Directional: Bigger, Safer Profits From Breakouts

Who the Service is For

This service is dedicated to investors who favor technical analysis to pinpoint directional movement in stock. This corner helps teach investors to identify stocks ready to move (either up or down) while providing alternative strategies beyond the simple buying and selling of stock. These strategies will maximize the use of an option’s leverage and limited risk characteristics to make more while risking less.

Which Strategies Will Be Used

We will use Long Calls, Long Puts, Vertical spreads, or Protective Puts and Synthetic Puts for breakouts or breakdowns.

Long calls and long puts provide investors with the potential for unlimited gains and limited losses. However, most investors do not realize there is a pace component to an option. Pace represents the rate at which the stock will move up or down. To an option investor, a $5 dollar move today is very different from a $5 move in a month. If you are not considering the pace component, you can lose on a long call or long put even if you’re correct on the direction. The proper selection of a call or a put is critical to the success of a directional trade.

Long puts are a more cost effective way to short stocks. Because of the unlimited risk in short stocks, brokerage firms have costly margin requirements that prevent many investors from shorting. However, long puts allow investors to profit from a downward move without any where near the level of risk and restrictions as a short sale of stock. Why limit your investments to only one direction? Now you can play both sides of the street.

When the proper application of leverage is applied, long calls and long puts can be a very effective way to replace the purchase and sale of the physical stock. The purchase of a well selected call or put instead of the stock itself can offer the buyer a much better risk- reward scenario, a better percentage return, and a more cost efficient way of playing a potential upside movement in the stock.

The Vertical Spread is a favorite strategy among professional floor traders due to its flexibility, cost efficiency, percentage return, and risk profile for both the buyer and the seller. The vertical spread can take advantage of directional movement as well as premium collection if positioned properly.

The Protective Put strategy will be used for potential break-outs. It is a long stock position accompanied by a long put position. The long put serves as an insurance policy for the long stock position in case of an adverse stock movement. A properly placed option can be used for stock replacement purposes to allow for better cost efficiency, better risk/reward scenarios, and better percentage returns. Why not use a call option instead? This is a secret of the floor traders and one that our members will know!

The Synthetic Put strategy will be used for potential break-downs. It is a short stock position accompanied by a long call position. The long call serves as an insurance policy for the short stock position in case of an adverse stock movement. A properly placed option can be used for stock replacement purposes to allow for better cost efficiency, better risk/reward scenarios, and better percentage returns. Why not buy an actual put option instead? Again, only our members will know!

Reasons for Joining

Directional trading is the approach most investors take with the market. Members of this service will be taught how to expand this concept by using an options leverage to provide better returns with limited risk.

Properly selected and executed break-out and break-down opportunities can yield investors and traders reasonably large gains in a pretty short time frame even in a stagnant market. But there are two major problems with trying to play these opportunities: The first is finding them, the second is execution. Breakouts and breakdowns not only present the ability for quick, easy profits but, in the case of a false breakout or breakdown, the ability for large losses. Knowing how to hedge this risk with options is critical for making big money in a safer fashion. This is easier said than done – let us show you how it is done!

Internet Payments