$10k Mistake Reveals Secret to Winning 93% of Trades

Yesterday I kicked off the Options Boot Camp with Andy Crowder, and it was a roaring success. His exclusive Training #2 goes LIVE tomorrow:

 Options Strategy Session: Copy My Trading Playbook with 5 Simple Strategies

You're going to see the top five PROVEN strategies that deliver 80% to 93% winning trades. Click here for access - it's completely free.

Before tomorrow's live training, you've got to catch up with Training #1. You'll discover the RULES for trading, the three-step trading process, how to manage and reduce risk, and Andy's No. 1 trading indicator.

Your video replay is right here (no registration required).

Let me tell you a bit more about exactly what you can expect to learn in the video.

Inside Options Boot Camp Training #1

4 Minutes: Let's start with the GOAL of the webinar: to show you how to earn $1,393 in monthly income payments over the next 12 months, without complicated trades.

10 Minutes: Andy explains how he LOST more than $10,000 by making a HUGE mistake. He was BUYING options, and initially made money. He then increased the size of his trades, and within a couple of weeks lost everything. That early experience has helped him discover the No. 1 rule for success: NEVER BUY OPTIONS.

28 Minutes: The stock market can underperform for long periods of time, even more than 10 years. Andy says, "Investors are at the mercy of the investing gods," when it comes to long-term investing. Investors must have a strategy for making money, EVEN if the market moves sideways or declines for an extended period of time.

30 Minutes: Speculators guess the direction of a security . . . whereas the best traders use calculations - something called probabilities - to determine the likelihood of winning a trade. This lets them make informed decisions, with a true sense of the potential outcomes.

31 Minutes: Selling options makes sense because we can WIN 70% to 90% of trades. And if you WIN more trades, your account can grow in ANY type of market.

 39 Minutes: Andy uses three steps for making winning trades. Step #1: Use ONLY highly liquid stocks and ETFs. He shares his list of ETFs inside the video.

42 Minutes: Step #2 is to pick a few indicators, and use them religiously. Andy's favorite is Mean-Reversion. He uses the Relative Strength Index (RSI) to determine if an ETF is "overbought" or "oversold." He even tells you what RSI levels he's looking for, before making a trade.

48 Minutes: Finally, Step #3 is to find a trade with a high probability of success. At a minimum, look for a 68% chance of expiring out of the money. Most trades are in the category of 80% to 90% chance of success. Again, it's all about the math.

54 Minutes: Risk management is KEY to success. If you don't have a strict plan in place, you'll lose your shirt. Account size and position sizing is key to managing the risk inside a portfolio.

55 Minutes: The chance of going bankrupt with a 5% allocation per trade is 1 in 3.49 billion! So, if you keep your trades small, you have a VERY small risk of losing your capital.

Now that you've seen what's inside Training #1, it's time to get on board with Options Boot Camp Training #2.

Just click here to confirm your spot right now.

Please do NOT wait another minute.

With 1,159 people attending Training #1, this was our most popular trading event of 2017!

NOTE: Our webinar software only allows 1,000 people to attend simultaneously, so you may have had trouble getting into the webinar room.

Get onto my special website now, and I'll reserve your spot.

 

The Top 10 Stocks & ETFs for Winning More Trades

Successful trading STARTS with having the RIGHT strategies (go here and I'll reveal my top 5 simple income strategies).

Yet even the best strategies won't work if you're trading the WRONG stocks and ETFs.

In the early 1900s, you could've been the best jockey and had the fastest horse. Yet you'd lose a race against a Model T Ford.

Why? Because a horse - even a very fast horse - can only run 25 - 30 miles per hour. Whereas the Model T tops out at 45 MPH. A horse just isn't in the same league as a car.

The same is true in trading. You're going to LOSE if you're trading the wrong stocks and ETFs.

The foundation for ALL of my options strategies starts with a watchlist of highly liquid, optionable ETFs and stocks.

Efficiency is a key factor to successful trading. Winning over the long-term requires using ONLY liquid options. Anything else will jeopardize even the best strategies.

You must trade highly liquid, optionable ETFs and stocks BECAUSE you want price efficiency on your side.

Options volume can vary dramatically between underlying assets (ETFs or stocks). Just think about the volume difference between a stock like Apple (Nasdaq: AAPL) and a small-cap stock like Spectrum Pharmaceuticals (Nasdaq: SPPI).

