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These are the kind of positions that we like to put on. We like to put on positions where it doesn’t matter that the indexes go up, or the indexes go down. We make money, either way.
There we are, on a portfolio-weighted basis, again, based on the Diamonds. We have a great deal of potential, on either side of this, to make money. Our maximum expiration profit and loss figure is the green line. Our current position is the white line. That’s how we manage our trade, as we go forward.
You’ll see both positions closed out, on the future videos. We’re doing adjustments. We’ll show you exactly how to manage your portfolio, based on the Greeks. Don’t let those Greeks confuse you or make you uneasy at all. I will simplify them to the point that you will understand exactly what Delta, Gamma, Theta, and Vega mean to your position.
We’re going to be managing our positions based on the entire portfolio. We will manage them by using these Greeks, in order to determine exactly where we need to adjust our position, so that we remain profitable, at all times.
We’ll also take a look at some big-picture ideas, as far as technical analysis goes. I’ll also show you exactly how we select our trades, and the strategy that we use in our trades. It’s absolutely critical to understand how our trades are created, and how they’re selected.
This is where the part of trading as a business comes in. We don’t trade without a plan. If you go into any kind of business, you’re going to create a plan. Whether it’s just on a single piece of paper, or even on a napkin, you’re going to have a plan for that business.
It’s absolutely critical that you trade according to your plan. You don’t trade by the seat of your pants. You don’t go into a market and just trade by buying and selling options of any kind, without really knowing what you’re going to do, in case the option that you’re purchasing goes against you.
You’ve got to have a plan. That’s where the trade selection strategy comes in, because we take a look at how these trades are selected, how we plan out the trades, how we select them based on support and resistance points in the underlying index, and how we go about adjusting them.
The adjustment videos are probably the most crucial part of this entire system. Once you get into a position, it’s easy to take profits when the market doesn’t move, because those options will simply expire, and you’ll collect the cash.
But what happens when the markets move against you? You have to know exactly what you’re going to do ahead of time, and that’s why we always say, “Trade with confidence.” If you know ahead of time, and you have a plan of how you’re going to adjust your position so you’re always in a profitable position, then you’re not going to be afraid. You’re going to trade with confidence.
That’s our overall objective. If you really want to simplify, it’s to take this white line, which is our opening position, and sit tight, until it rises gradually up to this green line, where we take our maximum profits. Normally, we don’t wait until expiration to take our maximum profits. We normally take our profits right around the 50%-60%, sometimes a little bit higher, depending on the current market conditions.
We don’t normally go all the way to expiration, and there’s a reason for that. In the last week of expiration, before an option expires, there are a lot of things going on with that particular option, that can affect our position.
Also, price can be a risk. Depending on current market conditions, we could have a profitable market position, but if we go into the final week of expiration, then the position may become unprofitable, because of price risk. Normally, we don’t want to take those types of risks, and we take the position off, prior to expiration. Usually, seven to ten days prior to expiration. That’s not such a bad thing, and I’ll tell you why, that nobody else will probably ever tell you. Not anyone from retail investors, and probably not any market maker, either.
I’ll tell you this now, but you may not understand exactly what I’m talking about. These Greek positions, the Delta, the Gamma, the Theta, and the Vega, will change dramatically as we get closer toward expiration.
In fact, Theta may drop off dramatically. Theta is the primary profit producer for these types of positions. We want these Theta number to be positive, at all times. The closer we get to expiration, because we’re doing a lot of “out of the money” credit spreads, and double diagonals, there may not be much Theta left.
In other words, if there’s not much profit potential left in the position, why keep the position open? Because there’s only seven days left until expiration, the options that we’ve written are extremely low-priced options. If there’s only $1.83 of Theta left on a per-day basis, why take the price risk? Why take the risk of the price moving against you, when there’s only $1.83 of profit potential in the position?
It doesn’t make any sense. It’s just like a business that has a very low margin item, let’s say you have to pay $850 to a wholesaler for, but you can only sell it for $900. It doesn’t make a lot of sense to keep that kind of product in your stock at such a high cost, when there’s very little profit potential in it.
It’s the same thing here. We only want to keep this position as long as Theta is working in our favor. Theta is the rate of decline of the option that we sold. In this case, in these positions, which are live positions, we’re collecting $31.37 a day, in decay of the options that we’ve written.
As that continues to decline, then we do not want to hold that position any longer. It doesn’t matter what our current profit and loss position says, at this point. Eventually, Theta will catch up.
So, that’s really our goal. Our goal is to move this white line up to this green line, and keep our price in the center of our profit graph here. So, hey, enjoy these videos. You’re going to find a way to trade that is unbelievably profitable, that will serve you for the rest of your life. These principles never change.
I also want to show you what the current profit potential is. Like I said, we only do one or two or three contracts. Now, when you get to the position where you start to have a great deal of confidence in your abilities to not only put on, select, and plan your trades, but also to adjust them, then you can do as many contracts as you want.
Like I said, we’re only doing a couple contracts on each one of these positions. Our profit potential, at this point right here, is $1289. That’s only 1 or 2 contracts. What if we were doing 10 or 20 contracts?
Well, just add a zero to that. Now we’re up to $12,890 in profit potential. Normally, we only hold these trades up to three or four weeks. That’s not a bad profit potential.
This is how professionals trade the market as a business. They don’t leave things to chance. They manage by the numbers. They manage their positions. They adjust when necessary. That’s how money is made in the markets.
There really is no limit to the amount of money that you can make. As long as you have the capital, you have the principal, you can make as much money as you want.
That’s it for this introductory video. I hope that you guys really got excited about this, because it is a very exciting business to be in. We’re going to have a lot of fun in this course. The videos will blow you away. You’re going to learn stuff that you’ve never learned from anyone else. Believe me, I’ve been trading and investing for 20 years. It’s extremely rare that anyone has ever revealed these types of trading secrets before. I’ve taken the $3,000 seminars, the $5,000 seminars, and the $20,000 courses and seminars, and there are very few people that actually learn how to do these types of monthly income trades.
It’s extremely rare. But once you learn it, this is the kind of stuff that you can hand down to your kids and your grandkids, because the principles will never change. Trade with confidence.