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If you're ready to take the next step in your options trading career, then this week's issue is just what the doctor ordered. What I'm about to show you is how the real money is made on Wall Street. Once you master this technique, you may not want to trade any other way.
But first, I want you to think about a roulette wheel. A novice might notice two colors on the wheel: red and black. This is similar to the binary outcome of a simple stock trade. You bet the stock will either go up or down (or in the roulette wheel's case, you bet on red or black). That's it.
But upon closer inspection, there are also a couple of green spots on the wheel. So if you bet that the wheel will land on black, you actually have less than a 50% chance of being right. The casino has improved its odds of winning on such bets to just over 50%. And given enough spins of the wheel, the casino is statistically guaranteed to come out ahead over the long haul.
Now, imagine for a moment if you could play just like the house does... tilting the odds in your favor over the long run.
I'm going to show you how to do just that in today's issue, using what's known as a spread options strategy.
As my colleague Jared Levy puts it, spread options give investors an "edge" over the house. But make no mistake; it's not a get-rich-quick scheme. The real beauty of spread options lies in their reliability. When used properly, it can reduce your exposure to the market's volatility by as much as half. And while most investors are stuck playing a zero-sum game, you should be able to make money 70%... 80%... even up to 90% of the time.
Before we get into the details, note that I said "when done properly." The sad truth is that most individual investors don't have the discipline necessary for this strategy. But when you take this sort of steady approach to trading, you'll be far better off than the vast majority of investors.
Jared uses this strategy in his recently-launched premium newsletter, Pro Trader. In it, he's been netting gains of 8.9% (in 19 days), 18.6% (in 24 days), 26.7% (in 26 days) and more.
Make Money From Stocks That Move Against You
So, let's talk about how spread options work.
A spread options strategy is essentially a combination trade, meaning you use two options instead of one. As Jared puts it:
The goal is to sell the option combination for more than you paid, netting a profit. That's exactly the same idea behind trading stocks.
But it's much better...
As long as the stock's price stays above a certain level (the higher of the two strike prices), we walk away with the maximum value.
To best understand how this works, let's take a look at a spread option Jared recommended on Wynn Resorts (NASDAQ: WYNN).
He used the strategy to capture a 26% gain from Wynn Resorts. At the time, shares of WYNN were trading for just under $67. Jared recommended a combination trade -- buying an option with a strike price of $55 and selling one with a strike price of $60 -- that had a maximum value of $500 per contract. He also told readers that the most they should pay to enter this trade was $395.
The maximum profit they stood to make on this trade was $105 ($500 maximum value - $395 entry price). As long as WYNN stayed above $60 (the higher of the two strike prices), they'd generate a 26% gain in 19 days, or 511% annualized.
This means shares could go up, stay flat or even drop to $60 -- an 11% fall -- and readers would still achieve our maximum profit with only $395 at risk. As it happens, Wynn's share price dropped 6.7%.
But it didn't matter. All that mattered was that it didn't fall more than 11%.
Since it didn't, anybody who made this trade pocketed a quick 26% gain in less than three weeks.
Sounds pretty fantastic, right? It's easy to understand why this is Jared's favorite trading strategy, as well as that of many Wall Street insiders. It's also why Pro Trader is the most exclusive trading service we offer at Profitable Trading -- we only reserve a few slots each year for new subscribers, and it can't be purchased online.
So if you want more information about the service, I recommend calling Nate Equall, our account manager. He'll be able to give you more information and help get you started. You can reach him at Nate@ProfitableTrading.com or at 888-308-6247.
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