Every single day at 12 p.m. ET, I get an email in my inbox that gives me at least an 80% chance of making money. Sometimes the payouts are $100, sometimes $200, and sometimes a little less (and sometimes even more). But they always come, right on time and ready for me to act on. In my view, this daily email is the greatest technical innovation to come out of TradeSmith since we debuted TradeStops 19 years ago. And I can personally attest that it's been a huge factor in helping me grow my wealth over time. Here's what that alert looks like... Right there in plain English, there's an opportunity to draw $85 in income from the options market by selling an uncovered put option on Modine Manufacturing Co. (MOD). (And by the way, you can still take the trade above by the time you're reading this. I'd just recommend reading the rest of this message before you do... especially if you've never made a trade like this before.) You might be surprised to hear there's no person typing up this email every day. No analyst crunching all the numbers on a company's fundamentals, then having to pick an options trade. No one from our email design and fulfillment team has to work on each day's alert email, either (and they're thankful for that!). Our algorithm generates each trade. And because of the way we've programmed it, it's guaranteed to only give you the type of risk-reward scenario I'd be happy to take with my own money. Though, we're not so bold to say there's no human behind the wheel. These positions are overseen by our senior analyst Mike Burnick, a 35-plus-years options veteran. Mike writes to our subscribers every day and lets them know what they need to do with these positions – even though, 99% of the time, what you need to do is "nothing." This alert service is called Constant Cash Flow and it's part of Options360 by TradeSmith. And today, I want to show you why Constant Cash Flow is my favorite tool among the dozens we've developed. And the only thing I need to show that is to explain the strategy itself - selling uncovered put options. You'll learn how it's done, the risks involved, and what you need to get started. As you'll see, this strategy is not for everyone. It's not for someone who's never invested before and doesn't have the money to trade seriously. Regardless, selling options is one of the best income strategies on the planet. Constant Cash Flow makes it even better. So if you can't use it now, you should work toward it. Here's why... Trading Options the High-Odds Way A lot of investors have the wrong idea about options. Looking at what's transpired over the past several years, it's hard to blame them. Options trading has come to be associated with the likes of Keith Gill, more notoriously known as Roaring Kitty. Traders like Gill buy options to take on massive leverage - aka, massive risk - on the rare chance that a low-odds bet pays off. Trading this way can be like buying a ton of cheap lottery tickets and hoping you're the lucky winner. The difference between most traders and Gill is, he has the influence to post a meme on Twitter (now X) and force his positions higher by causing the crowd to pile in. I don't have that influence... and I'm guessing you don't either. Now to be clear, there are intelligent ways to buy options and speculate on prices – I even do it a bit myself. But the vast majority of my options trading is not buying options, it's selling them. Here's why... If buying options is like buying lottery tickets with low odds, then selling options is like, well... selling lottery tickets. Think about it this way. According to Mega Millions, the odds of winning the jackpot are one in 302,575,350. The cost to play Mega Millions is about $2. And the most recent jackpot crested $552 million. In other words, spending $2 on a ticket to win the jackpot earns you odds of about... 0.0000003305%. So, we're talking infinitesimally small odds. Let's try to get a little closer... say a 1% chance. To have just a 1% chance of winning the Mega Millions jackpot, you'd have to buy 3,025,754 lottery tickets at $2 each. That'll run you well over $6 million. Not to mention you'd have one heck of a time looking for your winning ticket. For coin-flip odds of 50%, you'd have to spend about $300 million on tickets - and at that point, you're not even doubling your money on the jackpot. Now, I know this isn't news to you. The lottery wouldn't exist if it were easy to win. In fact, Mega Millions says 60% of its prize pool comes from ticket sales. And half of that revenue goes straight to the state hosting the lottery. And that's exactly my point. The very profitable business of the lottery heavily favors the sellers of the lottery tickets. And selling uncovered put options is quite similar... |
No comments:
Post a Comment