How the Darkest Day of the Year Delivered a 100% Winner

Let’s face it, 2016 is off to a rocky start.

There’s a lot happening in the markets right now to scare off investors and traders. And it seems like our TVs, radios, and the internet are flooded with nothing but red alerts.

So, unsurprisingly, investors and traders are panicking… maybe you are, too.

But during times like these, the worst thing you can do is exactly that – panic.

It’s at exactly this time when the most important thing to do is stay calm and levelheaded – and not let your emotions dictate your trading decisions.

Now, understandably, this may sound impossible to do. But it’s not.

What you need to do is plan your next move, methodically and carefully. And leave any fear and doubt you may have at the door.

And this is exactly what I did to double my money on one of the worst trading days of the year.

Amidst a tanking market, I found the pattern that gave me the ultimate “WYNN.”

And here’s how I did it…

This Is The #1 Fight-or-Flight Trigger for All Traders

Before I show you the profitable trade scenario that happened with Wynn Resorts Ltd. (NASDAQ: WYNN) I first need to talk to you about something we’ve talked about before: implied volatility (IV).

The basic principle of IV is that the higher it is, the higher the option’s premium is will be. It helps options traders because they can generally determine if an option is too expensive based on how high the IV is.

IV lets you see the market’s view on the potential move in the stock. A high IV means the markets are expecting a big move in either direction by an option’s expiration date. A low IV means the markets are expecting a smaller move in either direction by an option’s expiration date.

Now I have to stress that IV does not actually forecast direction; rather, it forecasts the magnitude of the direction a stock will move.

Typically, you would want to buy an option with a low IV. The anticipation here is that once the IV starts increasing, it will account for rise in the option’s premium along with any intrinsic value that may come along with it.

Now keep in mind that there is the chance that once you’ve entered a trade, the stock’s IV could start declining. If the IV alone was too high to begin with, then this could result in a depreciation of the premium. It is in this situation that you’d want the price to move further in-the-money (ITM), which would offset the drop the IV by adding to the intrinsic value.

IV can provide you with or remove your existing conviction to trade. And here are the three things you can do when looking at IV:

  1. You can stay away from options with high IV.
  2. You can hedge an option with high IV that you’ve already bought – by adding another option against it (i.e. a spread trade).
  3. You can find the patterns that do not rely on IV.

And #3 on that list is exactly what I did using my Money Calendar.

How I Banked A 100%Return on One of the Worst Trading Days of 2016

My Money Calendar crunches hundreds of millions of data points and shows which stocks have made an upward or downward move 90% (9 out of the last 10 years) of the time over the last 10 years analyzed. It then calculates the average profit or price move it made out of those years. IV is not a factor in producing that average price move.

Once I have that information, I work on the premise that if this stock made an average five-point move 90% of the time, I’ll build an option trade on it using that five-point move as my goal for the trade. Then, I then look for an option that has a chance to double with that price move.

And I found one…

Wynn Resorts Ltd. (NASDAW: WYNN) had an average expected price move of six points.

And today, I’m going to show the trade that I gave my Money Calendar subscribers:

Entry Date: December 14, 2015

BUY-to-Open: Wynn Resorts Ltd. (NASDAQ:WYNN) WYNN January 8, 2016 $65 Call (WYNN160108C00065000) for $3.50 or less.

Exit Date: January 6, 2016

SELL-to-Close: Wynn Resorts Ltd. (NASDAQ:WYNN) WYNN January 8, 2016 $65 Call (WYNN160108C00065000) for a 100% return.

ppt1 LARGE
ppt2 LARGE

I chose WYNN because I considered it a value play. In March 2015, the price ranged around $130, but at the time of the trade, the price range hovered around $65-$70, which is roughly HALF of what it was.

I also believe that contrarians like myself like the stock because although the bears were trying to drive the price range lower, there seemed to be enough buying happening to keep it at this range.

Furthermore, I anticipated that the casinos would be getting a good push in mid-December through the first week or so of January.

Although the IV was high at the start of the trade, this is one of those times when my Money Calendar found a pattern – regardless of IV. That said, I’m not trying to diminish the importance of IV because a low IV to begin with could have added to the trade’s profitability.

WYNN was anticipated to make a six-point move. But it moved a bit higher, and the option trade that was entered for $3.50 reached $7.00.

And that, my friends, is called a double.

ppt4 (1)

So there’s how I banked an easy double the SAME DAY the market spun into a freefall.

The trade worked perfectly, and I’ll continue looking for more trades based on the patterns and setups that my Money Calendar gives me.

And there’s one more thing.

Today, I’m sharing with you some of the upcoming stocks that my Money Calendar has already targeted.

For January, Money Calendar has already identified four trades that have the potential to deliver triple-digit gains. Netflix, Inc. (NASDAQ: NFLX), Gilead Sciences, Inc. (NASDAQ: GILD), and The Priceline Group, Inc. (NASDAQ: PCLN) are going up, while Newmont Mining Corporation (NYSE: NEM) is on the way down based on the 10 years of historical data that the Money Calendar gives me.

So keep your eyes on these, and don’t let the markets scare you away…

Here’s Your Trading Lesson Summary:

Implied volatility (IV) shows you the market’s perspective on the magnitude of a potential move in a stock. The higher the IV, the larger the move the markets expect. The lower the IV, the smaller the move the markets expect. And the three things you can do after determining the IV are:

  1. You can stay away from options with high IV.
  2. You can hedge an option with high IV that you’ve already bought – by adding another option against it (i.e. a spread trade).
  3. You can find the patterns that do not rely on IV.

I’ll talk to you soon,

Happy Trading!

Tom Gentile

3 Responses to “How the Darkest Day of the Year Delivered a 100% Winner”

  1. Dear Tom,
    I’ve been following your work through e-mail alerts and promos (from money morning and others) for quite a while, and would love to commit, however, I want to ask you a few things:
    – do you mind telling me roughly what the proportion of winning-versus-losing trades is, as I am in a bit of a tight spot right now. Also, is there a minimum amount of investable funds below which you would say the Money Calendar doesn’t work (as well)
    – do you mind specifying if the $1800 for the year promo you have going on right now, with money morning specifically, is in US$ (I’m in Canada)
    – is there a way I could split that payment in a few (even just a couple would make a difference in helping me get started)
    – lastly, I currently don’t have a trading account, and was wondering if you recommend anyone in particular (I used to work with Options Express)

    Thanks so much in advance for your feedback.


  2. To put things in perspective, I’ve done a little seasonality check on the VIX for the past decade. It averages an increase of 9.6% for the entire month of January, with a 50% probability of a 25+% spike happening (mostly in mid-January). Actually during 7 out of the last 10 years, the VIX has closed higher at the end of January than it was at the beginning. So even with the market falling 6%, this rough start we’re having isn’t THAT ominous after all. (Also, the VIX and the VIX/VXV ratio are a couple of my favorite contrarian indicators anyway.)

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