Stock Forex

Capitalizing Profits

I wrote my first book almost two decades ago. I have had a wonderful audience—a very supportive following. Those of you who know how I write and how I think will definitely be unsettled by the following chapter!

There is a purpose, a rhyme and reason to my madness. Indeed, it is in my attempt to explain my “stock market madness” that the following is written. Why? People come up and ask me how I can make such fantastic returns. How do I consistently get 10,000% plus annualized returns?

So come along—I hope you’ll come to understand my rationale and my results. It will take a while, but the first part of this chapter is necessary to understand the last part, the crucial part. It may be slow at first, and you’ll have to wade through my “Wade-isms,” as I have never before tried to encapsulate my thinking process and results. This is new territory. Hopefully not the final frontier.

Holy Macro

I hope to give a “macro-view” and use micro examples to justify my reasoning. There definitely is a “herd” mentality and I am not the first one to try to understand it and to figure out how to profit from it, or how to not lose by following it. More importantly, trying to understand this type of stock market mentality is the perfect way to try to figure out just when the “herd” is about to turn. This turning point is the point when a lot of profits can be made. But I’m ahead of myself. That is the conclusion to this chapter. The profit-making point of reversal or correction of a stock is crucial. I bring it up at the beginning so you know where this chapter is heading. I will not be untrue to the theme that has worked well for me, both in my personal investing and my seminars: use a little cash to purchase an asset, get in, then get out with a nice chunk of cash (profits) or smaller cash flows (payments). In short, I want income (cash flow) from dividends, capital gains, option premiums, or whatever income that allows us to live, to pay the bills, and grow rich.

Another theme of my books and seminars is “to whom are we listening?” If you want to make $100,000 a year, why are you listening to anyone making under $100,000 a year? It is to this point that we’ll launch into this area of discussion.

There is a widespread belief that the market is always right. I disagree. There are too many variables. The market is not always right. When it comes to a particular stock, there is definitely too much sentiment to come to any conclusion that a stock’s price is “right.” (I’ll give in on this a little, if you’re determining a stock price based on a “best guess” midpoint price between a high and a low, or a recent support level and resistance level.)

I’ll get back to individual stocks later, but for now let’s deal with the stock market in general.

Nowadays, the majority of forex consumers know that the best way to get stable profits on forex is to use automated forex trading systems (also known as forex robots). For this reason FX trading systems are so popular and also widely used with traders.

At the same time the huge variety of forex robots solutions makes it difficult for trader (especially for the newbie) to choose the best one. Forex related forums are just overflowed with the “fantastic offers” to buy the most profitable trading system. Every week you can find several more releases of new FX robots.

But despite the overwhelming assortment of forex trading systems just a few of them are really reliable and are able to provide you the stable profits. The most important question is how to find such systems among the great amount of available solutions?

The answer to this question is very simple. Best forex systems have several special features, whereby they are able to give you really significant benefits. So what are these features?

Firstly, the forex trading system must be supplied with the advanced money management technology. In this case the probability of losing your funds will decrease to the minimum.

Secondly, FX robot should be equipped with the auto adaptive technology. Hereby your software will be able to adapt the altering dynamics of forex market trends.

And the last important forex robot`s feature you must pay attention at is the Profit Trades percentage assessed through the testing period. It`s value should be more than 80%.

If you found forex robot equipped with the abovementioned features, you can purchase it without any doubts.

For most people, times are tough and sometimes working hard is not enough to make ends meet. Many people receive salary that barely support their daily needs. Some resort to extra sources of income like sidelines or part-time jobs along with their regular fulltime jobs. However, there are times when money is really tight and you have no choice but to take out personal loans. This is especially true in emergency situations when you need to find money right away.

One solution to financial emergencies is applying for cash advance loans. Cash advance loans help you get through until your next salary. It is an easy way to get cash without having to go through a very difficult application process. But since this also involves money, you still have to meet several requirements for your application to be approved. Here are some of things you should know about cash advance loans.

It is important that you live in the same country as you lender. Do not think that your application will be approved if you live in China and your lender is located in the United States. The borrower and the lender should be living in one country.

It is important that you are 18 years old or older before you can take advantage of these loans. Of course, the lender has to make sure that the borrower is a mature adult who can take on such a financial responsibility. You should also show that you have a steady source of income. Nobody will let you borrow money if you are jobless. It is important that you have the capacity to pay back. And lenders will know this by looking at your source of income and salary.

You should also provide certain personal information such as contact number where the lender can call you and bank account details.

After a company takes a big dip, the climb back up is volatile. Sometimes it stays down for a while and starts trading between a certain range. I call this rolling stock. If you follow my formula for a pure rolling stock play as outlined in the Wall Street Money Machine and at our live Wall Street Workshop, you’ll realize that $50 to $100 stocks don’t fit the formula. They’re priced too high. Your cash goes a short distance with an $80 stock. $8,000 buys 100 shares. Yes, a move to $85 would make you $500, but a $5 move on a $5 stock would also make you $500, but with only $500 tied up. A better example: $8,000 would purchase 1,600 shares of a $5 stock. A $5 move up would double your money. Upon selling you’d have $16,000—a profit of $8,000. Now to make it more exciting and still double your money (because there are many more companies at $80 which can easily go to $85 than there are companies at $5 which go to $10), let’s play an option.

