall, the trade returned well over triple-digits. However, our main theme in 2010 was that we kept saying the market was choppy which is why we used calls and puts. Our goal in choppy markets is to stay even and wait for a clear trend or volatility. Towards the end of 2010 we got on a hot streak because we told you about the trend and the bull market that was coming.
As for 2011, we rode the winning streak into February and we called for a market pullback. We were off by a week but the market did hit fresh lows in March and our portfolio was slightly down. Our portfolio was up after we called for news highs in April or a test back to the top of the trading range. In May we called for a pullback, got it, and into July our portfolio was positive. We thought there would be a breakout at the top of the trading range by August but we can blame the knuckleheads in Washington for that not happening. However, we can also thank them for creating turmoil and chaos – and not creating jobs- and spending America into a hole that it may never get out of. And causing the global markets to get crushed as well.
Now, here is the important part.
What we are seeing now is reminiscent of 2008 and 2009 where the option profits are getting larger and are coming quicker. A normal holding time for us is 3 weeks to make 100% for option trades (on a 5% move in a stock) but sometimes you can make 300% in a day or 50% in hours.
As for 2011, with the portfolio near even, we feel Tony the Tiger GREAT because this is exactly where we want to be. You will see option trades that lose 100% in our portfolios over the years but there is a difference in losing 100% on a 50 cent option or one that is $1.35 or $2.00. We have those too but the goal is to also use lower priced options that return 400% or 500% which easily offsets the 100% losers once we get volatility or a trend change like we are currently seeing in the market.
If an option is at 50 cents and you buy 10 contracts, it will cost you $500. If the options expire worthless, you lose 100%. However, if you are at a poker table and you are playing with $10,000 then you have only lost 5% of your stack.
If you have $1,000 and buy 10 contracts of a 50 cent option and they expire worthless then you have lost 50% of your portfolio or stack. And we should mention option trading should only be done in a speculative portfolio. You should also have a “growth portfolio”, a gold portfolio, a real estate portfolio, and for some, a poker portfolio if that is your profession.
Also, if you have a 900% winning return (like we currently have) on some trades, you will have made up for eight 100% losers. So think of each trade as a “poker hand” and don’t go all in on every hand.
It’s how you manage your portfolios that matter and why we trade the markets every week. Sometimes things are good, choppy, people get nervous, rallies fade, bull markets turn into bear markets and vice-versa. However, chaos is where the option fortunes are made.
And that is the point we want to make. Overall, this market is setting up to return some powerful gains because of the volatility and like we said, there is no better time to trade than now. While we may get caught with a few open call options, we are using the current market volatility to get positioned for the next massive leg down OR to play a possible rebound.
We have already seen huge winners for our 2011 portfolio of 357% on RIMM, 296% on Freeport, and a host of triple-digit gems. But we also have 100% losers. It is how options work. And we also have 967% winners…
We also want to point out that we have averaged 7-out-of-10 wining recommendations over our 4-year history and most “professional” newsletters are lucky to average a 50% win ratio. Other option sites don’t offer track records and say they did this or that. We update you twice a day, admit our losers, hot dog on our winners, and tell you when things are choppy, where the market is going, and what could happen.
So, if this market scares you then start learning how to play the downside by buying put options. Learn how to play a bounce with call options. Research what stocks are going on sale right now and which ones could continue to get pounded. Make a wish list, we are.
Now, if you haven’t seen our past track records send us an email or sign up in the box on the right of the website and you will have our portfolio in 5 minutes. If you are a current subscriber, check the Members Area to look at the 2008-2010 portfolios. We offer auto-trading for those of you who cannot watch the markets all day long.
We have an exciting Weekly Wrap coming out this weekend because we get to do lots of homework which we love doing. For those of you who are already subscribers, thank you for your support. If you are not a subscriber to our Weekly Wrap, we will be sending out a special code today with an incredible deal to both our Daily publication and the Weekly Wrap. If you are a current subscriber, add it to you ongoing membership.
As far as the market today, the Dow rallied 170 points at the open, fell 240 points to a low of 11,139 and is currently up 100 points 11,484. The S&P is higher by 10 points to 1,210 after trading to a low of 1,168. The Nasdaq is at the breakeven line, down 2 points to 2,554. Even as we type the market is all over the map as it reacts to a bevy of headline news.
We will go over the charts with you on Monday but we can’t wait for next week to get started. If you like action, make sure you use our special deal and sign-up for a one-year membership. As you can see, the market is juicy right now. Time to go pick some low hanging fruit.
Subscribers, check the Members Area for the updates and we will be back Sunday night with the Weekly Wrap.
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