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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

Option trading is one of the greatest games on earth! You can be a two-dollar investor, betting on the action of stocks, the markets, futures and/or commodities, or you can be the casino taking the bets instead of making the bets. You pick the role and have the fun and profit. Options are an excellent investment tool that gives you more flexibility, reduces your risks and increases your profits. Ive been trading options since the first option exchanged opened in 1973 and have seen everything. As an options newsletter writer Ive monitored and talked to hundreds of traders. Today, youre going to have the benefit of all this experience and information. This special report provides important nuggets of knowledge that have worked for me and my Maximum Options subscribers letting us capture profits on 80% of our trades. By incorporating these tired-and-true winning strategies to your trading youre going to become a much more profitable trader. In addition to my favorite 20 options trading secrets I will share with you a hot-off-the-press trading opportunity to get you started.

Secrets Revealed In This Report

1: The Advantages of Options Trading 2: The Simple Science of Options 3: Beware of Lady Luck 4: Get the Biggest Bang for Your Buck 5: Cheap is Not Always Cheap! 6: Swing for the Fences 7: Scaling Out Of a Position to Preserve Profits 8: Why Stop-loss Levels Are Critical 9: Beat the Clock 10: Beware Of Delusions of Grandeur 11: Dont Plunge! 12: Diversify 13: The Put Advantage 14: The Quick and the Dead 15: Slippage: The Hidden Cost of Trading 16: How to Get the Best Price 17: Know When to Fold Them! 18: Thars Gold in Them Thar Hills 19: Rules of the Road for Options Buying 20: Z-Trades: The Spread Advantage A Final Word to the Wise Free Trade

The Path to Profits is Paved with Options

Options is the buzzword on many investors lips because the potential leverage you can wield and the eye-popping returns you can generate are hard to ignore. Once considered a professional traders game, options trading has entered the radar of many an individual investor. But many people decide to stay away from options because they seem too difficult to master. Because of this, they lose out on their dream cars, vacations, new iGadgets and other things on their wish lists. Dont let this fear get in your way of fulfilling your dreams. I want you to meet and even surpass your financial goals. And Im going to help you do just that by helping you become a more savvy, successful options trader. Ive been doing this for as long as the options markets have been open. And Ive developed consistently successful strategies for selecting top-notch trading opportunities for my subscribers throughout the years. Since 2008 Maximum Options subscribers have had over 400 winning trades and have captured 100% gains on almost half of them. The most important thing Ive found is to keep things simple.
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

You have a tremendous opportunity to profit like a full-time trader while only focusing on your trading account part-time. Options give you that freedom. And as for that vacation home, tropical getaway or even that early retirement that you always thought was a great idea but not a possibility? Get prepared to make it a reality, because plenty of options traders have done just that! In Maximum Options, I give my members the type of trading opportunities that will enable you to make professional-grade investments without the need to spend hedge-fund-sized dollars to establish your positions. There is a seemingly endless bounty of stocks, indices and Exchange-Traded Funds that have options available for trading, and more become available for trading practically every week. When a few million contracts are changing hands every single day, its no small feat to sift through seemingly endless layers of rock to find the rare but glorious golden nuggets. Theyre out there and Im finding them every day. And I share them with my Maximum Options subscribers and today youre going to get a peek behind the curtain. To get into the best trades, I have a strict list of criteria when searching for the ideal trade. Im looking only for those that pack a tremendous potential punch I have no use for trades that might only make a 5% or 10% move. That kind of action might satisfy stock investors, but with options you are looking for the home runs. If the potential for a triple-digit return (100%-plus) doesnt exist, move on to find those that can provide you the kind of profits you want to see. How do I achieve institutional-sized returns without making a king-sized investment? Its simple, really. Any option that makes it onto my radar must be:

About the Adviser

Ken Trester started trading options when the first exchanges opened in 1973. As the nations foremost professional options trader, he isnt just an options educator. He also actively trades his own account. Ken has been a computer science professor at Golden West College in Huntington Beach, Calif., where he also taught a popular course on stock options trading. Ken is also widely quoted in publications such as Technical Analysis of Stocks & Commodities and Barrons. He has an MBA and has worked as a stock broker and an investment manager. His options success secret is startlingly simple. Its a strategy basic to all investing. Ken only recommends low-cost, underpriced options. In other words, he buys low and sells high. Its a simple theory, but one thats hard to put to work unless you have a math genius and computer whiz like him on your side. The trick is knowing how to find and buy underpriced options. Ken does this by using his computerized modeling system (based on three decades of real time, real life trading) that tells Ken, and you, which options are underpriced. To get in on the next trade click here.

Inexpensive (i.e., trading below $1, preferably well-below that level). Undervalued (i.e., their potential hasnt yet been priced into them). Thats only part of the story, but its my passion and my lifes work finding high-potential plays that can turn a 50-cent investment into a 500% winner in the space of a few weeks to a couple of months. When you begin trading options or trading them right if you got off to a bumpy start it can seem like being taught to swim by jumping into the deep end of the pool and fighting toward daylight. But once you get a few wins under your belt, your confidence grows and the rush that comes with turning a profit will become nothing short of addictive. Ill be happy to help you start scoring those home runs on a regular basis! Thats my deal with my Maximum Options members I am continually mining for those seemingly elusive yet ever-present bargains in the options markets, and your job is to play them and profit from them. Now if that doesnt sound like a fair trade, then I dont know what else could!

Bang for Your Buck into a Profit Explosion

Approximately 4% of all transactions that take place in an average day in the markets are options trades. Think about that for a moment with billions of shares changing hands every single day, options trading is still a relatively untapped resource for those who are looking to grow their personal net worth.

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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

Options trading has existed for a few decades, but it is in recent years that trading volume has exploded. More than 30 years ago, volume for an entire year was a mere 32 million contracts. In 2011 alone, 4.6 billion options contracts traded on the U.S. options exchanges. According to the Options Industry Council, this is a 200% bump above the 1.5 billion that traded in 2005. Weve come a long way, havent we? Despite these huge numbers, youre still among a small but growing group of savvy investors who know that theres a cheaper, easier and more-explosive way to make profits in the markets by trading options. And as a part of that 4%, youre practically a pioneer along this exciting path. Id personally like to welcome you to this sure-to-be-amazing endeavor! No doubt youve either made a few trades by now or you know someone who has tried their hand at trading options. And perhaps those trades might not have turned out very successfully, as there are a lot of rookie mistakes that beginning traders make. If you did try your hands at some options trades that didnt bring you the returns you were dreaming of, dont let go of that dream just yet. Just because things dont go asplanned the first time around, that doesnt mean this type of trading isnt for you. Dont let one negative experience or some second- or third-hand information keep you away from trying your hand at a style of investing that can mean the difference between you remaining in the workforce till you drop or whether you retire early to the remote island, foreign country or life of leisure that youve always dreamed about! You know that theres got to be a right way to do it there are people making money with options every single trading day, no matter how the broader markets are trading, including my Maximum Options members, and there is no reason why you shouldnt be profiting right alongside them. I cant express enough how incredible options are as a vehicle for playing the markets safely and inexpensively. Dont be dissuaded by those who tell you that options are risky perhaps the biggest risk you can take in the options markets is by not participating in them at all!

