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Chuck Hughes International Trading Champion

Trading Options for Income

November 3rd, 2014

Chuck is often asked whether there are certain money management rules that he lives by—or more importantly—rules that play a role in his income trading strategies. When it comes to Option Purchases, he definitely follows the following sound advice:

What makes trading options for income so attractive is the fact that you can purchase options and participate in their price movements without committing a large sum of money upfront, or serving as an official holder of a company’s stock. Another attractive characteristic is that you can give your stock options considerable more “room” to ride market fluctuations than you can with stocks.

Trading Strategy: Know When to Act

However, once an option starts to decline by 20%, we suggest you make a mental note to yourself and begin identifying a smart exit trading strategy. And be sure to execute exit strategy before option hits below 30%. Because experiencing a loss on this scale, can take you a long time to make up.

Trade Options for Income

As part of your exit strategy, decide whether to sell (or put) your options before their expiration date. Or, decide if you see a benefit in rolling options over, which could help you compound your returns while playing with the house’s money (so to speak).

To learn more trading strategies, check out Chuck’s webinars.

Posted by smartadmin at 3:52 pm

Options Advisory Service

October 24th, 2014

“Some education is required before one should attempt option investing,” says Chuck. “For those who are willing to learn how they work, they can become quite proficient at trading options.” Here we offer a high-level summary of what they are, and aren’t, and how small investors can use options as an extremely versatile investment tool for short-term gains.

Options Advisory ServiceSimilar to stocks, options are listed as a security and are executed on one of the SEC-regulated exchanges. In the simplest of terms, they are a contract that involves a buyer who is willing to pay a certain price to obtain certain rights, and a seller who is willing to grant the rights in return for the price.

The key difference between trading options and trading stocks is the time frame on which one holds the security. A stock can be held for an indefinite amount of time, so its value may increase; an option though has a set expiration date. And once the date approaches, an option contract needs to be closed or exercised—or, it will become worthless and not exit any longer, literally.

Other Benefits in Option Investing

When serving as the buyer, you have the ability to follow its price movements and trading volume on a daily basis or even in real-time. When the seller of an option, you too have the ability to quickly learn the price at which your order has been executed. Two other advantages that our Option Advisory Service likes to highlight for those interested in trading options are:

  1. Availability isn’t fixed as is the case with the availability of common stock shares.
  2. Transactions offer less paperwork and shorter turnaround times because options are certificate-less, unlike stocks. Even though, an investor who is trading options isn’t granted a position as a shareholder of a company and allowed to have voting rights and rights to dividends, there’s still great advantages in participating in a company’s or ETF’s potential price movement for a short period of time.

Interested in more? Sign up for our Weekly Option Advisory Service.

Posted by smartadmin at 10:57 am

Trend Trading System

July 31st, 2014

We investors have to deal with a number of
dilemmas—which many times force us to make some very difficult choices. The beauty of using a trend trading system is that you can avoid having to deal with too many dilemmas. And, risks are limited to the cost of the spread, plus your profit potential has no limit.

Trend Trading System

In Chuck’s video, Profiting in a Volatile Market with Spread Trading, he shares how investors can avoid losses by following his 3-Step Strategy, which includes (1) developing a price trend; (2) confirming a price trend; and (3) selecting an opportunity price using the trend trade indicator, the Keltner Channel.

Watch video to learn more:

Keltner Channels

Similar in practice to Bollinger Brands, which uses standard deviations to set trend trade bands (or bandwidth); the Keltner Channel uses an Average True Range (ATR) to set its channel distance (or width). It has an investor place trend trade lines above and below an exponential moving average to help determine a number of factors. Factors such as: whether a stock has been overbought, hit its oversold levels, could anticipate a reverse, or could be ending and approaching a new trend that is important to spot. Keltner Channel’s trend trade parallel lines are designed to follow price action and serve as a helpful trend trading strategy for investors. For example, a downtrend indicates the channel is moving lower, while uptrend means it’s moving in the opposite direction and “flat” means channel is moving sideways. All of which, offers a sound trend trading system that you can lock into—and be profitably positioned to reap its rewards no matter what happens to the underlying stock.

Posted by smartadmin at 3:13 pm

Option Spread Trading

July 17th, 2014

Option spread trading; a form of directional trading considers the direction of the market—and considers it as the most important variable. This form of investing is widely used in methods of spread trading because of the many strategies at one’s disposal to capitalize on regardless if the market goes higher or lower.