If the volume isn’t there, you will have a very wide bid-ask spread. A wide bid-ask spread leads to what’s known as slippage. Slippage makes getting the best price difficult. It could possibly mean having to pay 5% to 15% extra for the illiquidity. Just think about how much money that would equate to over one year.

EXCLUSIVE: The #1 Rule for Earning $1,393 in Monthly Options Income (click here)

Let’s look at an example.

spy1.png

The SPDR S&P 500 ETF (SPY) is one of the most heavily traded ETFs. It shows what I like to see in a bid-ask spread. As you can see below, at each strike for both the calls and puts the bid-ask spread is at most $0.03 wide. Ideally, that’s what you want to see.

Why is this important? Because if you buy at the ask and sell at the bid (or vice versa), you only have to make up at most $0.03, or 1.1%, on an option priced at $2.63-2.66.

Let’s say that the bid-ask spread was $0.25 wide on that same option costing $263-$2.66. Even though I would suggest setting a limit price in between the bid-ask, you would still have to make up $0.125 or roughly 5%. And that’s the best-case scenario.

spy2.png

 

In many cases the bid-ask spread is upwards of $0.50 or more.

Think about it. Do you want to make an investment where you're starting out down 5%, 10%, or even 20%?

I've seen lots of folks trade tiny and exotic ETFs, or options on thinly traded small cap stocks. And I'll tell you, I've never seen someone do this with any long-lasting success.

Here are the Top 10 Stocks and ETFs for trading options:

1.       SPDR S&P 500 ETF Trust (SPY)

2.       Powershares QQQ Trust (QQQ)

3.       iShares Russell 2000 ETF (IWM)

4.       SPDR Gold Trust (GLD)

5.       Apple (AAPL)

6.       Facebook (FB)

7.       Dow Jones Industrial ETF (DIA)

8.       SPDR Energy Trust (XLE)

9.       SPDR Consumer Discretionary (XLY)

10.   Netflix (NFLX)

This is a great starting point for trading. Inside my FREE Options Boot Camp, I'm going to share 30 - 40 additional stocks and ETFs that I like to trade.

Click here to confirm your spot in webinar #1:

The #1 Rule for Earning $1,393 in Monthly Options Income

This exclusive 3-part training could be the KEY to helping you win 80 - 85% of your trades. I'll see you next week!

Andy Crowder

 

Chicago Floor Trader Shares 5 "Keys to Success"

Most investors don't understand the true concept of leverage. In fact, the average guy trading from home takes on far greater risks than he probably realizes. Yes, the rewards can be amplified, but so can the risks.

Today, I'm going to show you how professional traders maximize their gains. I was lucky enough to learn these lessons from my mentor -  a guy name Larry who was one of the first "floor traders" at the Chicago Board Options Exchange (CBOE).

Larry taught me to understand the importance of thinking in probabilities and how it allows me to define my own risk.

As a result, I can understand the risk associated with each and every investment in my portfolio. Plus, I'm able to follow a few simple guidelines that have allowed me to conservatively grow my wealth using options.

Here are a 5 ground rules that you must follow:

·      Always think in probabilities (see it live by clicking here)

·      View options as an investment, not a trade

·      View options from a portfolio perspective

·      Allow time to work for you

·      Understand how options impact your overall portfolio

Do you think about probabilities on each and every investment you make?

Every successful trader that I've ever met is 100% focused on probabilities. And you should focus on this too.

Keep it Simple: Understanding Probabilities of Success

My favorite way to trade starts with this foundation:

Find a highly-liquid ETF in an extreme overbought/oversold state. That's when I begin to look for a high-probability trade.

But before I get into the heavy stuff, let me start out with some obligatory technical mumbo jumbo and then I will get to an example that should hopefully help to clear things up.

Probability of expiring out-of-the-money: The “probability of expiring” reflects whether the price of the underlying stock or ETF is above or below a strike price at expiration.

A stock or ETF will either finish out of the money or in the money, so there are two possible scenarios for probability of expiring: probability of expiring in the money or probability of expiring out of the money (Prob.OTM).

calls.png

 

We want to keep it simple, so let’s focus on what matters – probability of expiring out-of-the-money.

Probability of expiring out of the money is the chance that a strike price will close at expiration below an underlying stock price for calls and above an underlying stock price for puts.

My preferred trading software – Thinkorswim from TD Ameritrade – offers this helpful tool. For those of you who do not have a platform that offers Prob.ITM, you can just use the delta of an option, as it is roughly the same percentage.

I will explain in a moment why it is so valuable to know the Prob.OTM. Again, before I get to the nitty-gritty, let me explain “probability of touching” (Prob.Touch).

