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Identifying Stocks and Options with the Best Profit Potential

This week let’s take a look at the trend following system used to select option trades for high returns with low risk. If you can identify a stock moving up in price, you can profit from purchasing call options. Conversely, if you can identify a stock moving down in price you can profit from purchasing put options. Learn how to identify stocks and options with the best profit potential and how to select a low risk entry point.

Brokerage account statements shows that Chuck has $1.83 million in actual closed trade profits over the past two years and $711,579 in open trade profits using this trade selection process.


Generating a 'Cash on Cash' Return

This week we will look at a simple strategy for generating a 136% 'Cash on Cash' return with low risk.

When you generate a 136% 'Cash on Cash' return a lot can go wrong and you will still profit.

  • The underlying stock/ETF could decline substantially and you could still profit
  • If you had bad timing on entering the trade you could still profit
  • There could be volatile price swings in the underlying stock/ETF and you could still profit
  • This gives the strategy a huge advantage over stock and option directional trades that require the stock or ETF price to move in the right direction to profit
  • And unlike directional trades the strategy rarely gets 'stopped' out during volatile price swings

Learn how this strategy delivers substantial returns with virtually no risk.

Safety Strategy

The difficult market conditions over the past year has made it hard to profit from directional long or short trades if you use a money management system to exit trades before they develop into large losses. Directional trades can be easily stopped out in this type of market.

The best way to profit in this difficult market environment is to employ spread trades which can profit if the underlying stock increases in price, remains flat or decreases in price. One of Chuck’s favorite spread strategies is the married put strategy which is initiated by purchasing a stock and a protective put option. This is the lowest risk spread strategy and Chuck likes to call this the 'Safety Strategy'.

The Married Put Calculator below displays the profit/loss potential of an actual married put trade Chuck took recently for Apple. This married put trade allowed Chuck to lock in a profit of $35,490 and a return of 46.4% regardless of how much Apple stock may decline in price even in the unlikely event it declines to zero.

One of the great advantages of this strategy is that your profits are not capped. The profit potential for this trade increases as Apple stock moves up in price. The more Apple stock moves up in price, the greater the profit potential.

Learn how to limit your risk but not your profit potential with this spread strategy.

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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.