When trading for straight long/short trades, you’re on the lookout for a large move in order for you to cover your commissions, trading costs—and to make a profit. But with options spread trading, you can profit even if the expected movement in the underlying stock isn’t large.

For example, let’s say you are optimistic about a biomedical stock, which is trading at $60, and you expect it to rise to $65 within the next three months. You can buy 200 shares at $60, with a possible stop-loss at $58 just in case the stock reverses direction. If option spread reaches its target, you’ll be able to sell for a $1,200 profit (before commissions).

On the other hand, let’s say that you expect stock to only trade up to $62 within the next three months. The strategies behind option spread trading will still provide you with several alternatives to make some money off the hot biomedOption Spread Directional Tradingical stock.

Examples follow:
• If stock goes sideways, spread trading will allow you to sell with a strike price of $60 expiring in three months.
• You can also write two put options (of 100 shares each) and receive a gross profit.
• If stock rises to $62 by the time your options expire in three months, you make a nice gain.
• And, if stock trades below $60, you can buy the shares at $60.

As you can see, buying call options are a great alternative to buying the stock outright. They offer you more flexibility to structure your directional trades. Contact us for more.

Posted by smartadmin at 10:52 am

Bear Spreads for Growth Stocks

June 9th, 2014

We often get asked how an investor can join the growth stock bandwagon when growth has already occurred. Good question. We believe that every investor can take advantage of both a bear and a bull market if they play it smart. And here is what we mean by playing it smart: take the short position to limit risk and use more than one fundamental variable to rank stocks that you invest in.

Bear Spreads for Growth Stocks

Bear Option Spread

To take the short position, we suggest you purchase a bear option spread or a put option when you invest in growth stocks. Both stock strategies will allow you to carry less risk and sleep better at night. Purchasing a bear option spread gives you the opportunity to simultaneously purchase and sell two of the same or closely related future contracts. Alternatively, purchasing a bear put spread positions you well for a possible decline in the price and allows you to purchase bear put spread options at a specific strike price while also selling the same number of puts at a lower strike price.

Compare Multiple Fundamentals

To determine which growth stocks to invest in depends on you looking at multiple fundamentals of a given company and asking yourself?

  • Is the company selling more of its products and services at higher and higher profits?
  • Is the company continuing to innovate and adapt to market demands, whereby securing their leadership position?

Then we suggest you look at other fundamentals, such as a company’s positive earnings revisions, sales growth, operating margin growth, and earnings growth. Followed by looking at their return on equity, which is a key measure of a company’s profitability. (The higher the number, the more profitable a company is.)

Good luck—and feel free to contact us directly for more tips!

Posted by smartadmin at 8:56 am

Sector Trading with ETFs

May 22nd, 2014

Holding sector ETFs as part of an overall sector trading strategy can help you reduce volatility that naturally comes with owning individual stocks—plus, it can give you greater peace-of-mind. For example, let’s say Twitter, whose stock resides in the social media ETF index, experiences a 24% hit on a given day. But, the overall index is slightly profitable—you will be fine because ups and downs of the overall index buffers hits from individual stocks. Using a similar scenario, let’s say LinkedIn’s stock, whose part of the Internet index, suffers a 13% loss on a given day. But you end up making a 2% profit. Once more, it’s because the overall index fares well on that given day.

Plan Your Next Wealth Building Moves

sector-training

In the April 2014 video, “A Winning Strategy in any Type of Market” Chuck offers tips for analyzing Relative Strength Factor (Rsf) trends using the tool at http://www.etfscreen.com/. The tool gives a percentile ranking of a fund’s performance compared to other funds, as well as to the broader U.S. market. The values range from 0 through 99.99 with the highest performers on top.

Once you become familiar with, and begin using the tool, you will see how easy it is to track the funds you have invested in on a regular basis. The tool is also designed to help you target new sector trading opportunities.

If you missed Chuck’s video, check it out now and learn more about the secrets of successful sector trading.

Posted by smartadmin at 8:58 am

Begin Weekly Options Trading

November 12th, 2013

Buying and selling stock options are a new territory for many of our clients. Here we share some pointers, so you too get sound advice for weekly options trading.

Though considered an aggressive strategy, stock options trading can be potentially profitable and rewarding because you get to participate in a stock’s price movement without actually holding the shares yourself and putting out large sums of money.

Weekly Options Trading Service

Plus, you get to buy in at a fraction of the cost that would normally be necessary for true ownership. These facts, and being able to leverage real-time activity, make weekly options trading a choice for many to use in conjunction with stocks.