Probability of touching considers the possibility of the stock hitting (touching) the strike price at any time between now and expiration.

Again, I realize that you may not have access to trading software that gives you the probability of touching. Any worthy trading software will provide you with the delta of an option. And the Prob.Touch is simply double the delta.

So, the real question is, how can we use Prob.OTM and Prob.Touch to our advantage? Look at the chart below.

When I was putting together this example, the price of the SPDR S&P 500 ETF (NYSE: SPY) was trading at $250.09 and in an overbought state. My assumption based on the current overbought state of SPY is that the S&P 500 would move lower or at least slow down its current upswing over the next 30 days.

This is where it gets interesting.

Because I think SPY will slow down its current ascent, I want to choose a strike that had a Prob.OTM that is at least above 50%, and in almost all cases higher. I prefer 80%.

Look at the strikes below for SPY call options to see what qualifies – 208 and above. The strike immediately above the price $250.09 of SPY, 251, has a Prob.OTM of 56.84%.

calls2.png

 

That’s not high enough for me. It is essentially a coin flip. Again, I prefer something that has a higher Prob.OTM – say the November 255 strike, for instance. It has a Prob.OTM of 76.66%.

That means that that if I sell a vertical call spread, otherwise known as a bear call spread, I might sell the 256 call strike and buy perhaps the 258 strike. The trade would have a probability of success (also known as the Prob.OTM) of 81.49%. Extrapolate the 81.49% out 100 trades or 1,000 trades and you begin to see the value of using options strategies with a high Prob.OTM.

But what about Prob.Touch? How does that factor into all of this probability madness? Prob. Touch should be viewed as the potential stress level of a particular trade.

calls3.png

 

In our case, if we sold the SPY November 256/258 call spread, the underlying ETF would have a 38.52% chance of touching our short strike of 256. I like that percentage because there is still a low probability that SPY will “touch” my short strike.

You'll find that this is invaluable information, because it gives you a good idea of how stressful the trade will be.

Just think if we decided to choose to short a strike with a lower Prob.OTM, which inherently has a higher Prob.Touch – at say, the 254. Again, we want to use a bear call spread, so we would sell the 254/256. The 254 has a Prob.OTM, or probability of success, of over 71%, which is still fairly high, considering a stock trade only has a 50% chance of success.

But if you notice the Prob.Touch you will discover that the probability is over 58%. That just means that while you still have a good chance of the trade going in your favor, you should expect to experience some stress with the trade.

Most traders don’t think about this important aspect. Always remember – you want to take emotions out of the equation. One way to do this is position sizing, which should ALWAYS be considered with each and every trade. But the other way is to keep your Prob.Touch below 50%, and preferably below 30%.

These strategies are NEW for most folks. And that's why I'm organizing a 100% FREE training for Strike Price readers.

Training #1 starts on Tuesday. Go here right now to access my LIVE trading event:

The #1 Rule for Earning $1,393 in Monthly Options Income

Andy Crowder

#1 Indicator = Make Money Winning 85% of Trades

How many indicators do YOU use when trading? If it's "more than 5 or 10," it's way too many. Don't worry - it's a common problem.

Most traders use FAR too many technical indicators. Bull flags, bear flags, dojis, channel retracements and Fibonacci retracements are of the favorites.

Unfortunately, there is no “edge” when using technical indicators, particularly when using them in combination with one another.

New traders typically overwhelm themselves with the latest and greatest indicators.

And I've seen many traders move on to another indicator when it happens to fit their current market perspective.

It’s called "curve fitting" and it is extremely detrimental to successful long-term investing.

What's my advice? Keep it simple.

Early in my career I tried almost every indicator out there. It was like I was one of King Arthur's knights, on my quest to find the "holy grail" of indicators.

My search cost my tens of thousands in trading losses. And I'd like to help you avoid my mistake.

That's why I'm opening up this LIVE Options Trading Boot Camp. Click here for instant access.

To be successful, you must find a few indicators that fit your trading style. And then stick with them for the long haul. Remember, indicators are just tools to help you take the emotion out of investing.

The more mechanical the investment process, the better.

Now, I'm a bit unique. I'm a contrarian with a strong belief in hard statistics.  So, it makes sense that I would go with an indicator that measures mean-reversion.

Inherently, I prefer to fade an index whether overbought or oversold when the underlying index reaches a “very overbought/very oversold” state.

