People want to start making money fast. The best strategy to use for that goal is trading options. When most people think of options they assume that there risky. Which in fact, they are for those who don’t trade them correctly.
Stock options are used to create leverage and control risk. The strategies I learned from my mentors are profitable and simple once you get the hang of them.
There are two types of options, calls and puts. There are also two things you can do with any option, either buy it or sell it. The most basic strategy for using options is called a covered call. The strategy is composed of two different positions.
If you were long underlying xyz which is trading at $15.00 you would sell a call option against it and collect money in your account for selling that option.
Buy 100 shares of xyz at $15.00 and sell 1 contract (which is equal to 100 shares of stock) of the 15 strike calls with 30 days until expiration and collect $1 per share or $100 total.
At expiration you make money if xyz is trading above $14.00. Yes, you can make money even when your stocks go down!
• If XYZ is above $15.00 you will sell your shares at $15.00 and keep the $100 you collected to sell the option in the beginning of the trade.
• If you buy a call option you have the right to buy a specific underlying for a certain amount of time at a specific price.
• If you sell a call option you are obligated to sell a specific underlying for a certain price within a certain amount of time.
• If you buy a put option you have the right to sell a specific underlying at a certain price for a certain amount of time.
• If you sell a put option you have the obligation to buy a specific underlying at a certain price for a certain amount of time.
If this is your first time learning about options I know it’s confusing. But trust me, trading options will allow you to start making money fast.
By selling options you can start making money fast by creating a consistent monthly income that you can duplicate over and over.
Making money in trading is all about giving yourself an edge. Through various option selling strategies you can do exactly that. 80% of options expire worthless! So who’s making most of the money? That’s right, option sellers.
There are so many ways to make extra money. Trading options is the one that can really change your life. There are so many situations you can put yourself in through trading options that give you a mathematical edge.
Most people think trading options is risky. The reason is most people lose money who trade options! 80% of options expire worthless. So, who’s making all of the money? The people who are buying those options or those who are selling them.
The reason people say that options are risky is because they don’t understand them. If they did they would have a much different opinion. Just ask a successful market maker what he or she thinks about options. Market makers that I follow know a lot of ways to make extra money.
They are going to tell a completely different story. Options reduce risk and maximize profits if traded correctly. In this page I will show you some of my favorite strategies that put me on the winning side. The side where I have the mathematical advantage.
Positive time decay means that every day that passes option premiums decay or erode. In other words if stock xyz is trading at $20 today and the $20 call is trading at $1.95 then a day later all other things being equal that option will be trading for less than $1.95 because there is less time for it to be worth something.
There are a few important parts to my overall trading plan.
1. Price and plan for entering
2. Choosing the correct strategy
3. Plan for exiting the trade
4. Position Size
All four of these pieces to the puzzle are very important. The one I will focus on now is choosing the correct strategy.
The following are my favorite defined risk option spreads.
• Iron Condors
When I was looking for ways to make extra money I began trading. The problem I had as a beginner with my trading was I learned all of these strategies and started trading them but I didn’t have a plan for exiting and managing the positions. That part is just as important as the actual strategy.
For example, one of the strategies I began trading to make extra money is called a bull put spread. The trade is made on a stock you think is going to go up. I would collect $2.00 on a $5.00 wide spread. Then I would simply put it on and let it on and let it go with no exit plan. I wanted to find ways to make extra money but I was losing $3.00 on my losing trades using this strategy with no plan.
Some of these would expire worthless and I would make the $2.00 but some would go against me and I would take the max loss. Now I learned how to manage those positions and make the $2.00 on my winners consistently and only lose $1.00 or less at most! Trades that take on too much risk compared to reward aren’t going to work over time.
Controlling risk is the most important part of trading. It’s essential to make good consistent gains but it’s more important to have very small losers compared to your potential gains on your winning trades.
The best advice I can give to beginning traders is the following points.
1. Find as many successful traders who have been around awhile and learn exactly how they trade.
2. Learn as much as you can about each of their trading styles because what one person does might not work for you and vice versa.
3. Learn strategies that make sense! If you’re going to buy options make sure they’re deep in the money.
4. Have a plan to get out and minimize risk. In other words, know what the worst case scenario is before you even enter the trade.
5. Make sure you can make enough on each trade to justify being in the position. In other words, if your think there is a 50% chance you will win a particular trade and you can make twice as much as you’re risking, than that makes sense!
6. Learn position sizing! Never ever risk more then 3-5% of your portfolio on any one trade. I never risk more than 2% and that is very rare. I usually risk.5% of my account per trade.
To sum it all up, there are many ways to make extra money. I believe trading is one of the best. It’s rare to find an opportunity that can have a plan behind it where are the scenarios both positive and negative are understood. If the good vs. bad scenarios make sense with that plan than that’s a plan that will work over time.
You can also start making money fast by buying options. The most important part of option buying is you have to have to know exactly which options to buy. You don’t want to buy the wrong options because you’ll lose all of your money!
We all want to make money fast. Luckily there are ways to do it it’s simply learning what they are and how to apply them. Many people say options are risky, which they are if you don’t understand them.
• If you understand options you can use them to reduce risk and maximize profit.
• If you like to trade directional or trend trade there is no better way to do that than options.
• Lastly if making huge explosive gains in your trading account interests you then you need to learn how to buy options correctly. It is the best way to make money fast.
For example, buying an option that has little chance of ever being worth money doesn’t make sense. The sad part is people do this all of the time because those options are relatively cheap.
There are two components of an option. They are the intrinsic value and extrinsic value. Let’s begin defining them both
• Stock xyz is trading at $60.00.
• The $50 call with 100 days until expiration is trading for $11.00
The intrinsic value of that option is $10.00 because the difference between the price of xyz and the strike price is $10.00.
The extrinsic value of that option or time premium is $1.00 because that is the extra premium paid for the option that has no real value.
This is a good option to buy because it is way ITM (in the money). You don’t want to buy options with a lot of extrinsic value. Those are the ones you want to sell.
If you bought this option you would begin to make money as the stock begins to rise because it has a high delta (rate of change of the option). This option would make money fast because it would move quickly in price with the stock.
Let’s look at another example to bring home the point of the kind of options you want to buy.
• Stock xyz is trading at $60.00
• The $60.00 call is with 45 days until expiration is trading for $3.00
The intrinsic value is $0.00. It has no real value because it’s OTM (out of the money)
The extrinsic value is $3.00. This is the type of option you want to sell because every day that passes that $3.00 time premium paid will decrease.
If you bought this $60.00 call you would need xyz to rally passed $63.00 at expiration to make money.
So, the strategy I recommend is to buy ITM (in the money) options with a delta of at least (.7) or higher and at least 60 days until expiration. Of course this must be accompanied with a sound trading plan to minimize risk by using stop losses and hedging techniques.
If you want to make money fast then this type of strategy should definitely part of your portfolio because it allows you to take a little risk and make large gains.
In any trade you need to have defined risk. The best way to accomplish this is by having a specific plan for your trades before you’re even in them. People who succeed in trading don’t allow their emotions to come into play.
If you have money in the markets whether you’re managing it or letting someone manage ask yourself this very important question. What is my overall risk and when do I plan to take my profits? If you don’t know the answer to that question please learn how rich people invest their money!
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.
1. I know what my max risk is
2. I have a plan for the entire trade
3. I have a 2-1 risk/reward ratio
4. 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.