How Stock Options Trading Works

Let’s say an owner of 75 shares of stock sells a call option. And, you become an option buyer. After paying your premium, you will be granted the right to buy those 75 shares at an agreed upon price for a limited time. If the stock increases, you as an option owner will receive the profit instead of the proceeds going directly to the traditional stockholders—placing you in a very sweet and leveraged position.

Fast-moving, stock options trading can be volatile and speculative. Get more practical advice with Chuck Hughes’ Weekly Options Trading Service, so you can understand the advantages and disadvantages before beginning.

Posted by smartadmin at 8:43 am

Options Trading Strategies

October 28th, 2013

Those who begin investing in options are not necessarily interested in buying or selling the underlying stock but rather want to take advantage of its price movement. As the stocks move up and down because of supply and demand, an options investor will try to identify (early on) changes in price that they can leverage. This is important because the biggest success driver when investing in options is to capitalize on the stock’s price movement. For instance, if you are a “call buyer,” you’ll want to move when the stock rises, whereas if you’re a “put buyer,” you’ll want to make your move when the stock falls.

Investing in OptionsHere are other options trading strategies: We encourage clients to replace stock with options whose strike price is lower than the current stock price. We also caution them when doing so not to choose a less expensive call option, which gives no guarantees. Additionally, we point them to Chuck Hughes Weekly Option Advisory Service. The exclusive service helps small investors who are interested in smarter trading and investing in options.

While fast moving and tricky, options give an investor the leverage to purchase a share at a lower cost or sell a security at a certain price before a certain day. Learn how to predict when to make your move by joining our options advisory service.

Posted by smartadmin at 3:28 pm

Trading Recommendations: Avoid Hunches

September 12th, 2013

Unsolicited emails arrive. Popular radio shows push certain trading recommendations. And Internet chat rooms discuss more trading ideas. What is an investor to do? If you’re like some, you get excited about the new information that you hear and develop new trading strategies on-the-fly. A better approach would be to do your analysis before investing in a new company—even better, try to avoid common pitfalls that other investors fall victim to.

What to Focus On

Let the financial numbers prove the health of the company you want to invest in. This trading recommendation will allow you to determine how well companies’ products are selling and if it’s likely they will maintain profitability. While the market will favor stocks with different types of momentum (earnings, cash flow, operating margin, etc.), you’ll be more successful by focusing on several indicators.

To get information about public companies try their Web sites first. Most publicly traded companies have an investor section that contains financial data and reports. The SEC Web site at www.sec.gov., is also a good resource.

What Trading Recommendations to Avoid

Trading RecommendationsInstead of following hunches and gut instincts, practice patience. You’ll experience less loss if you can think with a longer-term mind-set and not be swayed by other’s trading ideas.

Also don’t get too comfortable. You might love the stock and love knowing that you own it, but if loses mount, you must be disciplined enough to sell it and move on.

Be early or late to the party. Again it’s smarter to think longer-term and choose to invest in companies who have a good track record in a number of areas. Over the years, Chuck Hughes has learned this to be true.

Learn other fundamental and technical indicators here.

Posted by smartadmin at 8:37 am

Don’t Mistime Your ETF Trend Trading

August 26th, 2013

Since exchange-traded funds (ETFs) have moved more mainstream because of their flexible day-long trading and their tax benefits, many of our clients are flocking to them. We’ll be the first to say that it’s very prudent to add ETF assets to your portfolio. By doing so, you can expand your trading reach into global markets; you can take long and short positions in the direction of trends; and you can come closer to achieving a 3 to 1 profit to loss ratio, which we advocate. However, there are some important things to keep in mind when using these securities for long-term investing.

Secure Your ETF Assets

Well timed ETF Trend Trading
By practicing the few disciplines below, you will be able to gain more momentum with your ETF trend trading and secure a profit.

  • Know that buying and selling too often can erode the cost benefits of investing in this type of security.
  • Avoid the temptation to trade and potentially mistime the market because you have more opportunities to trade throughout the day.
  • Continue to diversify your portfolio. Many investors think by having ETFs, they have diversified. While this is true, ETFs offer somewhat limited diversification because purchases are made around certain sectors
  • Avoid buying only what has gone up, which will most often place you in the position of buying high and selling low.

Besides these ETF trend trading strategies, watch video to learn how to use a simple technical indicator to tell when to buy and sell your ETFs.

 

Posted by smartadmin at 11:52 am