Discover how to WIN 85% of your trades! My FREE Options Boot Camp reveals step-by-step instructions, the top 5 strategies and 10 live trades.

Fading just means to place a short-term trade in the opposite direction of the current short-term trend.

Think of it as waiting for a well hit fly ball to hit its apex, or anticipating a bounce when that ball hits the ground. Nothing rises forever – and something that falls hard will bounce. I wait for an asset to reach extreme high or low conditions… and then get on board to ride the asset back the other way.

What is my favorite indicator?

It's the Relative Strength Index (RSI).

RSI, developed by J. Welles Wilder, Jr., is an overbought/oversold oscillator that compares the performance of a stock or ETF to itself over a period of time. It should not be confused with the term “relative strength,” which is the comparison of one entity’s performance to another.

Basically, the relative strength index allows me to gauge the probability of a short- to intermediate-term reversal. It does not tell me the exact entry or exit point, but it helps me to be aware that a reversal is on the horizon.

When an index reaches an extreme state, a short-term reversal is often imminent.

Here is my guideline for using RSI on ETFs.

  • Very overbought – an RSI reading of greater than or equal to 85.0
  • Overbought – greater than or equal to 70.0
  • Neutral – between 30.0 and 70.0
  • Oversold – less than or equal to 30.0
  • Very oversold – less than or equal to 15.0

Since I’m looking for extreme conditions, I almost always focus only on very overbought and very oversold conditions. I use three different RSI time frames – the shorter the duration of the relative strength index, the more I want to see an extreme reading. The time frames are RSI (2) and (5) days.

Let's look at a trade example.

The SPDR S&P 500 ETF (NYSE: SPY) is making new all-time highs.

Above, you can clearly see the “very overbought” and “overbought” state in the RSI (2) and RSI (5), respectively. While this does not occur often, when it does, I consider it an incredible opportunity to make a high-probability trade.

Knowing that the potential for a short-term pullback in SPY is imminent, you could employ a strategy known as a bear call spread. I don’t necessarily want to own SPY, but I wouldn’t mind trading here for the potential to make 26.6% over the next 38 days.

As an options trader, I love this scenario.

Extreme, short-term, overbought readings – like what we are currently witnessing in SPY and many of the major indexes – oftentimes lead to a reversion to the mean over the short term.

“Reversion to the mean” simply means that there is a greater chance of a short-term reprieve or “fade” in the price of the underlying stock. I like to think of it as the perfect opportunity to sell premium.

Right now, I’m bearish on SPY over the short term. I expect to see sideways-to-lower price action over the short term. But, I want to increase the odds of my bearish stance, given the extreme in mean reversion, by using this options strategy that allows me to have a margin of error just in case the short-term extremes continue.

In this case, a bear call spread – or vertical call spread – is the strategy of choice. It’s probably the most used strategy in my arsenal of options selling strategies.

How to Make the SPY Trade

To start, I have to decide which of several expiration cycle to choose. I prefer to choose an expiration cycle with roughly 25-50 days left.

For example’s sake, I’ll choose the October expiration cycle with 38 days left until expiration.

Once I decide which expiration cycle to use, I go straight to the probabilities.

I typically start with a short strike that has a probability of success around 75% or higher. The short strike defines my trade. It tells me how much I am going to collect in premium, plus my probability of success on the trade.

The October 253 strike has a 74.08% probability of success. Essentially, by choosing the 253 strike, I am content with the 74.08% probability that SPY will not push from its current price of $250.03 to $253 over the next 38 days.

Next, I need to choose a strike to buy. This defines my risk. I can decrease my risk exposure by choosing a strike that is closer to my short strike of 253 – say, the 254 strike. Or, I can choose a strike that is further away from my short strike of 253 – say, the 255 strike and pay less for the contract, thereby creating more premium in the trade.

I could sell the October 253 calls for roughly $0.78 and buy the October 255 calls for roughly $0.36. That equates to a credit of $0.42, or 26.6%.

Again, I keep it simple, very simple. Why would I attempt to create a complex options strategy when my strategy has a win ratio over 85%?

Why would I want to use an arsenal of gizmos and widgets, when I can use a simple tool like a hammer to get the job done?

Simple = boring and often that does not entice traders, but I am not here for excitement, I am here to provide a sound options strategy that makes people money over the long haul and that is exactly what the RSI indicator coupled with various options strategies (like bear call spreads) has succeeded in doing.

 

 

Las Vegas, and My #1 Rule for Trading

In trading, I always set a limit to define my risk. So, on a trip to Las Vegas last year, I decided to do the same exact thing.

