With the first week of 2017 trading in the record books, we covered and alerted some pretty awesome winners in the chat room. Even with everyone putting some green in their account to kick off the year, the options trading tips focus of this illustration leans on the fact: Mom & Dad Were Right!
Remember all those times your mother tried giving you that spoonful of wisdom, talking about “patience is a virtue”, but all you wanted to do was run at top speed, regardless of the blah, blah, blah coming from authority. Well, she was right and when you have the immaculate set ups like we just did with the FANG stocks and their CES Showcase this week, one other attribute Mom used to preach, “less is more”, is another reason why the one that fed you all those years is still trying to feed you when trading options.
Ok, let’s assume Mom didn’t preach those words of wisdom or you were a test tube baby with two Dads, you’ve probably heard the story of the father bull and baby bull who were sitting atop the hill:
There are hundreds of cows grazing below. The young bull says, “Let’s run down there and fuck a cow!” The old bull says, “No, let’s walk down and fuck them all.”
When trading options, many tend to hit and run like when we were 17 trying to steal a 6-pack of beer. However, while emotions are the least necessary human trait when it comes to applying your money into a semi-predictable mathematical probability, PATIENCE is an attribute which, when coupled with the “less is more” theory, can provide a very low-risk, high-reward outcome for a growing account.
Connecting the dots backwards in order to look forward, let’s see what 1 or 2 contracts would have been worth on those tickers we traded this week to illustrate this example:
- NOTE: Not looking at “bottom entries” and not looking at “top exits” and factoring in the commissions in & out
FB 119 CALLS
Qty. | Buy | Cost | Sell | $ Gain | % Gain | |
1 | $0.25 | $46.48 | $4.00 | $342.78 | 737.48% | |
2 | $0.25 | $72.98 | $4.00 | $715.53 | 980.45% | |
AMZN 775 CALLS
Qty. | Buy | Cost | Sell | $ Gain | % Gain | |
1 | $1.00 | $121.48 | $20.00 | $1,867.78 | 1537.52% | |
2 | $1.00 | $222.98 | $20.00 | $3,765.53 | 1688.73% | |
GOOGL 815 CALLS
Qty. | Buy | Cost | Sell | $ Gain | % Gain | |
1 | $2.00 | $221.48 | $10.00 | $767.78 | 346.66% | |
2 | $2.00 | $422.98 | $10.00 | $1,565.53 | 370.12% | |
BABA 91 CALLS
Qty. | Buy | Cost | Sell | $ Gain | % Gain | |
1 | $0.30 | $51.48 | $2.75 | $212.78 | 413.33% | |
2 | $0.30 | $82.98 | $2.75 | $455.53 | 548.96% | |
CMG 395 CALLS
Qty. | Buy | Cost | Sell | $ Gain | % Gain | |
1 | $0.50 | $71.48 | $3.00 | $217.78 | 304.67% | |
2 | $0.50 | $122.98 | $3.00 | $465.53 | 378.54% | |
TSLA 225 CALLS
Qty. | Buy | Cost | Sell | $ Gain | % Gain | |
1 | $1.00 | $121.48 | $3.50 | $217.78 | 179.27% | |
2 | $1.00 | $222.98 | $3.50 | $465.53 | 208.78% | |
SPY 226 CALLS
Qty. | Buy | Cost | Sell | $ Gain | % Gain | |
1 | $0.35 | $56.48 | $1.35 | $67.78 | 120.01% | |
2 | $0.35 | $92.98 | $1.35 | $165.53 | 178.03% | |
Hits you in the face when you look back at what was and what could have been. But the point really is how every week when we get into a running pattern, up or down, we always (especially Ryan) look back and say Damnnnnnnnnnnn!
The main points about how Mom & Dad were right when it comes to this options trading strategy are a) a little can go a long way when it’s the right time and b) before you hit & run, maybe think about leaving one soldier back to collect just that little bit more.