Fabulous February

Three of my four weekly trades returned a profit.  The fourth trade I entered wrong put by the end of the week it had righted itself and the trade broke even. To reiterate, the whole purpose of this website and this trading plan is to allow the user an opportunity to make extra income with little time and capital requirement.  We use a trading account of $2,000 only risking $1,000 (minus the amount of credit received for initiating the trade, $300), on any one trade.

The stock sorting software picks the top 10 stocks on the first trading day of the week, based on criteria I want.  In other words the best of the best.  My February picks were United Rentals, Inc., Norfolk Southern, and Skyworks Software twice.  These stocks were picked because they were all in a 65 day uptrend.  Stocks very seldom go straight up or straight down, they usually move in a saw-tooth pattern.  So it is not uncommon for a stock to be in a long term up trend but a kind of pullback in a shorter (10 day) period.  However these stocks were in both a long term and short term up trend.  These stocks also trade in the hundreds of thousands or more shares every day which provides plenty of liquidity.  The software program I use identified these stocks in a matter of seconds.

A quick visual of the chart of price activity on these stocks let me know whether the odds are the price will continue to go up or pull back.  Depending on that analysis, I will either place a Bear Call Credit Spread if I think a pullback will happen in the next 4 days or a Bull Put Credit Spread if I think the price will continue moving up over the next 4 days.  Either way I shoot for a $0.30 credit or a $300.00 on the $1,000 needed to initiate the trade.

All for trades for January were profitable grossing $1,200 never having more than $700 at risk.  An extra $1,200 a month would go a long way towards supplementing many household budgets.

See results.

 

Trophies or Trash

 

There is a passage in the Bible that asks the question, “What does it profit a man to gain the whole world but lose his own soul”?  Another way one can look at that question would be, how much is all your money, trophies and stuff worth if you don’t have your health?

I’m in a prayer group with a lawyer who told us of his dad’s passing.  He and his brother were going through their dad’s “stuff” trying to decide what to keep and what to sell or throw away.  They came upon several hundred trophies from years of tennis and golf tournaments at the local country club. These trophies that have a value of probably $100 maximum in plastic, wood and gold colored tin, meant nothing to these two sons.  What do you do?  Build a trophy case for days of glory long gone, store them in boxes for the next generation to deal with or pitch them?

What about my “treasures” that have consumed my time, effort and money?  Will my kids want any of it or will it just be something they will feel guilty about throwing away?  How much time did I spend chasing a dollar to buy the things I thought I “needed”?  Then there is always stress that goes along with meeting deadlines either self-imposed or ordered.  The missed meals or eating chemical laced fast food on the run.  The missed quality time with family. The missed opportunity for generosity.  All for what?  To have my kids throw most of it into a dumpster?

As Christians in the Western World, we cling to verses that admonish us to leave an inheritance for our children and grandchildren.  So we build our land holdings, IRA’s and portfolios as we follow Biblical instruction.  Could we be ignoring things like character, generosity and humility in the process?  Could it be that these qualities are a better inheritance than stuff?  A friend of ours always said, “The first generation makes it, the second generation enjoys it and the third generation loses it.”

A favorite Biblical passage of mine is, Religion that God our Father accepts as pure and faultless is this: to look after the orphans and widows in their distress and to keep oneself from being polluted by the world.

Continue reading “Trophies or Trash”

Jubilant January

All of my January weekly trades returned a profit.  The whole purpose of this website and this trading plan is to allow the user an opportunity to make extra income with little time and capital requirement.  We use a trading account of $2,000 only risking $1,000 on any one trade.

The stock sorting software picks the top 10 stocks on the first trading day of the week, based on criteria I want.  In other words the best of the best.  My January picks were Wells Fargo, Schlumberger, Western Digital and Marriott.  These stocks were picked because they were all in a 65 day uptrend.  Stocks very seldom go straight up or straight down, they usually move in a saw-tooth pattern.  So it is not uncommon for a stock to be in a long term up trend but a kind of pullback in a shorter (10 day) period.  However these stocks were in both a long term and short term up trend.  These stocks also trade in the hundreds of thousands or more shares every day which provides plenty of liquidity.  The software program I use identified these stocks in a matter of seconds.

