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Trading Stocks The Safe Way

Discussion in 'Investing/Trading/Cryptocurrency/Altcoins' started by Big Z, Apr 7, 2017.

  1. jpmartin
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    jpmartin Jedi Master FASTLANE INSIDER Speedway Pass

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    May I suggest you start publishing your trades live via youtube. So you can explain as you trade, remember to insert the right tags on each video (hint: use tubebuddy) and then as you gain more subscribers, you can link to your course. This way you'll have a much larger audience to cater to. Plus people will build their trust in you over time.

    I say this from experience, and I use it still.

    I don't know why I'm answering this on Christmas day, so have a great one guys. Merry Christmas and Happy hols!
     
  2. Mr.Brandtastic
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    Mr.Brandtastic Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    The main thing to keep in mind is whether a market is overbought or oversold, whether it's a bull or bear market (essentially the same thing), or whether they are planning any interest rate changes. I mean aside from technical and fundamental analysis, there are really only two type of serious stock or equity investing.

    One is low risk, low return, investing in high quality, top 500 companies with great leadership and innovative ideas. What most people would call "blue-chip stocks" simply meaning safe. Especially if they are developing new products or they are under strong leadership. Under bull markets you can make solid returns just investing in the top companies. During a bear market (which you must be well aware of the signs of a coming bear market), you can do well shorting many of the same companies. And yes it will be helpful to know when to buy and sell.

    The other is investing in start-ups with unlimited growth potential. Generally these are high risk, high return. However, if you invest with known killers, seasoned executors who have run successful businesses before, it can go down to medium risk, high return. It will never be low risk because it is new and untested. But it is how many people go from wealthy (a few million) to super wealthy, 50+ million category.

    Either way make the money first through a business. A true money-making machine. Then dabble in these types of things. Even a 1000% return on $250 investment is only $2,500. But a 1000% return on $25,000 investment is $250,000. Or a $250,000 investment could be 2.5 million dollars. Compound interest maintains your wealth, explosive growth explodes your wealth.
     
  3. jpmartin
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    jpmartin Jedi Master FASTLANE INSIDER Speedway Pass

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    Sounds easy when you say it like that :)

    The problem now is that the public markets are no longer reliable wealth builders, while the private markets exclude almost everybody who isn’t already wealthy. Which is why many are turning to cryptos recently...
     
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  4. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Thanks for the suggestions.
     
  5. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Happy New Year Everybody,
    With this new year I would like to do some examples of trades to give anyone interested more information on what I call trading safe. Please understand that with this strategy you will not have as much gains if the positions go up, but at the same time you will not have as much risk either.
    The two basic strategies are the
    1. Married Put Strategy
    2. Collar Strategy
    You can do some of your own research on this on the internet with a simple search (I highly encourage it) to get a better understanding of what they are.
    Basically as I have mentioned in other posts its buying stock and insurance to protect against a down move. Also in the collar strategy you can sell a call to to help pay for the insurance.

    Here is an example of a trade (This is just an example, I am not taking this position in real trading) for educational purposes. Using the the market close prices from Friday 12/29/17. This is a married put position.
    AAL currently trading at 52.03
    The Feb 09, 2018 52 Strike Put @ 2.08
    Buying 100 shares and 1 put contract would be an investment of
    5203.00 + 208.00 = 5411.00
    Max Risk until Feb 9 is 211. 211/5411=3.8%
    Regardless of what happens the position cannot lose more than 211 between now and Feb 9.
    I chose this stock because I like the way the chart looks on it, and I feel that it has the potential to move up.
    I will track this position from now to Feb 9 and make whatever adjustments I feel are needed to illustrate (for educational purposes) how I would trade it. (Again I am not trading this in a real account).
    If you guys have questions please ask and I will try to answer to the best of my ability.

    Thanks
    Z
     
  6. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    No adjustment today just a recap of where it sits now.
    Stock Price = 52.99
    Options Price = .70
    Total 53.69
    Profit/Loss -42.00 If exited today at those prices, but the position is still on.
     
