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Discover option strategies that deliver reliable monthly income
There are many strategies for trading options. By joining ROI as a Member you will learn to trade low-risk strategies, some of which require only a small amount of capital.
in first month
What is special about ROI?
There are many strategies for trading options.
But first let me introduce myself. My name is Robert Jongebreur, the founder of ROI. I have traded options for some 20 years with mixed results.
Until recently I made money in some years but lost money in other years.
Then 2 years ago I decided to research a wide variety of different option strategies in detail and determine which strategy might work for me.
After a lot of research I came to the conclusion that no single strategy works best all the time and that different strategies are needed when the market and the economy are at different stages of their cycles. At the moment (first half of 2018) I have 3 favorite option strategies.
To receive these join at the low price of $9.95 for the 1st month.
Following my research, I re-started my option trading using the new strategies in October 2016 with a small amount of cash. My account increased by $20,000 in the following 15 months and weathered the downturn in early February 2018..
I am the first to say that this spectacular growth included quite a bit of luck but on the other hand one strategy I followed from Feb 2017 delivered an average profit of $520/month for 7 months straight. Then I lost $1,200 in September 2017 and stopped following this same strategy even though I had made an overall profit of just over $2,400 over this 8 months period.
In the meantime I had started another option strategy which worked well but then changed to a new strategy which also made profits. So I have changed strategies as the market, the S&P sector hot spots, the economic outlook and market sentiment changed.
It is not unusual for me to have 8 small trades (where maximum loss on each trade is less than $500) on at the same time where 5 are bullish and 3 are bearish. If the overall market rises the bullish profits will generally outweigh losses on the bearish trades. If the market falls sharply then the bearish trades will generally protect the overall portfolio from losses and if there is a loss it is likely to be small. I must point out that my plan is for each of these 8 small trades to make a profit but I know that some will make a loss. My goal is to make a profit, overall, on these 8 and, secondly, to protect the downside. The upside will always take care of itself.
You can cancel your subscription at any time and no further payment will be required. Also, as a Member you will be able to contact me with any questions you may have. I will answer all questions and comments personally and aim to reply within 24 hours.
These are some of my maxims:-
- Never underestimate the strength of an underlying trend and don’t be too concerned about occasional corrections as that is the nature of the market. The trend is your friend (until it ain’t and assume that can happen at any time; so be aware and buy protection where possible).
- Decide on a direction, up, down or sideways based on a 3 months forward outlook, with a view to exit in a time frame of less than 1 month
- Trade spreads where possible with the long 1 strike ITM but be prepared to go long without a short on some occasions.
- Place some bullish trades and some bearish trades at the same time as a single “group” and later close all of these at the same time where the “group” has shown a profit.
- Overall, you’ll do better by taking an option position on bearish stocks than bullish stocks but the best position is to hold some of each, at the same time. If the overall market direction is bullish then hold these in a ratio of 5:3 bullish:bearish (or 2:1 if you prefer) and vice versa where the S&P500 is bearish.
- I am not a great believer in technical indicators and if you do and it works for you that’s great but I will always have a close look at a chart before placing a trade. Broadly speaking I like to look for momentum ie is something about to happen?
- Don’t be afraid to try & test a new strategy to benefit from high probability opportunities. For example, at certain times of the year such as around Thanksgiving and prior to Christmas the market tends to exhibit certain repetitive trends.
- Where a position shows a good profit it is often better to exit for a profit, or by locking in a profit (eg by adding 2 shorts ATM and 1 long OTM) or by selling half and keeping half as holding the position and then seeing that profit erode is not a good feeling. As they say “you can never go broke taking a profit”.
I would like to talk about trading styles and my views on these. There are three styles of traders:-
- Discretionary traders – these are traders who use their intuition or gut feel for the selection of a stock, an index, a commodity or an FX trade.
- Technical traders – those who use indicators to select a trade but the problem is that there are dozens of technical indicators and it can get very confusing. Sometimes the indicators work for a while but then stop working and the trader then adds one more indicator or selects other technical indicators.