A quick visual of the chart of price activity on these stocks let me know whether the odds are the price will continue to go up or pull back.  Depending on that analysis, I will either place a Bear Call Credit Spread if I think a pullback will happen in the next 4 days or a Bull Put Credit Spread if I think the price will continue moving up over the next 4 days.  Either way I shoot for a $0.30 credit or a $300.00 on the $1,000 needed to initiate the trade.

All for trades for January were profitable grossing $1,200 never having more than $700 at risk.  An extra $1,200 a month would go a long way towards supplementing many household budgets.

See results.

Options 105: Money Management

Broke Millionaires

We all know of millionaires that are broke, physically, relationally and spiritually.  What good is my money if I’m overweight with diabetes, have high blood pressure or cancer?  If I’ve lost my wife, my kids and most of my friends, can my money replace them?  The Holy Scriptures say “what does it profit a man to gain the whole world but lose his own soul”?

When I first started trading options, I was trying to build a large portfolio and account.  I made the classic mistakes of not taking profits, not cutting losses short and staying in trades too long.  I would get a nice account built up and then one or two losses would set me back to where I was.  I did this over and over until my wife lost confidence in me but worse yet, I lost confidence in myself.

It took me many months of paper trading, (practice trades), and encouragement from a good friend to get me back on track.  I had to re analyze what my purpose originally was.  It wasn’t to get rich but to enable me to make a good living from trading.  Also in that initial purpose was to be able to teach my Daughter and Daughter-in-law a system of generating money from home so they could afford to home school my grand kids.

After months of testing in both up and down markets I am confident the system I outline in Options 101 thru options 104 can do just that.  If a person is willing to take the time and effort to absorb these few simple to implement steps, they can create a weekly income from $300 -$1,500 with controlled risk and very little time involvement.

Following are my points to money management using this system:

  • Initially trade only ½ of my account.
  • Each Friday withdraw only ½ of my profits.
  • Pay a tithe (10% to church or charity) on that half.
  • Place 10% of that half in a secure savings account.
  • Use 80% of that half for bill paying, something fun as a reward or groceries, etc.
  • Leave ½ in my account.
  • Always leave enough in my account to cover 2-3 losses in a row.

The worst thing that can happen to trader initially is to suffer a couple of losses and no have the backup to stay in the game.

 

Options 104: Making Weekly Income

As I said in Options 102: Reading the Tea Leaves and finding the Trades, selling options can be more lucrative than buying options.  However along with that comes an increased risk and also some requirements by my broker that I am not willing to take.  But there is a way to sell options with minimal risk and financial outlay.  That is using credit spreads.

Credit Spreads

What is a credit spread? To make it as simple as possible, the word “credit” means I get paid for initiating the spread or position.  I sell one option receiving credit or money and then I buy another option as an insurance policy. The insurance policy costs less to buy than the money I took in so the difference is my net credit.

The difference between the two strike prices of the options bought and sold is $1.  For every contract I engage in this strategy I have to have $100 in my account.  If I want to do 5 contracts I need $500, 10 contracts $1000 and so on.

I always try to use strike prices away from the actual price of the stock which provides more safety.  These are called out of the money strikes.  Do not let that term confuse you as these are usually shaded a different color than the in the money strikes.

The spreads I like to do are called Bear Call Credit Spreads (BCCS) and Bull Put Credit Spreads (BPCS).  I like BCCS when a stock is showing signs of retreating from an uptrend or just staying neutral.  I like BPCS when the stock is in a nice solid uptrend with no sign of weakness or pullback.  These are conditions when the melting ice cube effect as talked about in Option 102 work well to my advantage.

 

Example of options chain.  Center numbers are the strike prices.  The numbers on the left ate the price of calls and the number on the right are the put prices.  Prices in white are the out of the money prices and the ones I am interested in.

Example of an order for 1 contract of a Bear Call Credit Spread, selling 1 February 17, 2017, 78.50 call and buying 1 February 17, 2017, 79.50 call for insurance.

This spread in this example will net me $0.31, ($0.65 – $0.34) or $31.00 per contract.  Five contracts will net $155 and 10 will net $310.

A Bull Put Credit Spread is done the exact same way.

Putting It All Together

Let me putt this simple, plan for consistent income with limited risk and little time commitment into steps.

