- July 12, 2014
- Posted by: CoachMike
- Categories: Options Trading, Trading Article, Trading News, Trading Tutorials, trading videos
One of the things I love most about using a powerful options trading strategy is the incredible flexibility that it gives me.
If you are like me then you either have financial TV or radio on throughout the day.
This means we are flooded with news and new trade ideas constantly.
This can lead to big profits as long as you have an options trading strategy in place that gives you exact entry and exit points.
Avoid Impulsive Trading
This will prevent you from taking trades blindly and instead provide you with high probability trades.
Let’s use the recent Middle East crisis as an example.
We all know that during the month of June fears of another conflict in Iraq caused some large swings in the price of Crude Oil. Turn on CNBC or Bloomberg and you heard endless stories talk about how the conflict could affect energy prices and the stock market as a whole.
How to Profit
So how does one profit from this?
The first way would be to trade the Crude Oil futures contract. The problem with this approach is how expensive these futures contracts are. Not many traders have the capital to hold a position for any length of time.
Instead, we can use a basic options strategy to profit.
A second way to profit from the change in Crude Oil prices is to use stock options.
One of the products that my Options Mastery students trade all the time is USO which is the United States Oil Fund. It is an ETF that tracks the price of Crude Oil.
We used this product to play both the upside and downside in the price of Crude Oil during the month of June. We took two trades and they both ended up winners.
Our Active Swing Trader options trading system identified the exact entry and exit points on both trades. Click here for a full video recap of these USO trades.
Options Trade Examples
The first trade came on 6/4 and our Active Swing Trader options trading system gave us an entry point at $37.87.
Instead of buying the shares of stock we decided to buy Call Options.
We chose the June 37 Call options and paid $1.05 for each contract which gave us control of 100 shares of USO at $37 per share until June expiration. This took a total of $105 for each contract that was purchased.
Our system gave us a target of $38.79 and was hit on 6/12.
We sold out of our call options for $1.83 giving us a profit of $78 per contract or a 74% return on our money in 8 days.
The second USO trade came on 6/30 and this time we decided to play a pullback in the price of crude oil.
All we had to do was track the Active Swing Trader system which told us to go short at $38.65. Instead of shorting the shares of stock we bought Put Options.
We bought the July 39.5 Puts for $1.02 or $102 per contract purchased. This trade gave us control of 100 shares of USO at $39.50 until July expiration.
The system gave us a target at 37.73 which was hit on 7/10. We sold out of our Puts options at $1.86 which gave us a total profit of $84 or and 82% return on our money.
These trades allowed us to take advantage of the news to book profits from the changes in the price of Crude Oil. We were able to do this with a maximum risk of around a hundred dollars per contract making it perfect for trader of all account sizes.
If you do have access to more capital all you need to do is add on more contracts to the trades.
The options on USO are very liquid and can be traded with multiple contracts without any issues.
Take Advantage of an Options Trading Strategy
We have taken advantage of a powerful Options trading system like the Active Swing Trader to book profits on the price of a commodity.
We aren’t limited to trading individual equities like Apple or Google.
Trading options allows us to profit on:
- even bonds if we choose to
We can control our risk easier than any other product available to traders. This is why every trader needs to have access to basic Call and Put strategies as part of their overall portfolio.
Start with a basic Options Trading Strategy and you are well on your way to taking advantage of any event to hit the markets.