If you have seen the movie The Big Short, its about a few traders who spotted a potential crash in the housing market back in 2006.
To capitalize on the fragile subprime mortgage loans they saw in banks, real estate and mortgages, they used Put Options to take and educated and calculated risk that the entire financial system was going to implode.
They were right..
Michael Burry, made $700 million for his investors.
Andres Lahde turned $10million into $97 million.
And John Paulson, billionaire hedge fund manager (not in the movie) turned $3 billion into $15 billion.
1. How traders are Getting Rich using Options
Here’s what we can learn from the above, hedge fund manager can create a life-changing fortune in both good or bad markets.
Options, when traded with a systematic approach can be the single greatest wealth creating tool that exists today.
The reason why hedge funds, billionaires and average traders choose options is that very few people understand them. Most amateur option trades trade options with little to no knowledge at all which can be dangerous.
the truth is, options are not risky. Not understanding it well enough and trading it with no trading plan can often result in a large loss. That is why trading options gets a bad rap.
2. Options are safer than Stocks
Options trading when done right , can be much safer than trading stocks or mutual funds. With a systematic approach to uncovering winning opportunities and capping your downside risk, options trading can yield a very high risk:reward ratio, think gaining $10 for every $1 invested.
The fact that Michael Burry, Andrew Lahde and John Paulson all used options in a well thought out option trade , making billions along the way.
3. Average people are using options to make a fortune
Our system have allowed ordinary people just like you to profit from trading options. Regardless of you age, gender, background or education, options trading can be the key to making massive amount of profit in s short time.
most of our trader use only 5-10 hours per week rather than being glued to your computer all day.
4. What are options , really?
If you are new to options, these are the basics. A call option gives you the right but not the obligation to purchase share in a specific company at a specific price before a specific date.
A ‘premium’ is the price you pay for the right. Let’s assume you expect a house in the suburbs of Chicago to rise in 3 years time. You put up a small ‘premium’ for the right , but not the obligation to buy the home at some point in the future.
If the price of the house rises after a few years, you can exercise your option to purchase the home and make a profit. Else, is the house price drops, your lost will be capped to the ‘premium’ you paid.
Example of Optionality, small downside large potential upside
5. The Perfect risk management tool
Assuming you intend to buy 100 shares of Apple (AAPL) at todays price . You will need to put up about $10,490.
Alternatievly, you could purchase the right of the same 100 shares of AAPL at $109.49 for only $896 over the next 90 days with the same upside exposure.
If AAPL increases to $116 from $109.49 , you would make $651 or 72% out of the initial premium you paid.
6. If this is so lucrative why isn’t everyone rich from trading options?
It is the same reason why most people are not getting rich trading stocks. 80% of trading options , just like stocks is emotions. 20% will be the system.
Most people trade with no trading plans. Professional traders, wall street insiders have been using options to earn fortunes for decades. They trade following a systematic approach with tight risk manager with odds staked heavily in their favor.
7. Trading Options with High Probability Chart Patterns
To most people, the markets looks like chaos. Professional traders know how to identify patterns that repeat over and over again.
they know some charts are worth $1k and other $10k or even $100k.
Options gives a tremendous amount of leverage. A 10% move in the underlying stock can potentially yield you 100% to 200% profits buying that option.
The earlier example we gave you where the trader turned $110,000 into $2.4 million in 28 minutes requires a stock to move 28%. This is rare and the trader capitalized on a takeover rumor. However, if he had owned the stock, he would not have made such an impressive amount of profits.
Rule #1, never more than 10% of your initial capital . No matter how giddy this post might make you, you should never go all in and risk every dime in your portfolio hoping to make 25x your money on ONE SINGLE TRADE.
Rule# 2 Law of Compounding
Albert Einstien called compound interest ‘ the greatest mathematical discovery of all time’.
With LiveTradr system, the compounding rule amplifies the growth of your working money.
Let’s assume you are stating with only $5,000 and every 2 months you make about ($500 profit) .
in 4 Years your $5,000 would have grown into $1,888,933
here’s how we used the Monte Carlo Simulation to break it down.
Here’s everything you need to
- Proper risk management
- best way to identify a trend
- done for your Support and Resistance levels.
- Critical Market Turning Points
- Done for you Fibonacci Retracements
- Done for you Elliot Wave Analysis
- How to trade Options the 3 step process
- Where to place a Stop Loss to minimize risk
- Where to place Take Profit orders
- They 3 Key Breakout patterns for explosive returns
- How to build a Consistent monthly income trading options
If you are new to options trading, we will walk you through step by step the basics of options trading.
The Live Tradr team is a group of hedge fund professionals trading their own funds delivering the latest high probability trading signals to you.