Now, you should know that I'm NOT a gambler. But after 3-days attending a conference in sin city, I had to try my hand at the tables.

Before leaving Caesars Palace, I hit the cash machine and pulled out $100 (I even left my debit card in the hotel room, to avoid the urgent to get more cash later in the night).

Just like I do when I place a trade, I set a limit of $100 to gamble with on this occasion, thereby defining my risk. Of course, just like trading efficient options markets I wanted to get as much mileage out of my $100 as possible., Sso I headed to old downtown Vegas where the odds and minimum bets were the best. My goal was to have fun, I just wanted to have fun, but at the same time I wanted to maximize my time on the table, ultimately knowing that eventually the casino’s small edge would catch up with me. It always does when the odds are stacked against you.

Amazingly, I found a $1 craps table with 100x times odds within minutes of arriving downtown. And I quickly discovered a half-drunken gentleman who let it be known that it was his payday. He had managed to triple his paycheck over the past hour.

All I could say was “awesome” and wished him continued success in his winning ways. But I soon noticed that his destiny was bleak. He was taking low-probability bets at every turn.

Meanwhile, I, on the other hand,I methodically played the pass line and maximized the odds behind each wager.

I allowed probability to make Probability was guiding my decisions. But my strategy, at least for the time being, Initially, my strategy was failing me. And to my left the half-drunken gentlemanwas the drunk guy, who continued to move toward a complete state of drunkenness, continued to defy who defied the odds by WINNING making low-probability bets … and winning.

Every “right” decision I made quickly turned into a loser, while every “wrong” decision made by by my now drunken playing partnerthe other player was a winner.

His loud drunken statewinning streak had caught the attention of passersby. Several made comments such as “wow, this guy is amazing” or “this guy is good.”

Of course, no one paid attention to my methodical and boring high-probability strategy, probably because I wasn’t loud and boisterous. Why would they? I wasn’t winning.

But I knew his fate was sealed. He had no process, no strategy. He made drunken stupid bets based on zero statistical advantages. Yet he continued to defy the odds.

Meanwhile, my statistical methods – making every bet to maximize my probability of success – were losing.

And now itThen it became even more interesting. The gentleman gambler started to increase his bets.  I'm not a professional gambler, but I knew that tThe end was near.

How could I tell? Because it's just like trading. I can’t tell you how many timesDuring my 20 years in the markets, I’ve seen traders , particularly options traders, become overconfident after a winning streak and decide to arbitrarily increase their position size. This is often a recipe for catastrophic failure.

Predictably, the gentleman guy eventually gave up all of his winnings and his paycheck. Sadly, his ignorance regarding probabilities had caught up with him.

I, on the other hand,Meanwhile, I was back above break-even (after being . I was down to a little more than $310 at one point). And then, before the probability gods began to finally work in my favor.

So, what’s the lesson herefrom my late night in downtown Las Vegas?

It all goes back to my #1 rule as a trader: NEVER BUY OPTIONS.

It's critical to sSpend more time focusing on the process and the strategy rather than the end results. Remember, if randomness was not a factor, every decision we make as investors would be based solely on the outcome. And if that were the case, the process or strategy would be judged solely on the end result.

But as we all knowIn gambling and trading, randomness is ever always present in investing as it is in gambling.  And aWlthough we are drawn tooften judge our investments decisions and those of othersbased upon on outcomes. However,, it is often dangerous to do so without some perspective on how they got therethe process.

This type of behavioral trait leads to a herd mentality and failure. as a long-term investor. Randomness can indeed teach us the wrong lessons.

But with a sound process or strategy, we you'll know what to expect.

Yet, most self-directed investors Unfortunately, most traders don’t take the time to learn strategies with statistical advantages. They prefer buy the stock, ETF or mutual fund that has recently performed the best. They have no systematic rules or process, just a hunch based on randomness.

The drunken Las Vegas gentleman gambler had no process and no discipline, and we saw his fate. The market for trading stocks or options is no differentexactly the same.

This is why I love to trade options. I almost always want to act trade as the casino.

How do I do this? I want to sellBy selling investors options with a low-probability of success. Typically, I sell options to other traders, and they have a 15% chance of winning.

with approximately a 15% chance of success. This gives me an 85% chance of winning on each and every trade.

Good Trading,


Andy CrowderI challenge self-directed investors to find a better strategy when investing in stocks, ETFs, or mutual funds.

