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The IPO prospectus from high-frequency trading firm Virtu Financial reveals that in the past four years, the company has lost money in exactly one of 1, trading sessions. Morgan didn't have a single losing day in Bank of America notched a perfect performance of its own in the first quarter of Clearly, Wall Street trades and invests its own money a stock gumshoe pro-trading-profits differently than the "buy and hold" strategy it preaches to its clients.
Wall Street works very hard to keep one of its most powerful income strategies out of the hands of regular investors. Because what most investors don't realize is that selling puts isn't just one of the most conservative options strategies The conservative strategy of selling options is driven by a stock gumshoe pro-trading-profits you might find shocking: That means whoever sold those options gets to keep the full premium collected as income from their sale 4 out of 5 times.
And these aren't small premiums. Despite Wall Street's best efforts, well-informed investors are embracing selling options stock gumshoe pro-trading-profits an important source of portfolio income. In fact, this is what we do every week in my premium newsletter service, Income Multiplier. But deciding to sell stock gumshoe pro-trading-profits is only half the battle. Learning how insiders increase their returns and win ratios is the other.
That's why I'm sharing these 5 insider tips that provide a basic framework for understanding how Stock gumshoe pro-trading-profits Street insiders increase the probability of winning trades. The first is that the options expire worthless and the put seller keeps the entire premium generated from the sale.
This is a powerful income strategy and the most desirable outcome when selling an option because we keep this premium as pure profit. The second potential outcome is that shares of the underlying stock fall below the stock gumshoe pro-trading-profits price on the date the option expires.
This obligates the put seller to take ownership of the shares. Although that's a low-probability outcome, it's the reason why it's so important to sell options only on stocks you actually want to own. In the event that the put seller is put shares, stock gumshoe pro-trading-profits want to own a great company with plenty of long-term potential that will quickly rebound from a temporary pullback. All options contracts have an expiration date.
Some options expire every week; other options expire after several years. Options that are stock gumshoe pro-trading-profits far into the future have a higher premium value because a longer time allows significant price swings or unexpected events to occur. That could be a macroeconomic event like a recession or a company-specific event, such as earnings falling short of expectations. Conversely, options that expire in just a few weeks or a month are much less susceptible to price fluctuations.
Think of this like a baseball player hitting a bunch of singles and doubles as opposed to an occasional home run with lots of strikeouts. Every options contract carries a probability of expiring worthless. It all depends on the variables of each individual contract. One of the biggest factors impacting the probability of a worthless expiration is an option's strike price.
Options with strike prices that are far away from the stock gumshoe pro-trading-profits stock's current share price have a lower probability of assignment than those with strike prices that are close to current prices. Regular stock investors should always diversify their portfolios. Holding stocks from different sectors and regions of the world is a great way to reduce volatility and stock gumshoe pro-trading-profits price risk.
Stocks from different sectors and industries tend to have a lower correlation with each other. That same concept of diversification holds true for selling options. As an options seller, it's important to avoid highly concentrated positions stock gumshoe pro-trading-profits sectors, stocks or themes with a high correlation.
This reduces the probability of one single event triggering assignments on multiple open put positions. This is the No. It's also a familiar theme across any asset class. A novice investor experiences great results early in the game with a new investment strategy. Gaining confidence, the investor begins to quickly ramp up the size of their position, increasing risk significantly. When the size of the investor's trades has grown out of proportion to the value of the account, one small miscue can have serious implications.
This is a recipe for disaster. The value of any individual put-selling position should be calculated stock gumshoe pro-trading-profits a percentage of overall account value. That makes actual results and the growth of an account the primary stock gumshoe pro-trading-profits of position size as opposed to a bout of short-term confidence driven by a bull market. The unprecedented track records that Wall Street trading firms are racking up are due in large part to successful strategies like these.
But I think it's time that regular investors got in on the wealth-building opportunities that these traders are so set on hiding from the public.
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