The stock is at $80. You call your broker and buy the $85 call options, say two months out. You pay $1.25 per option and buy ten contracts for $1,250. The stock moves up to $84. Your option is worth $3.75. You sell for a $2.50 profit and make $2,500. Look at the power of leverage.

Options allow you to invest in the big stocks by proxy, using a small amount of money.

Look back at the chart on Motorola (page 90). Every time the stock goes down to $50 to $52,1 buy the $55 call option. I’m not hoping the stock goes back up to $100, though it would be nice, and I’m not doing this to buy the stock. I’m simply going to sell my $1.25 option for $2.50 or $3.50 when the stock rolls up. Another day, another week, another $10,000 profit.

Some stocks just seem to trade in a certain range (support at the bottom, resistance at the top.) Check out Ford (F). It rolls between $27 and $34. When it gets down to $27 or $28, I buy the $30 calls or the $35 calls if they are cheap. I sell them when the stock gets to $32-$33. Don’t get greedy. Get out, get your profits working better somewhere else. If it gets to $34 or $35,1 then buy the $35 puts. As it falls back to $30 or under, I sell them. This past year, this has been a bankable play.

An  Introduction To Proxy Investing

More bang for the buck! That’s what we all want. Wise use of stock options is one way to get it. This chapter is about using a form of proxy investing to leverage greater returns. And returns, to me, mean extra income, not just an increase in value.

Throughout all my real estate books and courses and now in my stock market educational materials, I stress “cash flow” concepts and techniques. After all, is it not cash flow that pays the bills and lets us get into an ever-increasing upward spiral of income?

Buying or selling options to purchase stock are simple strategies loaded with opportunities. There are variations on purchase and exit strategies, and combination plays both with the underlying stock and with other options. Options are derivatives of an investment on an underlying security. A call option is the right to buy a stock at a fixed strike price anytime before a set date. A put option is similar, but is the right to sell. Both calls and puts expire. They end. This expiration is one inherent risk of option investing.

Why would anyone want such a risk? Simply because of the fantastic profits which can be made in a very short period of time. You see, an option moves up and down in value with the movement of the stock, but to be precise, it moves on an exaggerated scale. I’ll explain this as I go along and illustrate it with examples. Once we’re through with the basics (and I refer you to the book, Wall Street Money Machine for more details) I’ll show you a few, heavy-duty strategies to get you making more money.

Example: you could buy a stock for $86. The stock seems down right now; you think it will go back up to $92 or $96, where it’s been trading for some time. It’s March. You check the May $90 call options (the right to buy the stock at $90 per share before the May expiration date). The call options are $2.50 each. You’ll spend $250 plus commission for one con­tract (a contract contains 100 shares of stock). $2,500 would purchase 10 contracts. You could also buy the $85 calls, the $95 calls or other strike prices, and you might be better served by buying options with a different expiration month than May. (I explore short term and long term plays in my other special reports and in other chapters.)

Your $2.50 option premium gives you the right to buy the stock at $90. Obviously you want the stock to rise. Many people suggest the stock would have to go to $92.50 for you to break even and above that for any profit. A better under­standing of the strategy, though, will help you see that the stock doesn’t have to rise that high for us to be profitable.

Options are bought and sold like stocks. There is a trader (like a market maker or specialist) who buys and sells. Like stock, you don’t know who purchases your option—it just happens. Options have bids and asks. A bid is what you can sell it for, the ask is the price you pay to buy. The bid and the ask move up and down according to several factors: 1) the supply and demand for the option, 2) the time left before the expiration date, and 3) other market sentiments. For ex­ample, with tremendously erratic stock, the market makers keep a high option premium because they know the stock has the potential to make big swings. Also note: you do not have to trade at the current bid and ask. You can place orders to buy below the ask or an order to sell above the bid. These orders can be day orders only or “Good Till Canceled” (GTC) orders. It costs nothing to place the order.

Watch the movement of the option compared with the stock price in the following example. Look at the $88 price. The option is $3.75. This will not stay constant. This $88/ $3.75 quote is, say, six weeks before the expiration date. If it were six days, the option could be $1.25. You see, an option buys time. A part of the premium is the time value. In our example, the $3.75 is all time value. Why did it go down to $1.25? Because “the invisible market” doesn’t believe very strongly that in six days the stock will go up to or above $90. If the stock stays at $88, the option probably will expire worthless. However, look at what hap­pens when the stock goes above $90. The option has be­come more valuable. Someone is willing to pay $4.75 for the right to buy the stock at $90. If the stock goes to $98, the option could be worth $8 to $9 (or more), again depending on the time left before expiration.