 

The Simple Way to Earn 14.5% Low Risk Income

Every month, thousands of traders show up for my LIVE webinars.

During these webinars, I always do a couple poll questions. And one question I often ask is:

What is the #1 reason you are joining us today?

Over 86% of our readers stated they wanted to “become a better trader” or “learn a new trading strategy.”

Do you want to become a better trader? Click here right now to access my EXCLUSIVE Options Boot Camp - 100% FREE.

My goal is to help YOU become a better trader. And I do this in a variety of ways including in-depth articles, videos and our crowd-favorite educational webinars. But we’ve always wanted to do something a little more in-depth… with a boot camp training.

It’s time to dedicate a few solid weeks to taking that deep dive into some of the best options strategies the investment world has to offer. The same strategies that options professional use.

Inside this LIVE Options Boot Camp, we plan to cover a variety of options strategies and my high-probability approach.

Specifically, we'll teach you the following strategies:

·         Selling puts

·         Covered calls

·         Poor man’s covered calls

·         Bear call spreads

·         Bull put spreads

·         Weekly options

·         Iron condors.

You'll discover the basics of the strategy and my approach. Plus, I plan to reveal some real-time trades as my examples. Examples, that we plan to follow up with and discuss in the boot-camp live training session.

Hopefully, by the end of our version of a boot camp, you will have the tools necessary to trade options successfully over the long-term.

 

One Simple Trading Strategy... Could be Perfect for YOU

So, without delay, let’s talk about one of an easy to use and effective options strategy. An options strategy that offers the highest-probability of success of any strategy, stock or options, in the investment universe. An options strategy that allows investors to collect a consistent stream of income. The strategy…selling puts.

Here’s how selling puts works – and how using this strategy can boost your income while you wait for the price you want to pay on a given asset.

For instance, say you want to invest in the energy sector. You aren’t sure about which company to choose so you’ve decided to buy the SPDR S&P Oil and Gas Explorers and Producers (NYSE: XOP).

The energy ETF is currently trading for roughly $31, but you feel the price has been beaten down enough and a bounce is looming, especially if you have long-term expectations. Rather than set a limit price of $29, $2 below the current price of the ETF, you can sell puts at your “limit price” and boost your income while you wait for the ETF to hit your price of $29.

You could sell options premium in November for at least $0.83, or $83 per contract. That’s a 2.9% gain over 70 days or 14.5% annually. You can use the put premium to lower the cost basis of XOP or simply use it as income... your choice.

A quick aside: Typically, when you have a wide bid-ask spread you want to sell your option of choice halfway between the bid-ask spread. This alone will increase your return significantly over the long term.

In comparison, say you wanted to purchase the 100 shares of the ETF at $29 for a total capital outlay of $2,900. So, you decide to set a limit at $29 and wait and wait for the ETF to hopefully hit your limit price.

But if you sell puts at the strike price of your own choosing – you get paid.

I am always befuddled by the fact that most investors choose not to sell puts, particularly in this situation.

You are willing to buy the ETF at $29, so why not collect some premium and lower your cost basis even further by selling a few puts? In this case, you would sell one put at the November 29 strike because you are willing to own 100 shares of the stock at $29. Remember, one options contract equals 100 shares of stock.

So again, we could sell 1 XOP November 29 puts for roughly $0.83 or $83 per contact over the next 70 days. If XOP falls below your strike of $29 at expiration you would be assigned the stock at $29 share, 5.7% lower than the ETF’s current price of $30.76.

Additionally, you can subtract your collected premium of $83 to decrease your cost basis even further. So, in reality you actually own the ETF for $28.17 ($29 – $0.83) . . . a savings of 8.4% from the current price of $30.76.

And you can keep selling put options, thereby lowering your cost basis further, until the ETF hits your stated price. Again, if you did this over the course of a year, you could sell puts on XOP approximately five times for a total of $4.15 or $415 (based on one contract).

Selling Put Options: Harness the Power

Annualized, that is an 14.5% return on the $2,900. It would lower our cost basis from $29 to $24.85.

Now you can start to see the true power of selling put options.

I have to urge caution – and point out the obvious: you should never sell puts on a stock that you don't want to own at that strike price. That’s how most people get in trouble – they only pay attention to the income – forgetting that they CAN and eventually will get put to the shares.

Now . . . knowing that you are able to lower the cost basis of a stock that you want to own anyway, why would you choose to do things differently?

My Options Boot Camp is NOW OPEN.

Go here right now to confirm your spot - no registration required!

Good Trading,


Andy Crowder