- Rules based traders – these traders look for patterns in the market and then do some back testing and then create a set of rules around these patterns. In essence, these are technical traders who have carried out quite a lot of research to select their trade.
All these trading styles can be improved by adding some fundamental analysis to the mix. For example, a closer look at GDP, unemployment, labour participation, interest rates and interest rate forecasts will provide some indication of the underlying strength of an economy. Similarly, a closer look at a stock and its sector, its PE ratio and other financial ratios will provide some indication of its medium term outlook.
Coming back to the strength of the economy, there is no doubt that the USA is doing really well and despite what some forecasters say, China is holding up remarkably well. That’s not all. India is also showing solid growth.
So on that basis, a 3 months outlook for the S&P500 would have to be bullish. But as we all know the 1987 crash came totally unannounced and the 2007/8 GFC came with little warning. Thus I’m very much aware that a sizeable correction can arrive anytime, unannounced (as in early Feb. 2018) so I hold a number of bullish spreads and bullish longs but, as always, I’m cautious so I also hold some long puts.
Here are some things you should know about the market, Fund Managers and stock commentators. There are some 9,500 mutual funds in the US managing approx. $16.3 trillion while there are more than 8,000 Hedge Fund Managers worldwide. Traditional Fund Managers are much more regulated and operate under stricter controls than Hedge Fund Managers. Many Hedge Funds use computer trading programs that accentuate any trend. They are basically betting that their sophisticated computer programs and analysis will allow them to be right more often than not and they tend to use options and derivatives to deliver extra income.
Thus there are tens of thousands of funds and hundreds of thousands of individual stock specialists and analysts. Now, all these specialists spend most of their working hours involved in the management and selection of stocks and, as such, are expected to be much brighter than you and I in making money from the stock market. The funny thing is that managed funds on average do worse than the S&P500 index.
Part of the reason is that once you have more than six stocks in your portfolio your portfolio lacks diversity and your portfolio more or less follows the index. So why should you put your funds with a professional manager whose fund will, on average, do worse than the index. Now of course there are funds that do better than average and there are funds that do worse on average and that’s fine.
The simple point I’m making here is that buying the index will on average do better than your fund. Over the last decade, more than 85% of large-cap actively managed funds underperformed the S&P500 index. Think about this, if a fund performs just as well as the S&P500 then it will perform worse than the S&P500 after the fund manager deducts its fees.
Fund manager’s talk about the need for diversification. Yet it is strange that many have well over 100 stocks in their portfolio which they call spreading the risk. That’s not spreading the risk, that is emulating the index. Don’t get me wrong, I have a great respect for fund managers. I’m just pointing out a simple fact.
Here is something else to consider: –
Every day we are besieged by analysts talking about the market but what they are really doing is commenting on the past. They will talk about a host of market matters and market news and what this stock has done and what the market has done and very little about what they expect to happen tomorrow. My view on this is simple which is that “yesterday is history and tomorrow is a mystery” applies to us all, specialists and novices alike.
Now here is something that should concern you: –
Stock commentators who suggest that you follow them because they recommended XYZ and that went up 400% and another stock which went up 500% if you had bought here and sold there, as shown on the chart. What they don’t tell you is that they recommended dozens and dozens of stocks and invariably some will have gone up quite a bit. So selecting the really good ones and ignoring the really bad ones doesn’t inspire confidence. Withe benefit of hindsight we would all be millionaires many times over.
Now here’s one of my favorite issue:-
How many stock pickers are there who say “follow my system and achieve a tenfold increase in three months”? There are many. Now here is the point. If they were so sure about making a tenfold increase in three months why would they even bother telling you and I about this system. Surely they would want to keep it a secret? And asking you to invest a lot of money to learn about their system seems a bit odd. That sounds to me that’s how they make money and their system is suspect. Hopefully you agree with me on this.
Then your next question might be “then why would I invest $9.95 for the first month and $49/month thereafter to learn about option strategies”? A good question.
