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Options
trading money management is the heart and soul of making your
account grow while preventing unwelcome disasters.
Trade with intelligent money management and increase your
confidence.
Ok so let’s say your stock options trading system is actually
making you money. You
feel that the system can be trusted and now you are anxious to ‘up
the ante’ and start making bigger returns.
So what do you do next?
Well first of all, keep trading but just keep your position sizes
small, for now. It’s
now time to do a little tweaking with your money management of your
position sizes. Doing
this right could possibly make you hundreds of thousands up through
millions of dollars, literally.
Doing options trading money management wrong can cause you a
lot of misery, pain, and suffering and wipe out your account
quickly!
In essence, you want to keep your position sizes (the total amount
you have invested into an options trade position) even and never
more than 10% of your options trading portfolio on a small account
and down to 1% to 2% options position sizes on very large accounts.
With options, even if you kept your ‘bet’ size the same,
say 20 contracts for each and every trade, you could make a great
living off just one stock – even if you never increase your
position size. But if
you wanted to taste a little of that compounded, ‘parabolic’
growth increase your options position size by 20% to 30% max every
time you double your account (never increase it to 100%!).
In case you’re
reading this and do not have a profitable Stock Option Trading
System or stock there are excellent systems available. You can try
and figure a system out on your own or you can short cut success by
purchasing some one else’s system or service and emulate what they
are doing.
Here are some basic trading system approaches that can net out
consistent profits: Trade
trends. Trade pivot
points. Trade swings in
the direction of the trend. And
that pretty much covers it for successful moneymaking, directional
options trading that’s worth your time.
If you’re profits are bigger than your losses then you have a
winning trading system. You don’t necessarily have to win more
than you lose. Yes you
can actually make money by losing more than you win if your winners
are big enough and your losers are small enough.
The issue when trading options is that when you lose you can
easily take a 25 to 50% or more of your position just by simply
stopping now through the stock price action.
That means you will want a system that doesn’t lose too
often.
This brings up the issue of
making a fortune in options trading without losing your shirt.
There is nothing worse than making a fortune in options trading then
quickly giving that fortune back.
If you’ve ever done that you can understand why people
jumped off bridges and have tall buildings in 1929 during the great
stock market crash. It’s
a most miserable feeling because you get so high and excited, and
happy from your gains and then if you lose that if worse than never
having had obtained it in the first place.
So promise yourself now that you’ll never put your self in
that position and that you’ll aggressively guard your profits at
all times.
Firstly, you’re going to have to get committed to being extremely
serious about making a lot of money with your options trading.
It’s a psychological game where you need to convince your brain
(and your ‘subconscious’) that you really want the success are
willing to do what it takes to get that success.
For some reason most people who trade options don’t like
the concept of commitment or getting serious about their options
trading (maybe they are too excited about ‘easy money fast’.
It’s interesting to note that money can be ‘easy’ and
come ‘faster’ once your are committed to your options trading
success.
Well believe me, if you can get over the initial hump of committing
to your options trading success it’s quite painless and your
options trading becomes so much more fun and exciting, not to
mention successful. Why?
Because now your “inner person” can justify you making
hundreds of thousands of dollars or millions trading options and not
feel guilty about it because you’ve committed to it and “paid
the price” to get it done.
Oh yeah, feeling
worthy of massive profits that completely from trading options is
very critical to you if you want to keep your money.
Bad, false beliefs about your worthiness to make and keep a
lot of money or whether having a lot of money is “bad” or not
can seep into your mind at any time if you’re not paying
attention. They can
count them your friends, your family and in particular your parents. Just because your family or your parents have bad Money
believes that does not make them bad people!
Everyone needs to program their mind correctly about making
and keeping money on their own.
So once you set your mind straight about being okay with hundreds of
thousands or millions of dollars in options profits it’s time to
move on to the mechanics.
With options trading you cannot hundred percent compound your gains.
So get that out of your mind now because throwing your entire
account into a trade is a very bad habit and doing so can open a
Pandora’s box of a lot of future pain.
So here is the secret to grow your options account at the quickest
rate: when you double
your account, increase your options position size by 25%. No more than that!
Take a look at some of these 2007 results on OPIVO Trading below.
What if you just used 20 contracts on each trade?
… And didn’t even compound!
2007
OPIVO Trading System Results
The
OPIVO Portfolio "The Fantastic 10"
- AMGN
8/8 100% Winning
+69.34 $/share
- RIMM
12/12 100% Winning
+284.67 $/share
- AZO
17/19 89.47% Winning
+169.73 $/share
- GM
13/15 86.67% Winning
+61.46 $/share
- CLF
10/11 90.91% Winning
+187.1 $/share
- GOOG
11/12 91.67% Winning +589.28 $/share
- LVS
12/15 80% Winning +138 $/share
Total:
+$2,562.84 "Points" = "$s Per share"
- GS
14/17 82.35% Winning +336.01 $/share
- BIDU
7/7 100% Winning +483.28 $/share
- AAPL
12/15 80% Winning +243.97 $/share
185%
Cash on Cash Stock Portfolio Return.
More importantly performance is done in a super safe, a most
conservative way of trading, with no big draw downs like the 'buy
and hold' guys. "Steady Growth on Stock Market
Steroids" .... And we haven't even mentioned the OPTIONS
trading returns!!
Ok
let's mention Options Trading Returns. Let's keep it simple so
let's say a diligent Trading THE BOMB trader used 20 contracts of
options, calls or puts, on each Trading THE BOMB position.
Let's also only give 70% of the net stock price gains to Options due
to option premium and deltas.
Net
results: 2,562.84 profit points X 70% = 1793.99 Options profit
points x 20 contracts (it's like 2000 shares of stock) = Yikes,
maybe we shouldn't print this... well anyways you'd be looking
at $3,587,976.00 in profit.
And
it would take on average $870 per options contract, averaging all
the options contracts over the various stocks X 20 or $17,400
per position. But hey if you are just getting started - just
trade 2 options contract per position!
In
2007 our portfolio only had 131 total trades or about 13 trades a
year, or about one a month. Now that should seem like a very
doable pace for you
The moral of the story is… take it easy.
Don’t push the envelope with options.
Your comfort level is a good indicator of position size.
If you feel totally comfortable with 10 contracts then trade
10 contracts. If 10
contracts feels a little crazy, move that amount of contracts down
to 5 contracts. Just
remember, if you have a small trading account do not risk more than
10% in a position ever with options.
If you have a larger trading account reduce that amount for
your stock option trading system down to 5% and then 2% and 1% when
you get really huge.
I expect you to succeed! So
please send me your success story when you’ve accomplished
your options trading success.
For a Stock Option Trading
System that can help you get on the fast track to success fill out
the form below.
OPIVO Trading allows you
a new great angle for your online options trading. You can
take a three week free trial, no obligation. And at three
weeks you should be able to see plenty of OPIVO trades. in
order to get more information on OPIVO Trading simply fill out the
form below and you will be transported to a free report on OPIVO
Trading.
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