When trading options, even the smallest move in the underlying stock can result in explosive profits.
Just yesterday, we saw exactly this scenario play out with one of my Money Calendar recommendations. Our stock made its move, our options skyrocketed, and we doubled our money in just a single trading day.
Of course, when you’re trading options, those quick moves can work both ways – so you have to grab your profits when you can. If you hang on to a trade for too long, it could roll over, and your winning trade could turn into a loser just as quickly.
Today, I’m going to walk you through that winning Money Calendar case study and show you exactly what happened – and the best way to protect your profits.
Let’s get to it…
Money Calendar is an incredible tool that crunches tons of data points to calculate a stock’s price move from a start date to an end date, along with the average price move it has made over the past 10 years. It also shows you the percentage success rate of those moves.
On September 8, based on its calculations, Money Calendar recommended The Goldman Sachs Group Inc. (NYSE:GS).
Take a look at Money Calendar’s “payout appointment” on GS:
Actions to Take:
Entry Date: September 8, 2015
BUY-to-Open: The Goldman Sachs Group Inc. (NYSE:GS) GS September 18, 2015 $185 Call (GS150918C00185000) at $5.00 or less.
Fills came in at $3.58 shortly after the instructions went out.
Money Calendar showed the average price move happened in seven trading days, and had done so 90% of the time, or nine out of the last 10 years.
How to Protect Your Profits
Take a look at the Exit Strategy that was included with Money Calendar’s Goldman Sachs recommendation:
Exit Date: September 16, 2015
Profit Taking Option:
SELL-to-Close: The Goldman Sachs Group Inc. (NYSE:GS) GS September 18, 2015 $185 Call (GS150918C00185000) at a 100% ROI.
Notice that before we even make a trade with Money Calendar, we already have an exit strategy in place. The Exit Date is the absolute last day to exit your positions. And the Profit-Taking Option tells you exactly when to take profits – at 100% gains – eliminating all the guesswork once you’re in a trade.
And here’s the best part – you can set this up with your broker ahead of time.
The best way to do that is with a Limit Order.
Limit Orders allow a trader to enter or exit a position at a predetermined price, and is filled only AT or BETTER than that price, no less. I typically use these types of orders on both entry and exit prices to get exactly the prices I want (limit orders are a great way to cut risk).
Your exit from a given position is just as critical – if not more so – than your entry. With options especially, using a profit target and a limit order can mean the difference between a winning trade and a losing trade.
|Here’s your trading lesson summary:
Options can deliver profits quickly, sometimes in as little as a single trading day. But booking those profits can be difficult in today’s fast-moving markets. Here’s what you need to know:
- If you hang on to a profitable trade too long, it could roll over and turn into a loser very quickly.
- Identify your exit strategy – when to take profits – before you enter a trade.
- Place Limit Orders with your broker ahead of time to make sure you get out of a trade with your profits intact.
P.S. – Yesterday’s Goldman Sachs trade is just the latest “money doubler” my Money Calendar has delivered for members. Remember, I never recommend a trade unless it has the potential to return 100% gains (or more) in 30 days – and as you can see from today’s case study – those profits can come in just a single trading day.
We’re scheduling more payout appointments this week, including bullish moves in Nike and Priceline. If you’re interested in joining them, membership is open. You can get full details here.
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