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So, you’re getting close to a 30, 40, 60% return on your investment, in just a few weeks. If you have been to the bank lately, you know that interest rates are pretty low right now. You’re lucky if you get 2.5% a year on your money market fund.
Even if you only did one contract in this, your margin requirement is only $573. You have a profit potential of close to $300. That’s a huge return on your investment, in just a few weeks.
That’s it for portfolio building. The two main trading vehicles that we use are double calendars, because the margin requirements are so low, and they have a good, wide profit potential for us. We also use the sale for iron condors. They also give us a very good profit potential, in a very short period of time.
The key, again, is to adjust those positions, when necessary. There is timing involved in adjusting these positions, because you don’t want to wait too long. Let’s talk about that, just for a second. Once your price begins to approach your breakevens on either side of these trades, you want to get into a position where you want to adjust them.
If you take a look at the adjustment videos, you’ll see exactly how we do that. In the case of our IWM position, this is one way that we actually adjusted this position. I’m going to show you exactly what we did, here. On this IWM position, we had a double calendar on. The price ran against us to the upside, to the point where it was very close to our breakeven point.
What we did, in order to compensate for that – it ran very close to our breakeven point. In most cases, most option traders would panic, at that point. They would say, “Oh, the trade is not going to work out, because if it starts going beyond my breakeven point, I’m going to be in losing territory. I’m going to start losing a lot of money.”
What we did instead was, we put on another double calendar, on top of the double calendar we already did. This allowed us to extend our breakeven points, and put us back into a profitable position. Our original double calendar was centered right in the center, but the prices ran up against us, and then to adjust, all we had to do was put on another double calendar, on top of that.
It put us back into a very profitable position. It was a very easy adjustment to make. Once you understand how to do adjustments, there’s really no reason for you to lose money. There are extreme situations in the market, in which the price is just out of control. We’re talking about October of 1987, for example. The market dropped 500 points, which was a huge percentage move, at that time.
In those kind of situations, you’re probably better off just getting out of your position altogether. You just want to close it. But we’ve had one instance of that in twenty years. Logic would tell us, and probabilities that tell us, that those are maybe once in a half century moves, that could affect our positions.
Because we put positions on calls and puts at the same time, generally what’s going to happen is, yeah, we get hurt on one side of our trade, if we do have a dramatic move like that. On the other end, we’re going to make money. Those are the kind of protection, the kind of hedging, that we want to do in these positions, in order to remain profitable.
Even if we do get very dramatic moves in the market, we’re going to be prepared, because we know what to do. That’s why I always say, trade with confidence.
Any last remarks, there?
Speaker 2: That just summed it all up. I think Dave is trading with confidence, and I can certainly see myself doing that, within a very short period of time. I’m very excited about this, Dave. I thank you for the opportunity to come and sit with you here, and actually watch you do this live. I’m really excited about this, and I think anyone else watching this is feeling the same way.
Speaker 1: That’s great. The thing is that we can put these trades on, but when it gets on to the point where you’re starting to make these trades, and you need some assistance, that’s why we have put our membership site together. You can see the positions that I put on, on a daily basis, and then you can take a look at it. I record the videos in the morning, and I put them on the website right away, of the review of that day.
If necessary, if you need additional help, you can see exactly what adjustments I’ve made, so that you can make them in your portfolio, at the same time. I’m not making specific recommendations for your investments. It’s really for educational purposes only, because I am not an investment advisor.
However, you can see what I’m doing, and then take that into consideration of your own investment objectives, and then go forward from there. It does help you to see exactly what I am doing, and then whether it makes sense for your position or not, to make the same type of adjustments. Also, to see the type of adjustments that you can make in your position, so that you remain profitable, or if it gets to the point that you need to get out, and cut your losses short.
Our objective with adjustments, of course, is always to remain as profitable as possible. That’s why we set up our membership site, just so you can see exactly what potential there is, for adjustments to these trades. Also, what kind of trades and new information might be available in the future. As you grow in experience with these trades, you’re gong to see that there are other trades that you might want to take, that actually increase the profit potential of your overall portfolio.
For educational purposes, you can’t beat it. Our membership site is always on the cutting edge of these types if trades. We’re going to teach you everything that we learned, as we go along.
Speaker 2: Thank you very much, Dave. This is good stuff.
Speaker 1: Thanks for being with me, Scott. It was really a pleasure to have you here. I’m glad I could explain how to build your portfolio, because it’s a really critical component of this system.
Alright, guys. That’s it for today. Trade with confidence.