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Trade Management Rules 

This week’s video will look at trade management rules for exiting losing trades quickly and not exiting winning trades with a small gain.

Once we establish a directional option trade, we will exit a losing trade before it develops into a large loss. Cutting losses short is essential to your trading success as it is very difficult to recover from a large loss.

If you take a 50% loss on an option trade, your next trade requires a gain of 100% for you to just break even!

We also do not limit our profit potential by exiting winning trades with a small profit. Most traders do just the opposite and take a quick profit as soon as possible and hang on to losing trades. This results in a portfolio with limited upside profit potential and unlimited downside profit potential.

Once we have a profitable directional option trade, we create an option spread to protect profits and increase the probability for a winning trade. The video below with show you how to manage your option trades for more profitable trading with lower risk.

ETF Market Neutral Spreads

Most of us have closed out a winning trade only to see the underlying stock or ETF continue to rally knowing that we left profits on the table.

We also know from experience that it is very difficult to watch a winning trade develop into a losing trade. This is very hard on your psyche as a trader and can help you lose confidence in your ability to be a successful trader.

The following technique is simple to implement and once it is in place you can forget about the trade. No need to monitor the markets or world events. Bad earnings reports don’t matter. A severe selloff in the underlying stock or ETF actually produces more profits with this technique. You can place the trade and take a vacation!

Let’s look at an actual Market Neutral Spread for the Nasdaq ETF that will profit regardless of the price movement of the Nasdaq ETF.

Option Income Strategy

The following clip from "Ultra-Safe Money Strategies", explains Chuck Hughes' Option Income Strategy. In what markets does it work best? What are the benefits of this strategy? Chuck takes you through an in-depth look at how to implement and profit from this trading tactic.

Generating a Steady Income Stream with ETFs

In this video we will explore an ETF income strategy that can help you create a steady income stream from selling option premium. Actual trade examples presented in this video show how it is possible to receive a 139% ‘cash on cash’ yearly return with this ETF income strategy. A $10,000 investment would earn $13,900 over the course of a year with a 139% cash on cash return. If you receive a 139% cash on cash return a lot can go wrong and you could still profit from the trade:

  • The underlying ETF could decline substantially and you could still profit There could be volatile price swings in the underlying ETF and you could still profit
  • This gives the ETF income strategy a huge advantage over stock and option directional trades that require the ETF price to move in the right direction to profit
  • The trade can profit if the ETF increases, remains flat or decreases in price
  • You can avoid being ‘stopped out’ of your trade during volatile price swings

A Winning Strategy for 2013

In this video we will explore a unique strategy that uses a combination of technical and fundamental analysis to select stocks and options with the best profit potential.

Learn how this strategy recently produced over $3.6 million in actual profits. Copies of my brokerage account Profit/Loss Reports presented in this video show that this strategy produced $1.542 Million in actual profits from stock investing and $1.824 Million in actual profits from option investing.

Become Your Own Bank

In this video we will explore how a little known option strategy allows you to collect cash in your brokerage account allowing you to become your own bank. Actual trade examples will be presented that show how Chuck collected a 30% cash option premium. This allowed him to purchase stock/ETF at a 30% discount. This actual trade example allows him to profit if the underlying ETF increases in price, remains flat or decreases 20%.

 Actual Trade
If ETF Price Increases 10% = 53.2% Return
If ETF Price Increases 5% = 49.8% Return
If ETF Price Remains Flat = 42.7% Return
If ETF Price Decreases 20% = 14.1% Return 

Copies of Chuck's brokerage account Profit/Loss Reports presented in this video show that this strategy produced $1.116 Million in actual profits over the past three years.

Using Option Calculator

Option Purchases

  • Options are a wasting asset
  • So the goal is to minimize time value and maximize intrinsic value
  • Buy in-the-money options
  • Limit time value to 1% of stock price per month
  • $100 stock 3 months to expiration...limit time value to $3.00

In this video we will explore the use of Option Calculators to help us determine the profit/loss potential for an option trade before we take the trade

  • Buy 14 TJX April 201225 calls @$7.55
  • TJX stock trading at $32.40
  • .15 time value=.4% time value
  • Stock currently trading at $39.36=90% open trade value

Interesting Image

Chuck Hughes' Option Spread Strategy Produces 194% Return

The option spread strategy is a great way to profit in up, down or flat markets. A diversified portfolio of option spreads can be traded in smaller accounts. For example, trading one contract would only require a $4,800 trading account for the option spread portfolio below. Learn how this portfolio produced a 194% average return.

Buy Stocks at a 30% Discount

A little known option strategy allows you to buy stocks at a discount. Buying a stock at a 30% discount enables you to profit if the stock price increases, remains flat or even declines 20 to 25%. This option trading strategy continues to profit even during non trending markets. Learn how to hold your stock during volatile price swings and still realize a good return even if the price of the underlying stock remains flat or declines.

Please contact us for more information on Chuck's Option Trading Seminars!

Futures trading involves high risks with the potential for substantial losses. Hypothetical performance results have many inherent limitations, some of which are described as follows. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. there are numerous other factors related to the markets related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. Option and stock investing involves risk and is not suitable for all investors. Only invest money you can afford to lose in stocks and options. Past performance does not guarantee future results. The Chuck Hughes Inner Circle Advisory trade record does not represent actual investment results. Trade examples are simulated and have certain limitations. Simulated results do not represent actual trading. Since the trades have not been executed, the results may have under or over compensated for the impact, if any, of certain market factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.