A Little Goes a Long Way

The lure of trading options is simple: You can pay merely pennies on the dollar to enter a great deal of your options trades, which means that you can control stocks that you might not otherwise want to buy outright (think Google and Apple) for practically pocket change in comparison. Options can cost anywhere from a few cents to more than your average stock price, depending on how high the shares are trading. I like to place my bets on options that are trading well below $1 a piece or $100 per contract (as one contract represents 100 shares of the underlying stock). If a 50-cent option trades up to $3.50, then you can make an easy 600% return on your investment. But if the trade doesnt go in my favor, the most I can lose on the trade is 50 cents per share. As a traditional stock investor, I have no doubt that youre looking at the charts of the companies you want to invest in (and those you already hold), and thats what helps you to make your decision whether to buy or sell. But did you know that you can trade options as a way of getting into a long stock position? Or that you can use options to protect a position you already own? Or even that you can use them as a way of protecting your entire portfolio? There are a lot of reasons why options should play into your overall investing strategy. You dont have to own the underlying stock to enter an options trade. You can buy calls or puts and secure the right, but not the obligation, to touch the stock. Its possible to write (or, sell to open) options as well, but if you really want to be short but with less risk, youre oftentimes better off buying a put option instead. Best of all, options have a limited shelf life that is, they come with an expiration date. But that doesnt mean you have to hold them until the end of that contract you can take profits at any time or close the trade if it looks like it isnt going to go in your favor. Trading options is all about having choices.
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

More Opportunities Than You Dreamed Possible

The potential of making double-, triple-, even quadruple-digit returns is the No. 1 reason why both professional and individual traders are drawn to the options markets. Just like any new skill that you want to acquire, it takes a whole lot of discipline, little bit of experience and a true desire to know what it feels like to win, because once you become accustomed to the rush that comes with hitting home runs, its a feeling you want to recreate as often as you can! Thats the beauty of the options markets theres room enough for everyone to join the options trading game and share in the profits. There are thousands upon thousands of options contracts available for trading at any given time in a variety of equities, indices and ETFs. So, not only can you make plays in specific companies, but you can also make trades that represent entire industries, just by buying one option that gives you exposure to several companies in a single sector! Although most brokers are familiar with options and offering options trading platforms, you are the best advocate for your account. It helps you to be able to talk the talk before you walk the proverbial walk down the path to the profits you are on the cusp of unlocking by reading this report. Ive been trading options for as long as theyve been around. I took my hard knocks as a beginner, just like you might be experiencing right now. But, Ive got almost 30 years of spectacular gains under my belt, and I look forward to continuing my winning streak for a long time to come. Even better, I am thrilled to be able to get you started along yours! The following 20 tips are my secrets to longevity in the options trading game. Now, just as a reminder, later on in this report Ill be giving you a free trade. I also want to invite you to join me at Maximum Options where Im with my subscribers every step of the way providing them with a consistent flow of profitable trades. These tips are part of my ingredients to trading success. And thanks to the hard knocks I took and the great lessons Ive learned along the way, Im still in this game and plan to be for a VERY long time to come. And I hope you will be, too! Read on and Ill show you how to begin! 1 |2 |3 |4 |5

I nves torP lac e M edia, L L C . A ll rights res erved. 7 0 0 I ndian Springs D rive L anc as ter, P A 1 7 6 0 1 8 0 0 -3 0 4 -1 7 2 9 For more information vis it us at www.inves torplac e.c om P rivac y/Sec urity

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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

Secret No. 1: The Advantages of Options Trading

Options trading has been considered by many to be speculative and dangerous, while stock investing, in comparison, is viewed as conservative and safe. Despite these views, the 2008 financial crisis caused even reliable stocks to take a nosedive, and some have still not fully recovered to their pre-2008 prices. Here lie the secret advantages of trading options: Leverage with Less Risk By owning options instead of stocks during such turbulent times, you could have greatly limited your losses. The big advantage of options is outstanding leverage, but and here is the key with limited risk. You can only lose what you pay for the options, which can be a small amount. Instead of outright owning tech stocks that could also come with dramatic downside risk, you could receive the same kind of leverage by using options strategies yet only risk up to 10% of your portfolio in the process.

Secrets Revealed In This Report

1: The Advantages of Options Trading 2: The Simple Science of Options 3: Beware of Lady Luck 4: Get the Biggest Bang for Your Buck 5: Cheap is Not Always Cheap! 6: Swing for the Fences 7: Scaling Out Of a Position to Preserve Profits 8: Why Stop-loss Levels Are Critical 9: Beat the Clock 10: Beware Of Delusions of Grandeur 11: Dont Plunge! 12: Diversify 13: The Put Advantage 14: The Quick and the Dead 15: Slippage: The Hidden Cost of Trading 16: How to Get the Best Price 17: Know When to Fold Them! 18: Thars Gold in Them Thar Hills 19: Rules of the Road for Options Buying 20: Z-Trades: The Spread Advantage A Final Word to the Wise

Keep in mind that you should only risk as much as you are Free Trade able to lose. Granted, youre in the options trading game to make the spectacular percentage returns that traditional stock investing doesnt provide, but it makes sense to do a reality check and only allot what you are comfortable letting ride in the options markets. Insurance on Your Financial Assets The advantages of options trading dont stop here. Options enable you to buy an insurance policy on your stock portfolio that is not available from any traditional insurance company. You wouldnt buy a house or a car without protecting yourself in case of emergency you should approach your financial assets the same way as your tangible ones! With options, you can design investment strategies that will profit regardless of the markets movement. Besides, you can craft these strategies with extremely attractive risk/reward pictures. The opportunity for spectacular gains of over 100% are relatively easy to attain for options speculators. At Maximum Options subscribers have locked in over 247 trades that have give them 100% profits or better including a whopping 408% from one of our Merrill Lynch trades.
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

There was even opportunity for success in the financial meltdown of 2008. It wasnt a good year by any means, but options gave a chance for upside at a time when it didnt exist anywhere else. For example, in September 2008, I bought put options on Boeing (BA) for $1.70. Well, the stock tanked, as so many others did, and we sold those puts for $4.60 a few weeks later for a 170.58% gain. Obviously, there have been many more winners, like 146% in Cirrus Logic (CRUS) Calls, 125% in Amgen (AMGN) Calls, 114% in Unitedhealth Group (UNH) Calls, 145% in Dish Network (DISH) Calls to name just a few of the 422 winning trades. These are gains my Maximum Options members all realized which helped them make money with options and grow their portfolio. But the fact that we have made money in a very difficult environment shows you that options are an extremely valuable risk-reduction, profit-maximizing tool, and investors of all stripes regardless of experience level and risk tolerance can use them.

