Start Making Money Fast Trading Options (part 3)
Credit Spreads
If you want free money making ideas that work you have come to the right place. I will give you my strategy and exactly how execute it for free. I learned this from many of my trading mentors who have become rich from it and many other things.
I love free money making ideas that is why I'm writing this particular page. The strategy isn't the important part. How I implement is the part that is most important. I will teach you both.
The strategy is an options spread trade called a vertical spread. Not new for anyone who has traded options before but for those of you who haven't I'll cover the strategy first then how I use it.
Here is an example of what I would do if I believed a stock was going to go down I would do the following.
• xyz is trading at $53.20
• sell xyz 55/60 vertical call spread for a $2.00 credit with 30 days until expiration
If I thought xyz was going to go up I would do the following
• sell the 50/45 put spread for a $2.00 credit with 30 days until expiration
Let's use example #2. The max profit on this vertical spread is $2.00. If you took no further action after placing the trade the max loss is $5.00 (width of the strikes) minus $2.00 (credit received) =$3.00.
But, I never take the max loss. The most I would risk on this trade would be half of the max profit, $1.00. If I couldn't get that ratio I wouldn't do the trade.
I would do this on a stock at support with a bullish candle candlestick pattern and place my stop order beneath support. The vertical spread I would sell would be beyond my stop loss.
The best part about this trade is positive theta. Meaning, all other things being equal, every single day that passes the vertical spread I sold is getting cheaper and cheaper because there is less time for it to end up ITM (in the money).
So, all I need is for xyz to not trade below my stop and my spread will expire worthless. That is the best case scenario.
The worst case scenario is I get stopped out. Less analyze both scenarios in detail.
With xyz trading at $53.20 my stop would probably be around $51.00. So if xyz never touches $51.00 I will win the trade. If your technical skills are descent this will happen a lot of the time for you.
If xyz which was trading at $53.20 when I put the trade on trades down to $51.00 I am going to get stopped out of the trade. My analysis was wrong on direction and I lost the trade right? Well, it depends.
If on the day that I put the trade on xyz trades down to $51.00 I will take the max loss of $1.00. But what happens if I get stopped out three days from now?
Remember every day that passes that option spread I sold is getting cheaper and cheaper all other things being equal.
Trading these free money making ideas it means that every day that passes your risk keeps decreasing. Depending on a few different factors what I have found is if I sell a vertical spread with 30 days until expiration like the above example, after about 15 days of being in the trade I will break even at worst if I get stopped out.
Meaning on the fifteenth day if xyz trades down to $51.00 the price of my vertical put spread will be the same as what it was 15 days ago with the stock trading at $53.20.
So why are these free money making ideas so good? Well, I make money if the stock goes up, I make money if the stock goes sideways, I make money if the stock goes down and stays above $51.00. The only way I lose money is if the stock trades down to $51.00 in the first 15 days. So I make money if I get stopped out after fifteen days. You mean I can be wrong and still make money? Yup that's trading for those of us who know how to use options.
Oh yea and all of those way's I make money with this scenario above three out of four of them have a risk reward ratio of 2-1. Meaning if I win I'll make twice as much as what I was risking if I got stopped out on the first day.
With these free money making ideas the fact that your risk decreases day after day as long as you're still in the trade is the most important part of this strategy. The best part about these free money making ideas is if you get stopped out on the 5th day you may only lose $0.70 on the spread.
As you can see with these free money making ideas the probabilities are in your favor. To make this strategy stick I'll outline the main point one more time.
• The only way you lose money is if you get stopped out in the first fifteen day's. The amount you lose depends on how many days pass before you get stopped out.
• If you don't get stopped out you win twice as much as what you would have lost if you got stopped out on the first day.
• Risk diminishes over time on a trade that you should win over 50% of the time with a 2-1 reward ratio.
Notice a these few important points in this strategy.
- I know what my max risk is
- I have a plan for the entire trade
- I have a 2-1 risk/reward ratio
- My risk diminishes every day because of positive time decay
I love free money making ideas that's why I wrote this page. I encourage you to learn this strategy because it works. The only other part you need to understand to implement this strategy is technical analysis. You need to find stocks that you can anticipate direction through various technical analysis strategies. Than simply make trades that follow your guidelines and rules.
Successful traders that are consistently making money fast no matter what direction the market is going all have one thing in common. They know how to control risk. They know how to cut losses short and let profits run.
Most importantly they will succeed in the future trading because they have a strategic trading plan that gives them an edge.
For example, If a trader is right 40% of the time but on his winning trades he makes twice as much as what he loses on his losing trades. Will this trader make money?
Let's say he's risking $200 per trade. Over the course of 100 trades he will lose 60 of them and win 40. He will make $16,000 on all of his winners and lose $12,000 on his losers for a net positive $4,000.
The purpose of this example is to introduce why a plan is so important. If you want to make money fast you first need to control risk. Once you learn strategies on when to enter and exit, which option or stock to buy, and how much to risk per trade, you can simply trade your plan which is bound to succeed over time because it has a mathematical edge!
In Conclusion, I hope this information helped you in understanding that options trading done correctly can be extremely profitable.
My Name is Michael T. Keenan. I have been studying all aspect of finance for many years. I specialize in learning how to duplicate money making strategies that already exist which has allowed me to make a lot of money much quicker than normal. I have met hundreds of various millionaires and studied thousands. I used their strategies and techniques to get rich.
I narrowed down all of the strategies used these millionaires to ten main strategies that I believed would be the easiest for me to duplicate and teach once I executed them. My studies have come a long way and it has allowed me to pursue two of my passions. I'm passionate about being wealthy and I'm even more passionate about teaching others how to get wealthy.
After executing several of the ten strategies I began to write a website which allowed me to share my resources and knowledge with others. This was my first step in following my second passion which is educating others. I love adding new knowledge that I've required along the way to my website so everyone reading my site can benefit from that knowledge.
I hope everyone interested in creating wealth and ultimately a better life for themselves and their families enjoys my articles and website. Visit my site below to learn more about the ten strategies I believe are the easiest money making strategies to duplicate in order to obtain massive wealth.
Would you like to start earning fast?
tinyurl dot com/2vnbsxzu (copy and paste this in a new tab and remove DOT with actual .)