Home // Options Trading // Trading Options: Earn a Living Trading Options – Video 1 Part 2

Trading Options: Earn a Living Trading Options – Video 1 Part 2



As I’ve mentioned, our margin is only $1,600.  I want you to take a look at this green linefor a secondbecause this green-line is our maximumprofit potential in this position.  If you look down here in the left handcorner of this picture, you notice that as I move the cursoraround, it gives you different numbers.

Right now, on Total, our position is generating about $20.  Actually this is a littlebit different than the monitor trade I show you up here.  We’re actually up about$51 but because they take into considerationthe bid and ask spreads, this might be a little bit lower thanwhat you just saw.  But it’s still $1,600 in March.  If you run your cursor over this green line, this is what happenswhen options expire.

Remember there are only two rules of the market.  One is prices will fluctuate.  Number two is all options expire.

Well when we put these positions on, theonly thing that we’re interested in ishaving these options expire within thisprofit range.  We have a fairly large range thatour prices can move in andthat’s what I mean bythe fact thatprices will fluctuate.  While prices can fluctuate upand they can fluctuate down, it doesn’t matter for our position.  All we have to do is be patient and waitand collect our money at the end of themonth whenthese options expire or just prior towhen the options expire.

Let’s take a look at thecursor.  Down in the left-hand corner you can see, even at this point, if prices were to move down significantly, we would still have a profit of $1,234 on this position at expiration, if prices move down.  Now we have a margin of $1,600.  What kind of a return on investment is that?  That’s close to an 80% return and may even be more.  If prices moved up, we might make even more money.  We have a maximum profit potential of $1,300 on this position.

If you look down here in the left handcorner, we’re looking at the date of expiration which is May 17, not the current date which is April 29.  We’re looking at May 17, which is the option expiration date.  We have a profit potential here of $1,327.27 at expiration.  That’s close to a 95% return.

Now you might be thinking well gee, Dave, that’s great; $1,600 margin and you’re making$1,300 or whatever.  Even if this landed someplace in the middle, you’re talking not less than a $1,000; anywhere from $1,100 up to$1,300 right in the middle.  So even if it went up or even if it went down, if it went way down here, well now your profit margins are a little bit lower but I can show you exactly what to do when you need to adjust those.  So, your profit potential isactually a fairly wide range here in prices so that you’re really taking advantage of the market’s fluctuations.

It doesn’t matter if the market goes up,it doesn’t matter if the market goes down, because you make money either way.  All you have to do is put these positions on three to four weeks before they expire and just sit back and just let them run and cash in a few days before expiration.  Let me tell you exactly what the actual potential of this is:  $1,600 margin, not much; maximum profit maybe around $1,300.  If you were to put let’s say double that,okay now you’re putting up $3,200 of margin; now your maximum profit potential is anywhere from $2,400 to $2,600 for only $3,200  in margin.

Let’s say you did ten times that.  I put $16,000 worth of margin up.  What’s my profit potential now?  My profit potential is $12,030 in this position at the one end and $13,375in this endand if it’s stuck right in the middle, it’s $10,335 in three weeksto four weeks.  And even that’s not a very large position.  It’s only ten times the margin so if you had $16,000 in margin, yourpotential profit at expiration is close to $11,000 to $12,000 in three weeks.

There’s lots of money to be made in this kind of trading.  This is the kind of trading thatthe professionals do.  They don’t care if the market goes up and they don’t care if the market goes down.  Either way they make money.  They pay attentionand respect the two biggest truths of the market:  that is that prices fluctuate and options expire.  That is exactly what we take advantage of with these kinds of trades.

So, with $1,600of margin and you can make about a $1,000 a month on this.  You tell me, is that a good return on your investment?  I think so.  You’re not going to get this kind of a return on your investment under any circumstances, under any other financial institution; only by doing this on your own.

This is the kind of system that I do.  All I do is look at it once a day.  I put on my trades 30 to 40days; you know three weeks to four weeks,before expiration of the options.  All I do is sit back and monitor them on adaily basis and then collect the money at the end of the expiration period.  That’s all I do.

And you know what,if you only have a couple thousand dollars of margin, look at the profits of $1,200 to $1,300 and, atthe very worst, maybe a $1,000 and the market can move up or down and it doesn’tmatter.  $1,000 a month is only going to cost you $1,600.  You get that $1,600 back in margin plus you make a $1,000.  So, I don’t see a situation in which you’re not going to get a huge return on your investment.

Nowdoes this always work?  I’m going to say that many strange things can happen in the market, there’s no doubtabout it.  Prices can fluctuate wildly and in those cases then you’re not going to be able to say well maybe we’re not going to have a profit; however, I’m not going to guarantee that you’re always going to have a profit.  What I am going to guarantee is that I’m going to show you everything that you need in order to create an environment where it doesn’t matter.  Even at one point,the market ran way against me and I had one position that was almost in a losing position and, guess what, most traders would probably just close out that position.  I turned it into a profit.

There are lots of situations that, if you know what you’re doing,you can really turn a losing situation into a profitable situation.  This is where the majority of traders in options just go wrong because theydo these one-dimensional trades.  They put on either a spread, they just let it go,they don’t know how to adjust,they don’t know how to manage their position by thenumbers, and they’re not treating their investments as a business. You know every business has maybe amonth out of the year and the other 11 months may be profitable if they’re running their business the right way you’re going to make a profit at the end of the year.

If you listen to the videos and I show you exactly how I do my trades and exactly how you can do your trades, too, then you’re going to have the knowledgeto trade with confidence.  That’s what this is all aboutbecause it doesn’t matter if the marketgoes up or down or even if it runs against yourposition, you’re going to have the knowledgeof what you need to doin order to turn that position around and make it profitable.

So, I wish you the best always.  This is the real deal.  This is how professional traders actually trade positions in large quantities.  This is how market makers who know what they’re doing and floor traders who know what they’re doingrun their investment business.

This is, in fact,probably one of the most secret and really hiddensystems.  You might know how to trade calls and puts, butputting them together into an investment portfolio, into a business situation where we are only managing by the numbers,is extremely rare.


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