Secret No. 2: The Simple Science of Options

Options are an excellent tool to have in your trading arsenal, as they give you more flexibility, reduce your risks and increase your income in the markets. A big advantage of options is that you can use them to profit in up and down markets all at a fraction of what it would cost you to purchase the stock. Lets take a look at a few real examples of how much less money you risk using options compared to buying the stock while allowing yourself the opportunity to capture larger gains. The first trade is Anheuser Busch. Anheuser Busch Date Bought Purchase Price Invested Amount # of Shares Controlled Date Sold Sold Price Profit Stock July 13 $77.47 $38,735.00 500 July 27 $81.08 5.58% Options July 13 $1.10 $550.00 500 July 27 $1.89 77.81%

As you can see on the chart above using options instead of buying the underlying stock not only gave you a larger profit (77% vs. 5%) but you had less of your money at risk ($550 vs. $38,735). Lets take a look at another example in the Target trade we did at Maximum Options. Target Date Bought Purchase Price Invested Amount # of Shares Controlled Date Sold Sold Price Profit Stock July 24 $60.20 $30,100.00 500 August 3 $62.00 2.99% Options July 24 $0.90 $450.00 500 August 3 $1.60 77.77%

Again, you can see that by using options you are able to invest a smaller percentage of your money while capturing a larger profit. Theres no reason to tie up $30,100 to buy 500 shares of Target when an investment of only $450 would control the same number of shares while offering you much larger returns. And thats the simple science of options.
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

Secret No. 3: Beware of Lady Luck

Most investors seem to invest by the proverbial seat of their pants. And when they are successful, they believe they have the power to predict the markets. But in many cases, their success is simply a matter of pure luck. As you probably know, luck runs in streaks, while being prepared and having a game plan is a more reliable approach to long-term success. When you buy options, your odds of winning on any play are lower than most people think. My track record in the 80s showed two years with an overall percentage return of more than 1,500%, but only 20% of the positions were profitable ones. Your probability of winning with options will always be less than 50% in a random market. Furthermore, with out-of-the-money options (i.e., when the strike price is above the market value for a call, or below the market value for a put), that percentage can drop dramatically. Its important to understand your odds of winning. Millions of people buy lottery tickets, yet their chances of winning the big prizes are so remote that they have the same chance of winning whether they play or dont play. State lotteries are actually a voluntary tax system knowingly or not, people who play are making tax payment to their state. In Nevadas casinos, there is an ancient game of Keno where 20 numbers are picked from one to 80. Fifteen-point Keno, where you try to pick 15 out of 20 numbers, pays $100,000 for a $1 ticket. What are your odds of winning? Your true odds are over 430 billion-to-1. Of course, no one has ever hit the 15-spot Keno and they never will but thousands of gamblers keep trying. We always measure your odds of winning when we make a trade recommendation. However, even if you know your odds of profiting, Lady Luck will try to trick you, for in the world of probabilities, there are winning streaks and losing streaks. Here is an example: During the 2012 summer Olympics, in one basketball game, Carmelo Anthony hit 10 out of 12 three-point shots. Now, an NBA player should hit a three-point shot about 35%-40% of the time, so even if your odds of winning approach 50%, you still can have long losing streaks. Its the same with options trading even if you are doing everything right, you could still encounter a long losing streak because a stock you are bearish on can be unexpectedly lifted by good headlines, or a stock you are bullish on might drop because the broader market is plummeting. Such streaks discourage the novice option trader. Many quit or change their system and start making the wrong moves, which extends their losing streaks. We see this behavior frequently with baseball players. When they go into a slump, they change their style of hitting and slip into a greater decline. Lady Luck has a tendency to make us look very brilliant or very stupid. Consequently, as you trade options, beware of her allure. Be prepared to encounter the occasional losing streak by sticking to your game plan and not getting discouraged at a temporary rough patch. Its not luck, but instead solid strategy, that will ensure that you get back on track. Of course, taking losses in stride is difficult and poses a major obstacle. If you cant handle loss, then you might want to consider whether trading options is the best strategy for you. But if staying disciplined in order to turn a consistent profit is a challenge youre ready to handle, beware of Lady Luck and dont let her trick you into making the wrong move!

Secret No. 4: Get the Biggest Bang for Your Buck

Buying options is the best way to start trading options. The big advantage that you have is that you cant lose
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

more than you paid for the option. This is not true of some other option strategies, such as option writing. When you sell to open a position without owning the underlying stock or owning a corresponding option to serve as a stock surrogate in case the trade turns against you (known as a spread strategy, which limits your losses but also the upside if the trade goes in your favor), your losses can be substantial. The major error made by option buyers and the reason they might incur big losses is that they pay too much for their options. In fact, many option authorities recommend buying in-the-money options where the stock price is trading above the options strike price. The problem with these options is that they come with high price tags, usually several hundred dollars to a thousand dollars per contract, sometimes more. There is a place for this type of investment strategy, but when youre aiming for high profits, you need a different strategy. In addition, when paying a high price for an option, theres a lot at risk one wrong move of the underlying stock and most of your option premium could vanish. However, if you pay very little for an option and the stock moves the wrong way, you wont lose much. Also, the higher the options price, the smaller its chance of yielding a big-percentage gain. Cheaper options give you a bigger bang for your buck. With cheap options, percentage gains of more than 100% are not unreasonable to expect or even unusual to achieve. You can buy options for as little as $5 per contract the cost of a cup of coffee in the morning which effectively means that youre controlling the underlying stock for just 5 cents a share. In my trading I set a guideline to avoid paying more than $200 for any option contract. That way, I know that I have a chance for a big-percentage gain, and I am getting the biggest bang for my buck. Remember, you can buy as many or as few contracts as you like, so if you buy 10 contracts, your investment would be $2,000. Thats the most you can lose, but if the stock moves in the right direction, you can easily get double or triple that amount in profits. To see this in action lets look at two examples we did at Maximum Options. We got into Cirrus Logic for $1.30 and in three weeks closed the trade for $3.20 giving us a quick 146% profit. Dish Network was a trade we got into at $1.10 and in three weeks closed the trade at $2.70 letting us walk away with 145% profit. Those kind of numbers make that tropical escape youve been wishing for seem a lot more obtainable, dont they? Get into our next trade, click here.

Secret No. 5: Cheap is Not Always Cheap!

Cheap options are easily found. Just look in financial publications or on your brokers Web site, and you can uncover thousands of options priced below $1. However, to be successful, you must buy options that are not only inexpensive, but also those that are bargains in a word, youre looking for underpriced options whose true value isnt yet reflected in the price. There are many factors that go into determining the value of an option the price of the stock, the historic impact of volatility (i.e., how the stock typically trades around regular events like earnings announcements), and dividends and interest, if applicable. After all, options are created, and their available strike prices are set, around the current value of the underlying stock. Keep in mind that theres a difference between undervalued options and simply inexpensive ones, as the vast majority of cheap options are overpriced or really worthless. You want to look for those stocks that are poised to make a significant move and whose options have yet to reflect that potential. Theres no sense in buying options only because theyre cheap if they dont have the potential to move inthe-money by expiration, youre better off not spending your money on the trade. A call option might only cost you 40 cents per share ($40 per contract), but if the stock is going down, that $40 would have been better applied to a put option instead. You want to look toward options that are close-to-the-money, for example those with a strike price of $20 if the stock is trading at $18, because the option can realistically become profitable. If you decide to go with a
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

$25 strike price, it would take a dramatic move for the stock to go up seven points during the life of the option. Such a long shot is always possible, of course, but the likelihood of that trade working out in your favor is very low. I spend a lot of time trying to identify bargain options. When finding such deals, the ability to predict what the underlying stock will do is not as important because the risk/reward picture will be so attractive that even if you are right only 30% of the time you will be a winner. For example, remember when I was talking about my track record in the 1980s and it showed a 1,500% return during two years, but only 20% of the options paid off during those years.