The only reason I can think of is that:-
- I have researched a large number of option strategies and taken onboard some of the strategies that I consider to have merit and then added my own fundamental research in the selection of options
- I take into account that changing economic and market conditions require a change in strategies every 1 or 2 months
- I am the only person who will place a limit trade(s) and share this trade and my reasons for this with subscribers every Tuesday before the market opens
- and finally, becoming a subscriber will make you much better informed about options and what to do and not to do in order to preserve your capital (my #1 Rule)
On Tuesday January 2, 2018 I withdrew funds and arranged to have just $10,000 in my account to start the year with. This has increased significantly since then. I share my opinions with subscribers and mention the trades I have placed before the market opens every Tuesday. Thus my trading plans and results are visible to subscribers.
I am an educationalist and not an adviser. I only express opinions and hope that you will learn from this. Should you decide to invest in options you should first consult your financial adviser.
I have traded and tested many strategies and have traded the options of stocks or indices of some of the following strategies (some of these strategies overlap):-
- Momentum Trading
- Trading Support & Resistance
- Trading Volatility
- Trading iron butterflies for income
- Trend following
- Trading hot & cold sectors and selecting best/worst in class
- Trading a number of technical indicators
- Trading speculative takeover targets
- Trading LEAPS for incomeTrading optionable stocks with 52 week highs or lows
My trading results showed that some strategies performed well but most did not perform (i.e. provide a reliable income stream) in the medium term. So I developed my own strategy which is a mix of some of the above strategies plus some rules of my own.
Note that I did not include FX as I am not a day trader. I do not sit in front of a screen for long. I place limit trades before the market opens and I trade, at most, in the last 15 minutes of the day.
If I am not filled with a limit trade in the last 15 minutes of the day then I review the position with a view to placing the trade “at market”. I do not try and “shave” the option price. To me it is simple, I either want the trade or not, and if I do then by placing the trade near the close of the day “at market” makes sure that I get filled.
But before placing any trade I make sure that the “Open Interest” in the option series is relatively high and that the spread between the buy and sell is not large. For example, I am happy to buy an option series with a $0.40 – $0.45 bid/ask range “at market”, expecting to get filled at $0.42 or $0.43. I am not interested in an option with a $0.40 – $0.65 bid/ask range. Thus, liquidity in an option series is important to me.
Back to trading strategies and some basic rules.
My most important rule is Rule #1 which is “use a strategy which ensures that you can stay in the market forever”.
The second Rule #2 is not to have any hard and fast rules. That sounds odd. Yes, I know. I have rules and I know when I break them but I’m prepared to be flexible. For example, I’ll back away from a losing trade if it hasn’t moved in the direction I expected within 3 days. But then if earnings will be announced in the next 5 days I might as well hang on as by that time the position might have lost 80% of the value of the option and letting the last 20% ride, in this circumstance, is acceptable to me. Generally, I cut losses quickly and let my profits ride. Based on a $10,000 portfolio, if I’m up more than $1,500 overall I’ll close every position, no matter what. It doesn’t matter if one position might double the next day. Who cares and, more to the point, who knows?. Taking profits is great and is the best way to abide by Rule #1.
Rule #1 is about staying in the market, no matter what. Taking large positions is the antithesis of Rule #1. You might be lucky once or twice but having large positions is the best way to lose everything in the long term.
Rule #1 is about building your portfolio in the knowledge that big swings, and I’m talking in particular about downturns, can happen any time, totally unexpectedly. For that reason if I have 8 open positions, then typically 5 will be bullish and 3 will be bearish.
I do quite a bit of research on a stock or index or ETF before placing a trade and make sure these meet my guidelines. I find it easier to be fairly bullish or bearish about a stock and I avoid searching for neutral stocks, meaning stocks that are expected to trade in a narrow range. It is a personal preference. Every trader should find their own preference for a strategy that suits their trading style. That might take a while but it is worth it in the end if you are able to find a strategy that fits your personal trading style or preferences. I have a personal preference for finding bullish trades but I also know that having some bearish trades (which I expect to deliver a profit as well) reduce the risk of my portfolio.
