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Why it worked: How a recent options trade paid off

Davis MartinDavis Martin ·

Backdrop: The common myth is that options are too complicated and risky, but just this week there was a perfect example of how and why you need to know about options to grow your account.

On June 20, I sent a pre-market alert to buy SPY put options to open, following the trading rules I provide members with. This means that I was expecting SPY to drop that day.

It did, falling 075 percent.

The payoff: If you shorted SPY and caught that whole move, congratulations, you made less than one percent all day. You won, but it hardly feels like it.

Meanwhile, the options I alerted members to — SPY 6/30 244 Puts — opened at $1.02 and hit a high of $1.73. If you caught all of that move, you’d have a 69 percent return on investment. (Some of my SPY premarket trade alerts — which I do every single day — have profit potential of over 100 percent based on the high of day divided by the opening price.)

The moral of the story: No one catches the whole move every time, not even close. But you need to give yourself the opportunity to get a piece of big moves rather than small ones, and options make that possible.

If you ever want to make any real money, you need to know how to trade options. They’re less complicated and easier than you think (and I’ve even found them easy enough to trade from a smart phone).

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   Davis Martin is the publisher of DailyProfitMachine.com. He trades SPY calls and swing trades stocks and stock options. He did not trade the put option described in this article on June 20, but members of his service did. He last traded SPY options on Wednesday, 6/30 243 puts where he was in and out in a span of roughly five minutes, netting a 10 percent gain.

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