Our objective is to identify options that are both cheap and underpriced or bargain-priced. While were looking to profit as often and as much as possible, its the eye-popping winners that help to offset the sting from the trades that dont work out as planned, so we want to ensure that were going after the home runs and not sitting on the sidelines when those spectacular plays present themselves!

Secret No. 6: Swing for the Fences

There is an old adage on Wall Street: Never be afraid to take a profit. But this adage does not always apply with options. As an options buyer, your major goal should be to hit a home run. You cant afford to nickel-and-dime your way to profits. When you see an option start to become profitable, theres always that pressure to want to quit while youre ahead, even if youve only posted a 15% or 20% gain on paper. But if you close the trade too soon, you could miss out on tremendous upside. We want you to be patient when a trade starts working in your favor because it could still have much more work to do before its done! Too many of your options will expire or lose most of their value, and the meager nickel-and dime returns will not be able to offset those losses. When you get some nice home runs under your belt, you can afford for some of your other trades to not work out. Home runs are best defined as options that return 100% or more. Cheaper options provide the opportunity to hit home runs. One of my favorite trade example is our NYSE Euronext (NYX) Calls where we captured 492% profits in less than three weeks. I recommended the NYX Calls at 60 cents or less when NYX was trading around $30. As you may know, a call option is a bullish bet, so I recommended these options with the expectation that the stock price would rise to my $34 target during the life of the contract. A price of 60 cents means it cost $60 per options contract, so I could control 100 shares of NYX for the cost of a dinner out. Why did I select this position? Because, according to the rigorous analysis that I use in selecting all of my option trade recommendations, it showed a theoretical value that was much higher than 60 cents, or $60 per contract. In other words, it was undervalued at the time I discovered it it was a true bargain. When the market began to ramp up from first-quarter trading, NYX surged five points to nearly $36 in just a few weeks time. As a result, that $60 investment turned into $355 per contract. Most of my Maximum Options traders open somewhere in the range of 10 contracts, so if turning $600 into $3,550 in less than a month sounds good to you, join us for our next trade. Of course, a string of 100%-plus gainers has the same effect. These put trades were all closed in one week! 177% gains in Shuffle Master (SHFL) 152% gains Schlumberger (SLB)
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

233% in Silicon Laboratories (SLAB) Then, just to show you how volatility really is an options traders friend, about a week or so later, we banked two big winners on the bullish side with 146% in Cirrus Logic (CRUS) Calls and 125% in Amgen (AMGN) Calls. Thats the magic of home runs. Just one or two can pay for a lot of strikeouts. However, hitting the home runs requires tremendous patience and good trading tactics. But, by putting these trading tips into action youre already ahead of the curve.

Secret No. 7: Scaling Out Of a Position to Preserve Profits

Your goal is to hit home runs to offset and get above any losses you may encounter. And to hit the home runs, you must let part of your position ride, aiming for greater gains. However, that is not to say that when your options show a profit, you shouldnt take some money off the table. Many traders take profits on half of any position when their option doubles in price, and then let the rest ride in case there is more upside to be experienced. If you bought 10 contracts, you can cash in five and see where the rest can lead you.

Money That's What You Want!

Take profits on half of any position when your option doubles in price, and let the rest ride!

This way, you have preserved your original investment and some profits while leaving some money on the table if the stock continues to go in the direction you thought it would. And if the stock turns against you, any loss you would incur is minimal, because it would only impact the remaining half of your trade. This way, youve enjoyed a big win and a small loss, which means youre playing the game smartly and youve preserved your capital so you can keep on trading! 1 |2 |3 |4 |5

I nves torP lac e M edia, L L C . A ll rights res erved. 7 0 0 I ndian Springs D rive L anc as ter, P A 1 7 6 0 1 8 0 0 -3 0 4 -1 7 2 9 For more information vis it us at www.inves torplac e.c om P rivac y/Sec urity

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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

Secret No. 8: Why Stop-loss Levels Are Critical

An option buyers major sin is to let a big profit slip away. Swinging for the fences and going for the home runs is only half the battle, because those well-executed positions should become profitable. Your next step is to protect the paper profits already in your position, which is a difficult task. Therefore, developing appropriate stop-loss levels are critical. As we discussed in Secret No. 7, scaling out of a position as it moves in your direction is a wise tactic. Here, you also need a trigger finger ready to capture the rest of your profits when you see signs of a reversal on the horizon. Although you can set a stop-loss order with your broker to be triggered when an option hits a certain price, you can keep track of the trade and set psychological sell stops based on how the stock is trading. That way, you wont be taken out of the options trade unexpectedly; you can exert more control by watching the stock closely and revising your trading strategy frequently. Once you have a good paper profit, always determine a trailing stop for the underlying stock. That is, a level just below the current market price. A 3% stop-loss is a good rule of thumb. In other words, if the underlying stocks price is $50, set a stoploss of $47.50. If the stock price hits $47.50, take profits on the rest of your position. Sometimes a tighter stop-loss may be appropriate.

Secrets Revealed In This Report

1: The Advantages of Options Trading 2: The Simple Science of Options 3: Beware of Lady Luck 4: Get the Biggest Bang for Your Buck 5: Cheap is Not Always Cheap! 6: Swing for the Fences 7: Scaling Out Of a Position to Preserve Profits 8: Why Stop-loss Levels Are Critical 9: Beat the Clock 10: Beware Of Delusions of Grandeur 11: Dont Plunge! 12: Diversify 13: The Put Advantage 14: The Quick and the Dead 15: Slippage: The Hidden Cost of Trading 16: How to Get the Best Price 17: Know When to Fold Them! 18: Thars Gold in Them Thar Hills 19: Rules of the Road for Options Buying 20: Z-Trades: The Spread Advantage A Final Word to the Wise Free Trade

To protect options profits, set a 3% to 5% trailing stop on the underlying stock.

The trailing stop is tremendously effective when the trade is moving in your favor as well. If the stock trades up to $50 and keeps on going, ratchet up your stops accordingly, keeping them 3% to 5% away from the present stock price. That way, if the stock trades down from that higher level, you will have plenty of time to close the position and keep most of your profits intact. However, even if the stop is not hit, you may still exit a position if you think the underlying stock is flattening out or when you believe it has hit some overhead resistance (for call option position) or underlying support (for put positions). Thats the beauty of options trading you always have options!
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

I cant emphasize enough how important quick action is when things start turning against you. With options, due to their limited lifespan, you are usually only given one chance to get out. In my Maximum Options trading service every trade sent out has complete instructions on exactly when to get in and out of each trade. To get complete instructions on our next trade and the details you need to begin making money, click here.

Secret No. 9: Beat the Clock

For option buyers, time is your greatest enemy. Given enough time, most stocks will make a major move, giving you the opportunity to score a home run. If you can find an undervalued option with a lot of time left until expiration, you have the perfect storm that can turn into a terrific investment. Remember, cheap, long-term options, where the strike price is in range of the underlying stock price, are true gems. The point to remember here is to buy enough time for the option to work in your favor, because time flies. Options depreciate as time passes, especially in the six month period preceding expiration when they lose their value even more quickly. So, it bears repeating: Buy enough time! Also, always set a time limit on how long you will hold an option. If nothing happens within that time period, exit the position and rotate your investment capital to where it will perform better for you.

