Secret 29THE SECRET OF PROFIT BOXES
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Many option buyers purchase options that are at or in-themoney.
These options have much higher deltas and move much
closer with the underlying stock or futures.
There are serious disadvantages with these options. Not only
are they quite expensive, where several hundred or thousands of
dollars are at stake, but one wrong move by the underlying stock
or futures and the option price will collapse, losing you thousands
of dollars.
Furthermore, unlike stock, you do not usually have a second
chance or the time for the stock price to come back. As a result,
you need to create a game plan that provides you with some
protection.
In my newsletter, The Put and Call Tactician, we create Option
Profit Boxes. The Profit Box is a game plan where if the underlying
stock or futures price stays in the Profit Box, you stay in
the option position, but if the underlying stock or futures leaves
the Box, you immediately exit the position.
The beauty with the Profit Box is that you are only in the position
for a maximum of three weeks and you have a very tight
stop-loss. You exit if the underlying stock or futures starts to
move in the wrong direction.
Check out the examples in Secret #66.
With such a strategy, you are in the position for a short time
to avoid the danger of time decay of the option and a lot of loss in
the option value. This strategy gives you the chance to exit if the
underlying stock or futures moves in the wrong direction.
This game plan also counters the tendency of the option
buyer to suffer from inertia. As an option buyer, as you already
know, one of your greatest enemies is inertia. You need to be
quick on the trigger when you take profits or cut losses. The
Profit Boxes help you with the process.
Many option buyers purchase options that are at or in-themoney.
These options have much higher deltas and move much
closer with the underlying stock or futures.
There are serious disadvantages with these options. Not only
are they quite expensive, where several hundred or thousands of
dollars are at stake, but one wrong move by the underlying stock
or futures and the option price will collapse, losing you thousands
of dollars.
Furthermore, unlike stock, you do not usually have a second
chance or the time for the stock price to come back. As a result,
you need to create a game plan that provides you with some
protection.
In my newsletter, The Put and Call Tactician, we create Option
Profit Boxes. The Profit Box is a game plan where if the underlying
stock or futures price stays in the Profit Box, you stay in
the option position, but if the underlying stock or futures leaves
the Box, you immediately exit the position.
The beauty with the Profit Box is that you are only in the position
for a maximum of three weeks and you have a very tight
stop-loss. You exit if the underlying stock or futures starts to
move in the wrong direction.
Check out the examples in Secret #66.
With such a strategy, you are in the position for a short time
to avoid the danger of time decay of the option and a lot of loss in
the option value. This strategy gives you the chance to exit if the
underlying stock or futures moves in the wrong direction.
This game plan also counters the tendency of the option
buyer to suffer from inertia. As an option buyer, as you already
know, one of your greatest enemies is inertia. You need to be
quick on the trigger when you take profits or cut losses. The
Profit Boxes help you with the process.