Earlier, I had a motivating talk with an option's investor who is still looking for for the key strategy to earning constant returns with option investing. He understood several things which were so well-known to me also.
The topic that really hit home for me was when he mentioned "Non-directional option investing doesn't mean we should generate return on investment in each and every direction. It means that we generate a profit if the asset doesn't move in any direction. In a few words, it's actually a directional strategy, sideways." This is absolutely the truth, and most investing programs say that it's easy to manufacture a profit with options simply because we can generate money for each and every direction. This is true in some viewpoints and false in others.
Those of you trading Iron Condors know what I am talking about; especially if you are trading the Condors that most courses and books teach. If you are trading this strategy in 2009, you probably aren't making anything. The reason being that the Iron Condor is just as directional as most option trades only that its direction is sideways. For some, it's just as hard to predict a sideways move as it is up or down.
I have had many calls over the years from people losing huge chunks of their accounts trading credit spreads and condors. They all say the same thing... "I was doing great for several months, and then all the sudden I lost nearly my whole account in one day." I have heard this story over and over again.
This is the reason why I don't push the popular Iron Condors, Bear Calls or Bull Puts. If you are a couple days from expiration, and the RUT is really near the sold strike, then at that moment you are in a very risky position. I'll remind you that this is the same risky method that many other investors are using to manage this option spread. Shortly all of your friends will be hearing the same story, but you won't be sharing this news with your wife! You smile at the moment, but you won't be if it happens to your trading portfolio. Another sad thing about this investng style is that the fear level is so astronomical that it really hurts your personal life. It makes it tough to sleep or even just relax each day.
Well, San Jose Options Mentoring has really changed the Condor and Credit Spreads that the usual investor is attempting to trade today. While others come into expiration sweating it out, worrying about the market moving past their short strike, we are relaxed, sleeping at night, and trading options in a much safer environment.
Constructing safe trades to begin with is a priority and will improve anyone's trading skills and returns, but another strategy that we've been working hard on lately is locking in profits. We have techniques to lock in profits on nearly all the trades that we do. It's one of the best things you can possibly learn as an investor.
Also, when we do have a trade go against us, well, we have ways to get a free trade from it. This is another important technique that we teach to our students. While many traders exit with a loss or never exit and sustain a huge loss, we exit and get a free bonus trade that can always lead to returns at a later date.
So, finally I'd like to say that whether we have a winner or a loser, we have some excellent adjustment tricks that will be sure to greatly improve your personal trading skills.
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