Time Flies with Options

Set time limits on how long you will hold an options. Exit if there is no movement. With expensive options, a threeweek limit generally works well.

One of the rules I trade by in my personal trading as well as in Maximum Options is to set a three-week holding period. After three weeks, I recommend exiting that position because the factors that made the option a good investment might have changed. Never be stuck with a position if it isnt working out in your favor, it can be easily replaced!

Secret No. 10: Beware of Delusions of Grandeur

Most option buyers have totally unrealistic expectations. A tremendous amount of hype exists about how much you can make by buying options. Many option experts promise 100% and even 1,000% returns each year. Unfortunately, most options investors lose and get discouraged very quickly when reality punctures their dream of instant riches. As weve discussed, those types of returns are possible, and thats why were all in this game to not only win, but to win big. But if someone promises those types of return with every trade, the best advice I can give you is to run as fast as you can in the opposite direction from them! Options buying can be a tough game because it sometimes requires tremendous patience. I have been writing option advisory newsletters since 1983, and in many years, we showed extremely high returns. However, those returns are theoretical returns, which are hard to convert to real returns. That is, while there may be gains on paper, its important to close the trades in enough time to capture your profits and/or limit your losses so that your average gains for the year are in the positive numbers. The problem with unrealistic expectations is that, by trying to attain extremely high returns, investors make the wrong plays and take far more risks than they should. Also, they are unable to handle losing streaks that they are certain to face if they take unnecessary risks and dont establish solid selling discipline. When I give my Maximum Options members a trading recommendation, Ill keep an eye on its performance and let the subscribers know when its time to close the trade. Its important to not get emotionally attached to a trade, whether its to keep it open past its prime in the hopes that it will go up even more (if possible) or to hope that its just going through a rough patch and will do an about-face and recover if it starts to drop. Of
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

course, the decision to stick with or to close a position is up to you, I always give my Maximum Options traders direction in a timely manner so they make the best returns possible. Options buying requires a lot of staying power in the ability to handle losses and still stay in the game. Unrealistic expectations will counter that and cost you years worth of potential profits. I dont want you to get discouraged by a bad day in the markets because there are far too many good ones in store!

Secret No. 11: Dont Plunge!

After trading stocks and options for nearly four decades, the one glaring error Ive seen both successful and unsuccessful traders make is that, at one point in their lives, they plunged into the market betting everything on one position that they considered a sure thing. Of course, that sure thing didnt pan out, and they lost almost everything. In fact, the surer you are about an event occurring, the less likely it is that it will happen which is the basis of the contrary theory. Contrarians tend to go against the conventional wisdom (i.e., being bearish when everyone else is bullish) in an effort to profit if/when the trend starts to change in their favor. Following our secrets No. 7 and No. 8 of scaling out of positions and applying stop-losses will help you save some of the bacon. A lot of traders try to time the markets, but even though what goes up must come down, and vice versa, doesnt mean its going to happen just because someone wants it to or just because theyve bet their life savings on it. Investing in options is an ongoing process in which we work to profit in a variety of sectors and take advantage of stocks individual bull or bear markets, all at the same time. The best approach is to have a good balance of calls and puts in your portfolio at all times.

Tip the "Scale" in Your Favor

A sure thing is anything but. If an opportunity seems too good to be true, it probably is. Dont let the prospect of making big gains on a long shot blind you to the fact that, instead of making a big return, you could lose everything you put into it!

Many of the top traders in the world have faced the same crisis when they played in the market, chasing the sure thing. These traders paid a high price for a valuable lesson. You dont have to pay this tuition if you dont plunge. Spread out your purchases over time and positions, and never bet everything on that sure thing.

Secret No. 12: Diversify

Diversification is an important tenet of Maximum Options and should be in your overall portfolio because it doesnt pay to be overweighted in a particular sector. If you dont have investments in other industries, its like putting all your proverbial eggs in one basket, and youll be walking on eggshells hoping that a bad day in the semiconductor or biotech field doesnt drag down all of your holdings. Not only is having a diverse long portfolio critical, but this strategy is equally vital to employ when it comes to options buying. Because you will encounter the occasional loser, initiating more positions gives you better odds of hitting home runs. With only a few positions, you could easily wipe out your portfolio very quickly. When we talk about diversification, we generally mean you should own both puts and calls and a variety of each. But there is another type of diversification that also applies here DIVERSIFICATION OVER TIME! Dont buy a lot of options positions at one time. In Maximum Options, we recommend 3 to 4 single options trades and 2 to 3 spread trades a week, and we hold them for anywhere from a few weeks to a couple of months, so we rotate capital regularly. Because trading is a personal endeavor, only you know how much money is appropriate to allocate to the options part of your portfolio and, in turn, how much to allot to each individual position. So, what we are saying here is to spread your risk out over various positions but to not take a huge position in each or a handful in particular. An average-sized position for an individual investor is 10 or 20 contracts, although you can choose the investment size that works best to help you to address your own goals and risk tolerance.
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

You are betting on market volatility, and if the market goes to sleep (and it does sometimes) and all of your money is in options at one time, your portfolio could vanish. Therefore, enter option positions gradually over time, patiently waiting for the market or a stock to explode. Once you see the market stirring, you can increase your option buying activity. A good game plan is to spend a set amount of dollars each year and gradually invest the capital over that period, possibly using seasonal tendencies to maximize your opportunities and gains. That is, if the stock generally trades up in January before it reports Q1 results, you may want to buy January or February call options a few months in advance, so that youre positioned for the upside that its earnings announcement could bring. Or if it tends to slide in the summer when other traders sell in May and go away, buy some puts in the spring and turn the summer doldrums into something to celebrate! Time diversification is also important for when the markets hit a rough patch, because if you have positions in various sectors and with myriad expiration dates, you will give yourself the best chance to weather any market conditions so you can return to play another day.

Secret No. 13: The Put Advantage

Your diversified options portfolio should include both puts and calls. However, based on my research and track record, even though Ive recommended the same number of puts and calls, the put options provided the best return by far with the bigger-percentage returns. Therefore, I bias my options portfolio with more puts than calls. Not only do puts profit better from surprise volatility, but when stocks drop, panic can set in and enhance the decline. And, of course, there is the institutional influence, because when portfolio managers decide to move their money from one name to another, its a mass exodus of dollars that can negatively impact the market value of the shares. When the big-money players bail out, a lot of the retail investors follow. Many years ago, technical analysis pioneer Joe Granville and I were discussing our love for put options, and he made a good analogy: When stocks rise in price, it is like climbing the steps of the Empire State Building. But when they fall, it is like jumping off the Empire State Building. Because stocks fall more sharply than they rise, puts can become more profitable, much more quickly, because youre actually betting on that stock price to go down. This violent price action gives you more bang for your buck. A few notable examples from our Maximum Options track record include: 110% profits in Lubrizol in 11 days 115% profits in United Rentals in 3 weeks 145% profits in Corinthian Colleges in 2 weeks 150% profits in Deckers Outdoors in 13 days 177% profits in Shuffle Master in 3 weeks 191% profits in Astoria Financial in 3 weeks 233% profits in Silicon Laboratories in 4 weeks There is also another advantage puts are usually cheaper than calls. This is due to the fact that put and call prices are based on the cost of holding the underlying position, and a call is a surrogate for the stock. It helps many option buyers to remember that owning a stock is more expensive than establishing a shortside position in a stock by owning a put. Every Thursday after the market closes I send out new put trades get the full details on my latest one by clicking here now. 1 |2 |3 |4 |5