  7. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Making an Adjustment Here. Selling the Feb 2, 55.00 Call for 1.44 lowering my cost basis to 52.67. I still hold the 52 Feb 9 Put , so my risk is now down to 67.00 and If I get called out at 55 i will make 233.00
    on Feb 2. That would be a 110% on my risk and a 4.3% return on my capital invested. In about 30 Days. Worst case scenario I lose 67.00 dollars now and if the option expires worthless under 55.00 I still have a week left to make another adjustment or just exit.
     
  8. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    AAL closed on Friday at 58.06. Still have about 2 weeks for the call option to expire. If it stays above 55 I get called out and have a realized profit of 233.00. Looks like that is the likely scenario which is okay by me. Then I can move on to the next low risk opportunity. I will keep this updated if I make any adjustments. My risk on this trade was never more than 211.00 and now stands at only 67 worst case scenario.
     
  9. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Quick update. The call on AAL that i sold expired worthless. My cost basis on the position is 52.67 and I still own the 52 strike puts which expire this week. Today AAL closed at 49.78, but since I have the right to sell at 52 I really would only lose 67.00, if I chose to exercise the option. As of right now My plan is to hold to see what happens later this week. Either I will make another adjustment or exit out of the trade and move on to another.
    A quick point, with the recent sell off, using this strategy has kept the money safe without having to worry about taking a big hit to the account.
     
  10. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Update: I exercised the put option on Friday on this trade and closed out the stock for 52.00 with a tiny loss of 67.00. I will be putting on another trade for educational purposes sometime later today or this week.
     
  11. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    Thanks for posting and the transparency!
     
  12. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Thanks MJ for the comment. Doing my best to give value here to the community.
    For tomorrow the new trade will be on BAC (Bank of America). Again I want to make it clear that I am NOT taking these trades in my real account. I am only showing them here for education only. However I am making sure that whatever fill I post is realistic based on the market prices.
    BAC close at 31.12 Given that, My limit price for tomorrow will be 31.20, if we trade below that price I will assume that the trade was filled at 31.20
    In addition I will assume the purchase of the 31.00 strike March 23 expiry Put option for a price of 1.15.
    total cost of the trade will be 31.20 + 1.15 = 32.35
    Right to sell at 31.00
    Max Risk 1.35 or 135.00 per 100 shares. 4.17%
    I will update as the position develops.
    Thanks
    Z
     
  13. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Trade is looking good so far. BAC closed today at 32.72 above the cost basis and the Put still has some value in it with 2 weeks left of time value. A little more up move and I will be adjusting this.
     
  14. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    BAC trade: closing it out today since the put option expires. This trade was positive but did reverse with the market sell off. The final tally on it is a 135.00 loss.
    I could roll this put option and increase my cost basis banking on a rebound, but I would rather pick another stock that may have more potential.
    First trade of 67 loss and second trade of 135.00 brings the total right now to -202.00.
    This is a good example of how trading this way keeps the losing trades small, which is one of the main goals with this technique.
    I could have played this a little safer by selling some call options when the stock moved up and it would have been a lower risk situation, but I felt that the stock might break out to the upside.
    Now its time to move on and choose another stock to evaluate and set another position.
     
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  15. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    Plan for tomorrow is to short CELG if we trade below 89.04. I will also be buying a call option to protect the position, capping the loss in case there is one. The limit sell order will be 89.00 and I will post the call option strike price and expiration tomorrow when I see the prices.
    This is the same as buying a stock and buying a put option to protect it
     
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  16. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    The CELG trade did not trigger. I will set it up for tomorrow. Stop in if it trades below 89.60 with a limit of 89.55. I will buy a call for protection and determine the strike and expiration sometime tomorrow.
     
  17. Big Z
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    Big Z Contributor Read Millionaire Fastlane

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    CELG is up again today and so this trade did not happen.
    New trade today.
    Long FND @ 56.38
    Long FND May 18, 2018 55 Put @ 2.85
    Short FND Jul 20 , 2018 60 Call @ 3.00
    Net Cost 56.23
    Max Risk until Put expiry is 1.23 or 123.00 per 100 shares.
    This is a collar strategy and will need adjusting as the trade moves. Also I expect that this position will be on for some time.
    Again this trade to showcase the trading strategy (in this case a collar) and not a trade I am actually taking.
     
    Mainstream7 likes this.