Good morning,
If you buy a call option on a stock you’re EXPECTING a big directional move.
Most traders don’t know algorithms predict the EXPECTED move for every expiration.
Simply put, that option you’re buying, it’s priced efficiently.
If you are to win, you need to outperform pretty smart computers.
This is why 3 out of every 4 options held to expiration end up worthless.
Source: The Complete Guide to Option Selling by Cordier and Gross
Ever bought an option and watch it go to $0 by Friday?
Most traders get destroyed buying options and by most I mean nearly ALL!
I have a solution, but first, let me share a conversation from chat Friday.
On Thursday September 5 Tito bought 4 contracts of the CRWD $255 call options expiring Friday September 13 for $7.74.
This makes his breakeven stock price $262.74 ($255 + $7.74).
Since each option contract represents 100 shares of the stock his investment was $3,094.60.
Tito shared the trade with the chat room.
He asked the following:
Firstly, the gain/loss clearly shows he’s down -42.48% or -$1,314.60.
Nothing against Tito, but sadly I see this all too often, he’s trading options and doesn’t understand how they work.
I teach trading, hence this email to my readers.
So Tito sinks $3,094.60 into CRWD calls last Thursday September 5.
By the following Friday (yesterday) he’s lost -42.48% or -$1,314.60 and doesn’t understand why.
The simple answer, his breakeven is $255 + the cost of the options ($7.74) so he needed $262.74 just to keep his $3,094.60 investment.
Point of all this?
The algorithm I mentioned earlier, the one that predicts the expected move for stock prices, it’s not wrong often.
This is just one of many reasons most traders are never profitable.
Listen, I’ve learned the hard way i.e. blood, sweat, tears, and a LOT of losses BUYING OPTIONS.
I wouldn’t say the game is rigged, because there is definitely a time and place to buy options. But even if you know what you’re doing, it’s still hard to beat the algorithm.
This is one of the many reasons I focus on SELLING options to traders like Tito. Nothing personal against Tito, but if you’re going to win as a trader, you need to beat the guy or gal next to you. Now I want Tito to be successful because he’s a subscriber of mine. But he clearly hasn’t studied my lessons yet or he’d know all this. And after our group conversation in chat Friday, it sounds like he’s going to do that this weekend.
Remember the statistic I shared above?
3 out of every 4 options held to expiration end up worthless.
Source: The Complete Guide to Option Selling by Cordier and Gross
Who makes the money if BUYERS of options are losing so much?
The SELLER!
And you can SELL options with as little as $2,000 and defined risk.
Which is exactly what I teach in the $2,000 Small Account Journey.
Here’s this week’s trade alerts:
Results not typical. Trading is hard. Nothing is guaranteed.
That’s last week! The service only costs $1,497 yearly.
» ENTRY ALERTS
» EXIT ALERTS
Expect more lessons this weekend on this topic. It’s SOOOO important.
And listen, I do believe there’s a time and place to buy options but ONLY after you fully understand how to sell them first.
Bottom line, if we think the algorithm is wrong and there is going to be a big move in a stock, we definitely want to buy a call option but ALSO sell a put spread too.
Learn more about how I sell options in the $2,000 Small Account Journey.
Eat, sleep, and trade!
Jason Bond
P.S. — my best performance so far since I launched this service:
Results not typical. Trading is hard. Nothing is guaranteed.
I want to point out that I cannot speak for my members’ performance, as results may not be typical and trading is HARD. And I cannot guarantee you will make money. But what I can guarantee is that I will work my BUTT OFF to teach you WHY I trade WHAT I trade.
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