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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

Secret No. 14 The Quick and the Dead

Buying options is a great game. It has that secret edge of surprise volatility in stocks and gives you the opportunity for big payoffs. Nevertheless, options buying does require close surveillance and quick action on your part. Too much hesitation could result in lost profits and even a loss of your investment capital in a particular position as well. Unlike your long portfolio, your options trading account requires more active money management. Although options only trade during regular market hours, they can open higher or lower than they closed the previous day because the prices are set based on how the stock performed in after-hours trading. You dont want to neglect your account for a few days and then come back to find out that it didnt behave as well as you thought it would while you were away. Even if youre checking in on your account every day or so, you might see a trade turning against you but give it too much of a benefit of the doubt to the point that the odds of it rallying back to profitability or your break-even level (that is, what you paid to enter the trade plus commissions) are getting slimmer by the day.

Secrets Revealed In This Report

1: The Advantages of Options Trading 2: The Simple Science of Options 3: Beware of Lady Luck 4: Get the Biggest Bang for Your Buck 5: Cheap is Not Always Cheap! 6: Swing for the Fences 7: Scaling Out Of a Position to Preserve Profits 8: Why Stop-loss Levels Are Critical 9: Beat the Clock 10: Beware Of Delusions of Grandeur 11: Dont Plunge! 12: Diversify 13: The Put Advantage 14: The Quick and the Dead 15: Slippage: The Hidden Cost of Trading 16: How to Get the Best Price 17: Know When to Fold Them! 18: Thars Gold in Them Thar Hills 19: Rules of the Road for Options Buying 20: Z-Trades: The Spread Advantage A Final Word to the Wise Free Trade

Inertia is the greatest enemy of the option buyer. Overcoming fear of loss or hesitation in capturing profit is what separates confident and savvy traders from those who are less successful. When trading options, time is the enemy. As expiration Friday (third Friday in the month) draws near, you need to watch your positions with extra rigor because you may only be given one chance to take a profit or cut a loss. The true value of an option is in the time it has remaining until expiration the longer it has, the more time it has to become profitable. When the clock runs out, youre forced to move on, but its wise to voluntarily get out while the option has as much value as you can capture. Were all in this game to win, but sometimes we have to accept taking a small loss as part of that overall winning strategy. There are always more trades to be made, instead of keeping a dying one alive in the hopes that Lady Luck (see Secret No. 3) will rescue it!

Secret No. 15: Slippage: The Hidden Cost of Trading

When we talk about the cost of trading, we usually think of commissions. But there is an even greater cost of
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

trading, and that is slippage. Slippage is the difference between an options bid and ask prices. The bid price is what you can sell the option for, and the ask price (also known as the offer) is the price you pay to buy the option. When you want to sell an option, the minimum price you will accept is the bid, while you are offering to pay what the seller is asking you to buy a new position. For example, if the bid and ask prices on an option are $1 and $1.30, respectively, you can sell the option for $1, but must pay $1.30 to buy it. With options, slippage can reflect a good percentage of the price. In our example, 30 cents is the slippage, which can account for as much as 30% of the price of the option. In casino parlance, there is the take, or house advantage, along with the commissions. And in casinos, the take or on roulette is more than 5%. It can be much higher when you are trading options due to slippage.

Profit Gobblers
Slippage is the difference between estimated transaction costs and the amount actually paid. It generally stems from a change in the spread, and it can eat up precious profit. Commission costs will tear into your returns. Dont pay more than $5 per option in commissions and aim for closer to $3 per option.

When trading, do everything possible to reduce slippage. This means reducing the number of trades made because every transaction incurs a slippage cost. Yes, we spoke of diversifying earlier and we fully support entering a variety of positions to expose you to profits from many directions. However, every time you make a transaction, you expose yourself to slippage. This is why I dont like complicated strategies where you enter and exit too many positions. There are a variety of advanced trading maneuvers out there that involve more steps than simply buying or selling a call or put, and not only can you be exposed to more slippage, but also to additional commission costs. Also, when trading cheaper options, slippage is higher because it comprises a higher percentage of the option cost. How can you reduce slippage? By keeping your strategies simple and by trading options with more liquidity that is, the ones moving on good volume that trade more often. This way, the spread between the bid and ask price is not as wide. Because commissions can compound your costs, you should shop around to get the lowest ones possible. Full-service brokers may charge you more but can also offer you more assistance if you need it, while selfservice online brokerages are geared more toward the do-it-yourselfers and can charge less because they dont have the individualized support available. If you are paying more than $5 per option in commissions, you are in real trouble. Try to avoid paying more than $3 per option. At Maximum Options you never pay too much for trades. I analysis each one to make sure youre getting in for the best price. As I said earlier, this helps you capture maximum profits and get the best bang for your buck. You can get a complete list of my current trades and the best price to get into them by clicking here.

Secret No. 16: How to Get the Best Price

One easy technique allows better trade executions or better option prices when you buy options: Test the waters first. Remember, the options exchanges are marketplaces, and you might be able to get a fairer deal if you indicate that you want to make one. For example, you want to buy an option that is quoted with a bid price of $1 and an ask price of $1.30. To buy that option right now, you will need to pay $1.30. But take a minute or two to test the waters. Enter a limit order with a price of $1.15 and see whether the

Sky's the "Limit"

Theres no guarantee that a limit order will be filled, but if the market price meets or beats your criteria (e.g., buy
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

market-maker will bite. (The market-maker is the one who sets the bid/ask spreads. His or her profit margin is the difference between the bid and the offer prices.) You may be surprised how many times your requested price will be honored (i.e., $1.15) instead of the ask price of $1.30. If your order for $1.15 is not filled after a few minutes, you can modify your order and pay the ask price by entering a market order or limit order at the ask price. Of course, the tactic probably will only work if you are trading online.

the X option at $1) it means that if the option trades at 95 cents before it climbs to $1 while the order is active, then you will get into the trade at 95 cents. However, your trade will not be filled if the option never trades below $1.10 for the life of the order.

When entering an order with your broker, his floor broker is supposed to work to get you the best price. However, honesty is not the best virtue on the floor, and floor brokers can tip off the market-makers to what orders they hold in their hands. Consequently, it is best to maintain control of your order and use the Internet to negotiate your trade.

Secret No. 17: Know When to Fold Them!

Fear of taking a loss is a classic error of the option player. When your trade goes bad, get out! When you are uncomfortable in a position and cant sleep at night, get out! When the trend of the underlying security goes against you, get out! Being able to bail out of positions is critical to your success; if you hesitate, you are lost! Remember, taking losses in options trading is a virtue, not a sin. The secret to success when playing poker is to know when to fold them. The same rule applies to options trading.