  1. Monday morning shortly after market opens, check the general mood of the market.
  2. About an hour to 2 hours after the market opens, run my search for stocks that have weekly option, sell between $50 and $150 and have their 10 day and 65 day moving averages at a 3 month high. (This is all built into my search so it’s done with 1 keystroke)
  3. Graph the top 5 results.
  4. Check which way the tail of the 5 day moving average of timing is pointing. If pointing up then I’ll look at doing a BPCS, if down a BCCS.
  5. Check Yahoo Earnings Calendar to make due there is no earnings reports due this week.
  6. Check options chain for the present week, making certain I keep my strikes out of the money.
  7. Making certain my net credit will be at least $0.25.
  8. Place order with my broker or online trading platform.

Now all I have to do is watch.  If I did a BCCS, I want the price of the stock to end the week below the strike price I sold.  If I did a BPCS I want the stock price to end the week above the strike price I sold.  If it does there is no action required on my part, the options just expire worthless and I keep all the money I was credited upon initiation on Monday.

If the stock goes completely against me, the most I could lose in the scenario above is $0.69 or $69 per contract.  Since my strike prices a $1.00 intervals $78.50 – $79.50, I have obligated myself for $100.00 per contract.  I took in $31 upon initiation so my net obligation is $69 which is my total risk per contract.  I also have a nice safety built in as my stock would have to go up by $1.28 before I am at risk.           ($78.50 -77.22 =$1.28)

My next post in the Options series will be, Options 105; Money Management

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How Can I Increase My Income?

I belong to a community of several thousands of internet marketers.  As new people join they may or may not choose to include a bio telling why they joined, what their past experiences were and what they want out of the program.  Of course I have not read all of them but of the ones I have read the majority site a need for more money.  The reasons are varied but the theme is strikingly similar.  In my opinion the sad reality is that most people have no plan to fulfill that need.

A Wish And A Hope

It has been said that people spend more time planning their next outing or vacation than they spend planning their future.  They wait until the end of the year and after assessing what they accomplished the previous 12 months they make a New Year’s resolution and start the whole process over again.

Intention + Mechanism = Results

Before I get into the few but necessary details of properly setting up your week’s trade, I want to shed a little more light on the value of this plan. These details will not do any good until a WHY has been identified.  If I don’t know why I am doing something, it more than likely will not get done and the how is worthless.  But if my why is strong enough then the how will appear.  A mentor of mine, the late Brian Klemmer wrote a book describing this concept, If How-To’s Were Enough, We Would All Be Skinny, Rich and Happy.  Another way of stating the same thing is,

The goal in creating this website was to help those people who really have a why, a need to create a supplemental or replacement income, with a plan to do just that.  Many people have made fortunes in the stock and options market.  That is not my intent here. The intent is to show a way to use those markets to make a safe, steady income.  And the real beauty is that this can be accomplished with very little risk capital and a small time investment.

If you look at the Results Page you can see that with an account of $5,000, we consistently brought into our account $1,500 weekly for a total from February 2016 to January 2017, $39,550.  Over 80% of our trades were winners.  This $1,500 weekly income is cash money and can be used for groceries, pay bills, fun or whatever else is needed.  The unique aspect to this plan is the ability to make, weekly, usable cash.  Most investment like IRAs mutual funds, life insurance plans, retirement funds and the like, have limited liquidity.

My next post will be Options 104: Making Weekly Income

I Need More Time

I need more time !!

Can we all agree, we need more time?  Whether you are a fireman, a teacher, a doctor, a nurse, a preacher, a farmer, a housewife, a lawyer, a writer, an athlete, a pilot, a programmer, a salesman, a mechanic, an engineer or any other worthy endeavor, the money you have in your pocket represents the time you have spent in the service to others.

There are only so many hours in a day, so how I spend those precious moments is key.  If I’m a pro football player, I won’t be for long if I sit around on the couch playing video games waiting for Sunday to show my glory.  A farmer makes his money when he sells his crop.  However to get that crop takes hours and hours of work in the fields preparing the soil, planting the seed and harvesting the grain.

This site could be for you if you need to find more purpose to your life.  The Creator gave each one of us unique gifts and abilities, and many of us are not using those abilities to their fullest extent.  All too often we don’t pursue our dreams because we feel bound up by of our circumstances.  The mom who may dreamed of being a nurse or an architect now finds herself working two menial jobs just to support herself and two kids. You may be someone who lost their job due to an accident and disability payments aren’t covering the bills.