If the stock is $92 and the option is $6.50, you see that $2 of the $6.50 is actually paying for stock. The option is “in the money” by $2 (intrinsic value). $4.50 of the option premium is time value (extrinsic value).

Now, the main question: what is our purpose in buying the option? Do we want to buy the stock? Maybe, but this author is waiting for the options to gain value so they can be sold at a profit. If we purchased the options for $2.50 and can now sell it for $4.50 (assuming the bid and ask is something like $4.50 x $4.75), we have a $2 profit. If we had purchased ten contracts, that would be $2,000.

Let’s review the word “exaggerated.” In this example a $1 movement in the stock means a 50tf movement in the option. Sometimes the stock to option movement ratio could be “tick for tick,” or dollar for dollar. A dollar rise in the stock produces a dollar rise in the option. The point is you have much less cash tied up. $2,500 controls 1,000 shares of stock. You didn’t invest $86,000 buying 1,000 shares of stock. Also, a $1 move in the stock from $86 to $87 is around a 1% gain. If this creates a 50c move in the option from $2.50 to $3, it is a 20% gain.

If you sell the $2.50 option for $4.50, the $4,500 cash will be in your account tomorrow. Options clear in one day.

After attending the first day of your workshop, I was confident that with some diligence one could in fact use the techniques you taught. The second day in class, with increased confidence, I made my first two rolling option purchases during the morning’s “early bird” session.

To my pleasant surprise, I was able to sell both options the following morning for a profit large enough to cover the complete cost of the workshop. I have contributed around $31,125 in the last 15 days, and thus have been able to clear a net profit of $23,252.35 after commissions. Yes, that’s right, 74.7% in 15 days and an annual percentage rate of 1,817%.

I’m still pinching my self to see if I’m awake! I am now eagerly waiting to attend The Next Step Wall Street Workshop and hold even greater expectations in mind.

Michael—Kent, Washington

Yes, we’ve all seen stock go up $2 to $10 in, or within, a day. Think about buying an option an hour after the market opens for 50c and selling it for $1.50 two hours later. Ten contracts would generate a $1,000 profit.

Let’s do the same on a put. Last year, Fannie Mae (FNM) did a 4 for 1 stock split. A few months later, the stock was rolling between $31.50 and $36. News came out that  the   long bond yield was down 3 points. This is the U.S. Treasury 30-year bond. The stock market was hammered that day. There were other things going on also. Fannie Mae is very interest-rate sensitive, as they borrow money at one rate and lend it out at another, higher rate. If the interest rates go up (that’s why the long bond was falling—fear of inflation and a rise in rates), the stock can really go down. Likewise, if interest rates go down, the stock might go up.

To put it mildly, the stock got slammed. I knew it would go down. I put it on the Wealth Information Network (WIN) immediately, telling my students how I was going to play it. The stock closed Friday at about $33. It opened at $31.75 (on a 30-minute delayed opening). I purchased the March $32.50 puts.

This lets me “put” the stock to someone else at $32.50. If the stock goes under $32.50, my put option becomes more valuable. It’s the opposite of a call. As the stock goes down, the put becomes worth more. I bought these puts for $lVs or $1,125. The stock went down to $27^! /i and as it bounced back up to $29 to $30,1 sold the put for $3⁵/8. That’s a four-hour play and a nice profit of $2,500. $3,625 minus $1,125 = $2,500 (minus commis­sions of about $110 for both trades).

If you buy options, you do not have the obligation to buy or sell the stock. You also don’t have to sell the option—you could just let it expire. You have the “right” to buy or sell. Again, though, I don’t buy the options to buy the stock. I buy options hoping for an increase in value and then sell them. It’s just quick-turn money.

I have a “bear market mentality” in the midst of a bull market. I really don’t like losing money. Options are very risky—only 15 to 20% of contracts ever get exercised. That’s not to say there are many losses, as some investors like me get in and get out rapidly. I have lost on several plays, and each time I do, I vow to never do that again. I want to learn from my mistakes; I’ve cut the losses to a bare minimum. I’m now somewhere in the range of one loser for every 18 to 20 winners. You can watch me do this on WIN, Wade Cook Seminars’ subscription internet service.

Here is how my trades have gone since I started using WIN I bought two Xerox (XRX) $125 April call options for $6.75 and sold them one week later for $10.75, a profit of $663 (49.1%). I also bought two Warner Lambert (WLA) $90 April call options for $6.75 and just sold them nine days later for $10.25, a profit of $562 (41.6%).

I’m shooting for 50% returns on covered call writing, all profits to be reinvested until I’m consistently pulling enough per month to be able to retire and do what I want with my life. Now there’s hope and light at the end of the tunnel. All my thanks go to Wade and everybody there on the WIN staff.

Augustin

You’ll see my “hunker down,” try not to lose a penny strategies permeating the following formulas.