Secret No. 18: Thars Gold in Them Thar Hills

From my research, experience and track record, I have found that the most powerful of all option strategies is to BUY CHEAP OPTIONS, especially puts. You have a statistical advantage in buying options due to the fact that stock prices move in a chaotic pattern, sometimes far beyond the range of the pricing models parameters. Such surprise volatility makes options become gems in the rough, or gold in them thar hills. Buying cheap options truly gives you a mathematical and statistical edge over other traders. However, finding the gold is more difficult than most people think because most cheap options are not good plays, viewing them as overvalued with little chance of paying off. Therefore, it is important to analyze an option before you buy it. And thats where I can help, because at Maximum Options I will be doing a thorough profitability analysis and then cherry-picking the best opportunities and presenting them to subscribers with clear, easy-to-follow instructions. You can calculate the probability of making a profit in part based on the theoretical value of the option (i.e., the delta) and implied volatility. Although option values dont always trade directly proportionate to the underlying stock, you can use the delta to gauge the options sensitivity toward movements in the stock. For instance, you might have held a call option at one time or another with a $35 strike price in your portfolio. But then perhaps the stock traded up through that number, but your option didnt follow it toward profitability. That can be frustrating because you made the right call, so to speak, yet the profits didnt follow. Delta refers to the ratio of change between the underlying assets price in relation to the change in the options price, which can help to explain why an option makes corresponding moves with the underlying stock or why it might refuse to go along for the ride in lockstep.
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We identified historical volatility earlier as something that can be monitored and measured based on how the stock typically behaved at certain times of the year (i.e., after earnings, around holidays, etc.). Implied volatility, then, is based on how it is trading in the current environment. This is one of many factors used in calculating an options premium, so the greater the fear in the markets, the higher the premiums will be. And thats the key determining whether the option premiums are spot-on or whether they are overvalued. Each week I identify a list of undervalued options, I look at the charts of the underlying stocks to make sure they dont face a lot of overhead resistance (for the calls) or underlying support (for the puts). I also analyze whether the underlying security has made the necessary move in the past within the time frame allotted. Then I look at a chart of the implied and historical volatility of the stock to make sure these volatilities are at low ebb on the charts. Finally, I do the probability analysis to ensure that were not betting on a dead horse.

Delta Force
With regard to calls, a delta of 0.3 means that for every $1 the underlying stock increases, the call option will increase by 30 cents. Conversely, put deltas, will be negative, because as the underlying stock increases, the value of the option will decrease. So a put option with a delta of -0.3 will decrease by 30 cents for every $1 the underlying increases in price. As expiration draws closer for an in-themoney call option, it will approach a delta of 1, and as an in-the-money put option nears expiration, it will approach a delta of -1.

This helps me find the best plays for my Maximum Options subscribers. Ensuring that they receive the trade instructions in time to establish a position before the price goes up, because then they get to collect those gains when it does! At Maximum Options we are looking for the undervalued plays that is, those designer names that are on sale for bargain-basement prices! You can find the historical prices of any stock through a variety of financial Web sites and charting services. You can tell from the stock price whether an option was trading in-, at- or out-of-the-money. Then look at a chart of the implied and historical volatility of the stock to make sure these volatilities are at low ebb on the charts. Finally, do a probability analysis to ensure you are not betting on a dead horse. I know it sounds like a lot of work and it can be but your trades will be much more profitable by doing this homework. If you only want the great trades I can do the heavy lifting for you. Thats exactly what I do for my Maximum Options subscribers. Every Thursday and Friday I send them new trades with only the most important details that will help them get into the trades at the best price helping them capture consistent profits. My next trade is coming out soon click here to get into it.

Secret No. 19: Rules of the Road for Options Buying

To help you in your option buying activities, I have established a series of guidelines for buying both stock and futures options. These rules of the road are exactly what I use to pick out winners in Maximum Options, and I encourage you to employ them in your own trading career. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Buy only underpriced options. Buy cheap options near-term options priced around $1 or less or below $2.50 for LEAPS. Buy close-to-the-money options. Buy options with as much time as possible before expiration. Buy options where the underlying stock has the potential for increased volatility in the future. Put the same number of dollars in each position. Diversify over time (two years). Buy in quantity to save commissions. Buy an option where the stock price has a good chance to move across the exercise price. Try to buy options where you stand a real chance of hitting a home run double-digit profits really help you build your wealth! 1 |2 |3 |4 |5

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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

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Secret No. 20: Z-Trades: The Spread Advantage

Options spreads are one of the great advantages of options trading. Option spreads enable you to create strategies where you limit your risks and maximize your gains. Spreads allow you to adjust your positions as the market changes to neutralize market risks. Credit spreads are one of my favorite strategies to create monthly income. This strategy allows you to get paid to put on the trade, then if the option expires worthless you get to keep 100% of your premium. A well designed spread is one with an excellent riskreward picture. For the option buyer, spreads are, to use baseball jargon, for those who are satisfied with singles and doubles instead of home runs. For the option writer, spreads can remove the unlimited risk present with naked writing. The big advantage of spreads is that spreads can be designed with a high probability of profit and very limited risk. A spread is defined as a combination of buying and selling (writing) two or more different options at the same time usually on the same underlying issue. The difficult part of spreading is learning how to design a spread and understand the risk-reward picture for the spread, which takes some practice.

Secrets Revealed In This Report

1: The Advantages of Options Trading 2: The Simple Science of Options 3: Beware of Lady Luck 4: Get the Biggest Bang for Your Buck 5: Cheap is Not Always Cheap! 6: Swing for the Fences 7: Scaling Out Of a Position to Preserve Profits 8: Why Stop-loss Levels Are Critical 9: Beat the Clock 10: Beware Of Delusions of Grandeur 11: Dont Plunge! 12: Diversify 13: The Put Advantage 14: The Quick and the Dead 15: Slippage: The Hidden Cost of Trading 16: How to Get the Best Price 17: Know When to Fold Them! 18: Thars Gold in Them Thar Hills 19: Rules of the Road for Options Buying 20: Z-Trades: The Spread Advantage A Final Word to the Wise Free Trade

As I said earlier my favorite strategy for spreads is the credit spread. Every Friday after the market closes I send my Maximum Options subscribers a new credit trade. Its a great way to grow your portfolio and since 2008 we have captured profits on over 247 trades. Take a look at our Eli Lilly trade. Below, is exactly what I told my Maximum Options subscribers: Put Credit Spread to Open Sell the Eli Lilly (LLY) Oct 46 Put and buy the LLY Oct 43 Put for a spread credit of 30 cents or higher. This recommendation is being made as a speculation. LLY is a major pharmaceutical company. The stock has been in a steady uptrend over the past year and has had a very strong past couple months. While a pullback from this recent rally would not be a surprise, as long as it doesn't morph into a larger sell-off this position should be safe. The company is scheduled to report earnings on October 23, which is after this position expires but is also a reason why its put options are expensive enough to provide a playable credit spread.
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

Here is the information you need to know to open the Eli Lilly put credit spread: Underlying Stock: Eli Lilly (LLY) Current Stock Price: $48.23 Trade Type: Put credit spread This position generates a 10% return on margin (120% annualized) for a two-week holding period. Your maximum risk is $270 per contract. Making the Trade: Use a spread order to Sell to Open the Eli Lilly (LLY) Oct 46 Put (LLY121020P00046000), and Buy to Open the Eli Lilly (LLY) Oct 43 Put (LLY121020P00043000), for a spread credit of 30 cents or higher. A put credit spread is a bullish position in which you want the stock price to stay above the upper strike price of the spread. Use an auto-stop order to close this position if LLY trades below $46 prior to October options expiration and you do not want to buy the stock. If you do not close the position and the LLY Oct 46 Put expires in the money you will be obligated to buy 100 shares of the stock at $46 per share for each credit spread contract you open. Guidelines to getting into the best credit spreads 1. 2. 3. 4. 5. 6. 7. Use index spreads Sell (write) a far-out-of-the-money index option. Buy an index option that is 5, 10, or 15 points further out-of-the-money. Make certain to get a credit or at least .30. Enter spreads with less than three weeks before expiration. Set a stop-loss that is out-of-the-money for the option you have written. Set a stop-loss where there is an 85% chance of not touching the stop-loss.