Rule #1 is about staying in the market. That means you have to preserve your pot of gold i.e. your portfolio, at all times. Don’t trade singly large positions as a single trade which goes south will set you back quite a bit. If I have 8 open positions, some might be options on stocks, or options on an index, or options on a commodity as that ensures some diversification. Having 4 bullish positions on 4 technology stocks is great if the tech index is moving higher but the tech sector, occasionally, pulls back very sharply. Thus 4 bullish positions in a single sector (tech in this case) should be avoided as it could result in a large dent in your portfolio, thereby breaching Rule #1.
There is nothing original about my strategy. It is an amalgam of a number of strategies which happen to work for me. It suits my style and it also gives me an edge, based on probabilities. Having 8 or so open positions at any one time, each one of which has been researched to provide a positive payoff, will not result in 8 wins, even at the best of times. I put a great deal of faith in probabilities and I know that based on past trades, 4 to 6 will be wins and 2 to 4 will be losses. As my wins are, on average, larger than my losses, then on average these positions will result in profits, overall. I do like to let some of my profitable trades run and not place stops. That’s where I exercise some flexibility rather than having hard and fast rules. But don’t get me wrong, I do have rules and when I breach a rule or about to do so I watch my position very closely and will exit at the slightest hint of trouble.
As I said, I like to let my profits run. That is one reason why I mainly buy long calls and long puts with a smaller number of option spreads. I used to trade credit spreads but over time I found that getting the direction and size of a move correct limited the size of my profits. Spreads do not necessarily reduce your exposure. Sure, buying a long call and selling a higher strike with the same expiry is cheaper than buying a long call if we are talking about the same number of contracts. But if my average trade is $400 then buying $400 of bull call spreads or $400 long calls amounts to the same exposure i.e. in both cases you lose $400 if at expiry the stock or index price is below the strike of the long call. Conversely, if at or near expiry the stock or index has moved quite a bit then the spread will limit your profit while a long call has a higher profit potential.
Now, having read this far, you might be thinking “what trading strategy should I follow?”. My answer is:-
- Trading is all about probabilities
- Trading is all about observing Rule #1 (staying in the trading game is paramount to success)
- My trading strategies are mainly based on these points. If my trades preserve my capital then I am keeping faith with Rule #1.
- If I place lots (5 – 10 trades) based on sound research and based on probabilities of success then my profits should outweigh my losses. Again, Rule #1 is adhered to.
- If I place a number of bullish and bearish trades at the same time and there are more bullish trades when the S&P500 trend is bullish and more bearish trades when the S&P500 trend is bearish, then a sudden large change in the S&P500 will not have a dramatic impact on my overall position because of the protection afforded by having both bullish and bearish positions. For example, in a situation where the S&P500 drops 3% overnight, the losses from the bullish trades will generally be covered in part, or all, from the profits of the bearish positions.
I hope you enjoyed reading the above.
To get my weekly trade recommendations and information on my strategies simply Subscribe Here.
if you have a question then send me a message and I’ll answer it personally.
In addition to Rule #1 and Rule #2 here are some more of my rules. I hold most of my trades for 2 – 15 days. However, one of the simplest strategies, recommended for novice traders, which produces the most consistent monthly income, I hold for 12 months.
3. Simple rules will hold up better in actual trading than will complex rules that are tailored to more specific market behaviour. Keep your system simple and you will find that this serves you better over time.
4. There is no such thing as a perfect system. Some systems perform better in certain types of market conditions. One of the most effective ways to improve the robustness of your overall trading is to include a diverse range of markets.
5. Only trade options that have adequate volume (Open Interest) with small spreads between the Bid & Ask.
6. A complete trading system that covers the decisions required for successful trading include the following:
- Markets – what to buy or sell
- Position sizing – how much to buy or sell
- Entries – when to buy or sell
- Stops – when to get out of a losing position
- Exits – when to get out of a winning position
- Tactics – how to buy or sell
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Options transactions are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. For more information, see https://www.nfa.futures.org. NFA is the industrywide, self-regulatory organization for the U.S. derivatives industry, providing innovative and effective regulatory programs.
U.S. Government Required Disclaimer – Forex, futures, stock and option trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using the strategies or tactics, or the information in this website or accompanying material will generate profits or ensure freedom from losses.