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Market Neutral Option Spreads

Our video below will look at an actual option trade for the BRIC ETF that will profit regardless of the price movement of the underlying ETF. The Market Neutral calculator below displays the profit potential for this spread trade assuming various prices changes in the BKF ETF at option expiration from a 30% increase to a 100% decline.

The analysis below reveals:

- If the BRIC ETF remains flat at option expiration a $813 profit and a 75.6% return will be realized (circled)
- A 10% increase in the ETF results in a $1,322 profit and a 122.9% return (circled)
- A 40% decline in the ETF results in a 62.5% return (circled)
- The minimum profit for this trade is 48.8% regardless of the price movement of BKF

Profiting During Market Corrections

The recent market correction has triggered a lot of stop loss orders for both stock and option positions. Stop loss orders are necessary if you want practice sound portfolio management. It is essential to exit losing trades before they develop into large losses which can devastate your portfolio.

The video below will look at an alternative strategy for portfolio management that protects stocks and option positions during market corrections. Whenever we have a profitable stock or option directional trade, we purchase a put option to protect our profits.

Many times, this put option protection can guarantee a profit for our trade regardless of the price movement of the underlying stock during market corrections. This allows us to maintain our positions during market corrections without using stop loss orders.

Learn how to set up these put option spreads that can allow you to navigate market corrections with low stress knowing your stock and option trades are protected during market downturns. It’s important to note that the put option protection does not limit your upside potential so you can participate in market rallies and profit if the underlying stock continues to move up in price.


A Low Risk Stock Strategy

This strategy generates cash income from the sale of call options. We get to keep this cash income and spend it anyway we want regardless of what happens to the price movement of the underlying stock/ETF.

We focus on stocks/ETF’s with rich option premiums. This allows us to collect cash payouts over the course of one year, that exceed the original cost basis to purchase 100 shares of the stock/ETF.

When you generate a 100% cash return on your stock position, a lot can go wrong and you will still profit:

  • The 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 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

Stock and Option Spread Trad​es

When you purchase a stock, the stock must go up in price to profit. A stock spread trade on the other hand can profit if the stock trades up, down or remains flat.

When you buy a call option the underlying stock must increase in price above strike price of the option at expiration or you will incur a 100% loss of the option premium.

You are always faced with the possibility of a 100% loss when trading options. When you buy a call option, many times the underlying stock will not make the expected move prior to option expiration which can result in a total loss of the option premium.

Option spread trades, however, can profit if the underlying stock is up, down or flat at option expiration. Most of our option debit spreads can produce a 30 to 40% return if the underlying stock is flat at option expiration. This provides a much better risk/reward ratio and gives option traders a much better chance at success.

Selecting Stocks and Options with the Best Profit Potential

In this video let’s look at combining fundamental and technical analysis to find stocks and options with the best profit potential.

Chuck’s brokerage account statements show there is $2.69 million in actual profits over the past two years for his stock and option trades:

• $853,848.72 in open trade profits
• $1.839 Million in closed trade profit

Learn how this simple to use analysis can give you the edge in profiting in any type of market condition.