Every Friday I send out a new credit spread. Click here to get into the next one. Well, there you have it, 20 tried-and-true, winning options trading secrets (dont forget about the free trade below) which will help you become a more successful options trader and build your wealth.

A FINAL WORD TO THE WISE

Options trading isnt for everyone that is, its not for those who dont want the ability to make big profits in a short, defined time period. But once youve gotten a few winning trades under your belt you realize how much power you have at your fingertips when you harness the profit-making potential that the options markets wield. While options trading can seem mysterious and risky to the average investor, approaching it from a realistic point of view will help you to stay calm and make informed, rational decisions that will help you protect and grow your original investment capital in the options markets. And for those of you who are ready to learn more about the options markets and are eager to initiate some trades on your own, I hope you can benefit from some of the lessons Ive learned (oftentimes the hard way!) as an active trader and investor. If you would like me to do the heavy lifting my Maximum Options trading service can help. The goal of Maximum Options is to recommend options trades that are designed to lower your risk and increase your profit potential. It sounds simple, but my method is actually very specific and relies on reams of data and analysis to separate the OK trades from the ones that are screaming, cant-miss buys. Our strategies offer profit, protection from market downturns, and probability of safe returns. There are thousands upon thousands of options available for trading, and anywhere between 10 million and 20 million contracts change hands on any given trading day. They are priced anywhere from a few cents up through the price of a share of stock with Google (GOOG) trading at $705 a share, its January 2014
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

LEAPS can cost up to $374 a share ($37,400 a contract). And while that might be a good trading opportunity for someone with that much cash to invest, Im not interested in that type of play because even a good move wont be anything dramatic. But what lights my fire is seeing a 75-cent option ($75 a contract) turn into $1.50 (100%), $2.25 (200%), $3 (300%), $3.75 (400%), $4.50 (500%) and so on.

Uncovering the Rare Gems

Uncovering these rare, often-overlooked gems is what gets me out of bed in the mornings and draws me to my trading screens I have the technology, experience and methodology to find these types of opportunities. They provide my Maximum Options members with a statistical advantage over other traders - and help them make their wildest dreams come true with all the profits - this is why my job feels like anything but work! When I find those incredible nuggets of gold that meet the magic combination of being underpriced/ undervalued, with high potential for both profitability as well as volatility (that is, a good risk/reward picture), I will share them with Maximum Options subscribers with clear buy and sell instructions so that they get the trade right, every time. Just as I believe in letting your winners run, I also dont want traders to hold positions for longer than they should if they turn against us, and I ensure that Maximum Options members take profits (or losses) at the right time because there are always going to be more trade coming down the pipeline whose odds are stacked firmly in our favor.

Active Traders with a Thirst for Action

If youve heard that there is big money to be made in the options markets, but you want to do it safely and securely by limiting your risk, Maximum Options was made for you. If youre an active investor with a thirst for action and a desire to manage your own account to expand your profits exponentially, youll feel right at home. When you join us at Maximum Options, it would benefit you to take advantage of every trading opportunity that comes your way. I know a lot of investors who cherry-pick the trades they decide to initiate, and many of them get frustrated because the trade they missed was the one that had the most-spectacular returns. Dont let that be you. For now, heres a trade of mine to help you get started on your way. This is the exact format I give my Maximum Options members, so you can see how easy my recommendations are to execute. Call Credit Spread to Open -- Sell the CurrencyShares Japanese Yen Trust (FXY) Apr 106 Call and buy the FXY Apr 108 Call for a spread credit of 30 cents or higher. FXY is an exchange-traded fund (ETF) that tracks the movement of the Japanese yen. The fund had been in near freefall since last October until recently finding some support at $105 and then again in the $102 area. The $105 support is the important one as an old trading rule is that what was support is now resistance. Additional resistance also exists near $106 with the 50-day moving average. Along with chart patterns, a key to this position is the Japanese government's active involvement in trying to drive the yen lower to aid its economy. Here is the information you need to know to open the CurrencyShares Japanese Yen Trust call credit spread: Underlying Stock: CurrencyShares Japanese Yen Trust (FXY) Current Stock Price: $103.72 Trade Type: Call credit spread
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20 Lucrative But Little-Known Options Trading Secrets By Ken Trester

This position generates a 15% return on margin (180% annualized) for a four-week holding period. Your maximum risk is $170 per contract. Making the Trade: Use a spread order to Sell to Open the CurrencyShares Japanese Yen Trust (FXY) Apr 106 Call (FXY130420C00106000), and Buy to Open the CurrencyShares Japanese Yen Trust (FXY) Apr 108 Call (FXY130420C00108000), for a spread credit of 30 cents or higher. A call credit spread is a bearish position in which you want the stock price to stay below the lower strike price of the spread. Because of the narrow spread involved with this position we are not recommending a stop price. Conservative traders who want to use a stop price can place on at $106.50. A credit spread involves writing (selling to open) an option and purchasing (buying to open) an option at a different strike price in the same underlying security. The position, or leg, of the spread trade that you sell gives you a cash credit to your trading account. The option you buy limits your risk and lowers your margin requirement for the trade. Decide how much of your portfolio you want to allocate to options trading (some investors set aside 10%, for example) and, in turn, how much money or how big of a position you are comfortable having in each recommendation. Beginning investors can choose to start out with two, three or five contracts before moving up to 10, 15 or 20, or they may decide that they will allocate up to $300 or $500 on any given trade again, managing your account is a personal matter, but consistency is key. When we issue recommendations at Maximum Options, we will aim for them to keep for a few days. That is, if you miss your email for a day or two, you can still get in if the recommended price is still obtainable. We understand that you have work and life commitments so we want you to be able to get into the trades at your earliest convenience and not feel like you missed out because you didnt jump in immediately. That said, however, the instructions and updates we provide are meant to help you generate and preserve profits and limit your losses as much as possible. If we recommend closing a trade, you may choose to keep it open, but you do so at your own risk. Similarly, if a trade performs so well that you are tempted to take some of your profits off of the table but we havent (yet) recommended to do so, you have to do what is right for you personally. Thank you for taking the time to learn about how I trade options. If you incorporate these 20 Lucrative But little-Known Options Trading Secrets into your trading I promise you will see an improvement in your profits. I also hope you'll join us at Maximum Options and take the next steps in your options trading journey! Yours for Maximum Options,

Ken Trester 1 |2 |3 |4 |5

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