Trend Trading Options
If you know how to spot a trend what would happen if you replaced stock with options to ride that trend?
Very large potential gains could happen.
But there are two different examples:
1. If you used the same amount of money you would need to purchase a stock: say $100,000. So you buy $100,000 in options. The stock rides a big trend for the next 3 or so months and your options go up 7 fold for a 700% return on your money. So now you would have close to $800,000. If you bought the stock and let’s say the 7 fold move was caused by a 30 point move in the stock, then your stock would be up 30% and your account value would be only $130,000 in comparison.
Of course money management, position sizing would be an issue here and you can’t buy the same amount of options as you would in stock unless that was an acceptable small fraction of your overall trading account size…
2. You could use a smaller sized position. Let’s say instead of putting in $100,000 you put in $10,000. And for a quick example let’s just say that $10,000 buys 10 contracts. Well if that 10 contract’s value goes up 7 fold you could make up to $70,000. That’s still a greater return than the $30,000 in the same example above.
And I show you this example to get a little taste of possibility. Of course there are many different variations that can be produced on the above example
I’ve had students, after they’ve become very good at trading trends, use such extremely aggressive positions as in example 1 above and score big. But I do not endorse such aggression in money management position sizing since it can very easily start to work against you – not a good long term success strategy.
Here are some of our options trend trading systems below. Warning! These are extremely powerful systems and are to be treated with the utmost seriousness. I’d hate to see you feel bad later on in life after learning these systems then ignoring them suffering regret from leaving potentially millions, and millions of dollars on the table… and I speak from experience.