Maybe you are just plain fearful of taking risk.  You’ve been burned before or maybe your investments have all gone sour.  You may be one of the millions of us who saw our retirement accounts shrink by 40% in 2008.

Whatever your situation is, this website may be for you.  I have added links to things that have been helpful to me over the years.  Please check them out.

Leave a comment, I want to hear from you.  And do come back for another visit because I will be continually adding posts that might just be helpful.

Dennis

 

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Options 103: Writing Your Paycheck

As I concluded Options 102, I said the charts begin to talk to you after some practice.  In this lesson I’ll give some examples.  Remember, to this point we probably have less than 15 minutes in the process of creating our 30 minute work week.

 

After running the search looking for the top 10 only 5 were returned.

On the Yahoo earnings calendar site,  I’ll go through the remaining 5 to make sure none have a report coming out this week.

As you can see DIS (Walt Disney) does on the 7th so I’ll eliminate it. None of the rest do.  So now I’m down to 4 candidates. Now for the charts and I still have about 10 minutes left.

In all the charts below, the green line, the red line and the red area in the bottom chart are all at their 3 month highs.   However the green line in the bottom section of the chart is showing a downward divergence.  These candidates are all indicating a possible pullback this week.

Since our 4 best picks are all looking to pull back next week we will be using a strategy called a Bear Call Spread.  I will cover the Bear Call Spread and the Bull put spread in Options 104: Making Weekly Income.  These are the only 2 strategies I use for weekly income.  This keeps the learning curve simple so that anyone can utilize it to their advantage in a short period of time.

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Options 102: Reading the Tea Leaves and Finding the Trades

In Options 101, I used the example of XYZ stock.  In that example I showed how using options could garner a huge profit and return on investment.  How are these awesome trades found?  Those are the types of trades the internet gurus use to try to sell you their $5,000 options course.  But in reality this is what happens so many times:

  • XYZ did invent a cancer drug causing the rumor but they didn’t get FDA approval and I watched my investment shrivel like holding an ice cube on a summer day.
  • XYZ didn’t meet the market makers earnings expectations and the stock went down below $200 instead of up. My investment $10,000 went to $0.

When buying options these things have to happen in order to profit:

  • I have to have the right stock. Finding the stock that is poised for a big move out of the 8000+ traded daily, takes research, knowledge and a little luck.
  • My timing of when the stock will make its move has to be perfect.
  • The stock has to move in my direction significantly and in a relative short period of time

In my opinion these are reasons why many stock brokers and “financial advisors” will tell you investing in options is dangerous.  If the proper education and caution are not utilized, that is good advice.

Loving the Melting Ice Cube

There is a flip side to every coin.  How do I use the melting ice cube to my advantage? Continue reading “Options 102: Reading the Tea Leaves and Finding the Trades”

Options 101: All I Know About the Stock Market

First I want to state that I have been “investing” in the stock market for over 20 years.  I only tell you that because I want to convey to you I am no “smarter” now than I was when I started.  I’m “dumber” now and thank God I am.

The stock market is a very complex thing with debt to equity ratios, capital appreciation, dividend analysis, market cap etc.  Thankfully the dumber I got the less I needed to know about such things.  If I ever need to know any of these, I have a program, Vector Vest, which will do the work in an instant.

Simplification of the Stock Market

I have a car.  My Wife asks me to go to the grocery store to buy some bread.  I walk out to the garage and unconsciously my mind does a check list; are the tires aired up?  When did I last fill up with gas?  Are there any oil spots under the vehicle?  I get in, turn the key, and back out soon to return with a loaf of bread.  Mission accomplished. 

Or I could go out and check the air in all the tires, Google catalytic converters and electronic ignitions, study the workings of both to gain a total understanding of their functionality completely.  In the meantime my wife walked to the store and got the bread she needed.

The latter is the approach most people take to investing in the market.  In the meantime the market has passed them by with many profit opportunities.  There are multiple such opportunities in both bull and bear markets.  Yes, even when the market is going down or not moving at all. Continue reading “Options 101: All I Know About the Stock Market”