Options are so powerful and the great thing about them is you can choose what kind of risk you want to expose yourself too based on your own preferences. Yes with trading anything you can choose how much risk to take but with options you can choose how quickly or slowly that risk will increased if your trade goes into the red. Just as in profit, do you want a large profit quickly because you feel confident in your trade or do you want the profit to grow slowly because you want more option for your trade like the ability to grow the size of the trade over time.
For instance, on Thursday February 10th I posted on our Twitter feed a perfect short term trade that was setting up. It was with respect to the $SP500. This was the chart how the chart looked.
We knew that Institutional Supply was the main theme that was in play and so the odds of price dropping were extremely high.
With that understanding I began to look for a good option to trade to take advantage of the short term move I was expecting from price. What I was looking for was a contract that expired fairly soon because the more price moved in the short term the more the value of the contract would increase. I settled on the SPY Feb18’22 450 Call which was selling for $5.25. So I posted this on our feed.
Later as price began to play to the downside I posted an update on the value of that contract which at the time had increased from $5.25 to $6.43. Now let’s say you purchased 10 contracts at $5.25 your investment value would be a total of $5,250 which would now be valued at $6,430 a profit of $1,180 or 22.4% return on your investment.
We weren’t done with this trade yet because we knew price had more to drop. So we held a little longer. The $SP500 continued lower moving into February 11th – the next day – and low and behold look at what that very same contract closed at the next day.
The contract went as high as $13 but settled in at $11.35. The value of the initial investment was $5,250 which now became $11,350 within one day. That is a profit of $6,100 or a return of 116%.
How incredible is that? When can you make over a hundred percent return on an investment within one day? Nowhere!
Let that inspire you because this is real, this is possible, and with hard work you can make this possible. I just proved it to you! ;)
Kevin Araujo
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