Tag: options trading

10-minute trade update: 1 month later...

Posted on by Trader Travis

If you were able to attend our live MarketClub Options Webinar that I hosted in March, you are probably curious what happened to the three 10-minute trades that we placed on AMAT, INTC, and NEE.

Watch the webinar recording below (no registration needed) to see how and why we placed those three trades.

MarketClub Options

Now here's your update: as of 4-26-18, all 3 trades show a small loss of $125.

Am I embarrassed that the live trades I placed are losing money? Nope!

Why?

Because losing money is normal.

A few losing trades here and there are no big deal. In fact, I teach (and follow) a money management formula that allows up to 25 losing trades in a row before it starts to hurt your account.

It is important to me to show how losses like this are par for the course. Ultimately, losses are overshadowed by your gains when you use a time-tested strategy like the MarketClub Options Blueprint.

Enjoy,
Trader Travis
MarketClub Options |

op*****@in*.com











AbbVie Put/Call Combination Produces 400% Greater Return

Posted on by The INO.com Team

Introduction and Set-Up

Below I’ll discuss my year-long call/put combination using AbbVie as an example. I’ve successfully been able to obtain a 15.3% return based on the current stock price while the buy and hold strategy would've only yielded 3.6% return. This is greater than a 400% difference in overall returns for this given stock over the past year. Leveraging the coupling of calls and puts around a core position over time can accentuate total returns and mitigate risk on a given stock. As discussed in more detail below, covered calls and covered puts can be combined to one's advantage. This is especially true in large-cap, dividend-paying stocks that tend to trade within a narrow range for long periods of time. AbbVie Inc. (NYSE:ABBV) is a prime example that fits this narrative and thus the stock of choice for this piece. Over the past two-plus years this stock has traded in a tight range between $55 and $65 per share while paying a dividend of ~4% on an annual basis (Figure 1). The company has strong fundamentals, financial stability and a robust pipeline for potential growth and sustainability. The goal here to initiate a position in AbbVie using a covered put to purchase the stock at a lower price than it's currently trading at a future date while collecting a premium in the process. If the stock isn't assigned then walk away with the premium and freed up cash that was earmarked for the potential purchase. If the stock is assigned, then shares are purchased at the agreed-upon price (strike price), less the premium for the actual purchase price. Now we've entered the position via leveraging a covered put, now the shares can be leveraged for covered calls to extract additional value throughout the holding of the stock while collecting the dividend. Ideally, we want to enter the position via a covered put and endlessly sell covered calls while collecting the dividend. However if the stock is called away during the selling of a covered call then this process can be repeated while being cognizant of the x-dividend dates to enhance overall returns.

Chart of AbbVie Inc. (NYSE:ABBV)
Figure 1 – AbbVie’s tight trading range over the past 2-plus years
Continue reading "AbbVie Put/Call Combination Produces 400% Greater Return" →

Realizing Gains Without Owning Shares Via Leveraging Cash

Posted on by The INO.com Team

Introduction

I’ve written many articles highlighting the advantages options trading and how this technique, when deployed in opportunistic or conservative scenarios may augment overall portfolio returns while mitigating risk in a meaningful manner. Here I’d like to focus on leveraging cash-on-hand to engage in options trading, more specifically selling covered puts. In laymen’s terms, I’ll cover option variables, an example, strategy and empirical results with commentary.

The Questions

1. Why buy a stock now when you can purchase the stock in the future at a lower price while being paid to do so?

2. Why buy stocks at all when you can make money on the underlying volatility without ever owning the shares?

Overview

Timing the market has proven to be very difficult if not altogether impossible. However creating opportunities to lock-in downward movement in a given stock one is looking to own is possible. If a stock of interest has substantially fallen to at or near a 52-week low, then one has an option to “buy” the stock at an even lower price at a later date while collecting premium income in the process. Alternatively, it's also possible to make money on the option itself without owning any shares of the company via realizing options premium gains as the underlying stock appreciates in value off its lows. This is called a covered put option, covered in the sense that one has cash to back the option contract. Leveraging covered put options in opportunistic scenarios may augment overall portfolio returns while mitigating risk when looking to initiate a future position in an individual stock. In the event of a covered put, this is accomplished by leveraging the cash one currently has by selling a put contract against those funds for a premium. It's also possible to make money on the option itself without owning any shares of the company via realizing options premium gains as the underlying stock appreciates in value. Continue reading "Realizing Gains Without Owning Shares Via Leveraging Cash" →

High-Quality Secured Puts Yield 20% Return

Posted on by The INO.com Team

Overview

I’ve written many articles highlighting the advantages options trading and how this technique, when deployed in opportunistic or conservative scenarios may augment overall portfolio returns while mitigating risk in a meaningful manner. Timing the market has proven to be very difficult if not altogether impossible. However creating opportunities to lock-in the downward movement in a given stock one is looking to own is possible. If a stock of interest has substantially fallen to near a 52-week low, then one has an option to “buy” the stock at an even lower price at a later date while collecting premium income in the process. Alternatively, it's also possible to make money on the option itself without owning any shares of the company via realizing options premium gains as the underlying stock appreciates in value off its lows. This is called a covered or secured put option, covered in the sense that one has cash to back the option contract. Leveraging covered or secured put options in opportunistic scenarios may augment overall portfolio returns while mitigating risk when looking to initiate a future position in an individual stock or looking to make money on the potential appreciation without owning the stock. In the event of a covered put, this is accomplished by leveraging the cash one currently has by selling a put contract against those funds for a premium. Why buy a stock now when you can purchase the stock in the future at a lower price while being paid to do so? Why buy stocks at all when you can make money on the underlying volatility without ever owning the shares? Continue reading "High-Quality Secured Puts Yield 20% Return" →

Supercharging Portfolio Returns - Empirical Options Data

Posted on by The INO.com Team

I’ve written many articles highlighting the advantages options trading and how this technique, when deployed in opportunistic or conservative scenarios may augment overall portfolio returns while mitigating risk in a meaningful manner. Options trading in layman’s terms can be described as a parallel to owning a rental property. One owns an asset that he is willing to leverage in the form of a tenant occupying his home for monthly rent. In the case of options trading, one owns shares and he is willing “leverage” these shares for “rent” or in the case of options, a premium. In this scenario, the owner of the home gives the tenant the option to buy the property or rent to own if he/she desires prior to a specified date. For the owner of the stock, he is providing the option to buy the underlying security at a specified price on or before a specified date. From the renter’s perspective, if the home value is increasing and the housing market is strong and on an uptrend, the renter would exercise this option and elect to buy the home. In the case of options trading, the renter of the stock would exercise the option to buy the shares if the shares rise significantly and lock in the lower, agreed-upon price. In the housing scenario, the renter elected to have the option to buy however didn’t have the obligation to purchase the home. The tenant witnessed home values increasing and decided to exercise the option to buy and capitalize on the rent he was already paying into the property. For the renter of the stock, the renter had the option to buy the underlying shares however he didn’t have the obligation to purchase these shares. The renter of the shares witnessed the stock take off and decided to exercise the option to buy and capitalize on the “rent” he had already paid into the option contract. As the owner of the property/stock, the ideal scenario is to own the property/stock and continuously collect rent/premiums on a monthly basis without relinquishing the property/stock. I will provide an overview of my empirical case study based on my options activity during Q2 2016 (Table 1). Here, I’ll provide details focusing on optimizing stock leverage via covered calls. Emphasizing the ability to sell these types of options in an opportunistic, aggressive and disciplined manner to generate liquidity while accentuating returns and mitigating risk via empirical data. Continue reading "Supercharging Portfolio Returns - Empirical Options Data" →