Frequently Asked Questions

Like any career, option trading takes a lot of time, practice and experience. Only after several years of successful trading would I consider it as a full time career. Trading is very difficult and there will be difficult periods.

With that said there are many people who trade options for a living and it can be a liberating and highly rewarding career. Just be sure to educate yourself as much as you can. The good news is, you are in a great place to jump start your education.

No way! We want you to succeed and continue to make money every month. If you win then we win. You may also cancel your membership at any time.

It’s important to start off slow, then moderately start to build up your option trading business. Getting the fundamentals down is going to be key to long term success. It is important to start off paper trading, so that the you have time to soak it all in before putting real money on the line. This way members can experience everything options without the risk of lose money, while getting all the advantages of learning.

Once there is a good foundation in place, it’s best to start off with small trades. We recommend starting off with just one contract trades and once you have a few trades under your belt and are feeling comfortable about the options game, only then scale up to the next level.

At this point it’s important to try many different back-end protected trades, with an account size of $10,000, feel free to execute as many as 10 trades a month to increase the rate of learning and at the same time having a well diversified portfolio. Don’t forget, you can also keep executing trades in a paper trading account, just to see how different trades play out. Remember, at the beginning it’s all about knowledge accusation, and paper trading is a great way to get that.

We are not going to win every trade and our goal here is not to get rich. What we are doing is consistently making money year after year, a return on capital that out performs almost any other form of investment. This is not a get rich quick scheme, if anyone is telling you that you’re going to get rich quick doing anything, you should turn and run the other way, because those never work.

We are only there to give you the tool and the education you need to be a smart and skillful options trader. These are the same methods that the biggest investment institutions use and we feel everyone should have the same ability to use them.

The fact is no one cares more about your money than you do. So it’s going to be very important that you take control and get the skills needed to make your money grow year after year. The corrupt investment banks are known for actively recommend trades to their customers and then actually taking the other side of the trade. Do you want to trust your money to one of them?

Now that you are here, just relax, have fun and enjoy yourself. Investing is not only profitable, it’s fun, it’s empowering, and people also have increased perception of people who manage their own money. Just be sure to take it slow, respect the process and if you have any questions we are always here to help.

Anyone new to option trading should start out paper trading. Remember, this is not a sprint, this is a marathon. Our goal is for long term success, and with that is a proper foundation. You need to get your head around what is actually happening on every trade. The best way to do that is with lots of trades and then evaluation of each trade. For new traders, this means paper trading without risk.

Paper trading will give new traders the ability to send out every different type of trade and the ability to study that trade without the stress of money actually being on the line. Paper trading is there for a reason, be sure to take advantage of it.

Our option trading methods are, what we believe, to be the best method out there for trading options. Go through our learning material and follow our trade alerts and learn the procedures.

Options are basically a bet on the stock which is governed by time, patience and experience. Options can gain and lose value through a number of ways, so it’s a very dynamic investment means. It is important to understand options before trading with real money.

We recommend never buying single options, due to the huge risk of losing your entire investment. It is possible to get lucky and make a lot of money this way, but in most cases it will result in a loss. Mixing options together allows us to maximize our probability of success while capping our risk. In the end, this will be a long term strategy that will continue to return profit time and time again.

When trading options, there are two main option spread types, credit spreads and debit spreads. Credit spreads are options strategies that involve receiving a premium, whereas debit spreads involve paying a premium.

So if we are trading multi legged option strategy, if the option we are buying has a higher premium than the one we are selling, this would be a debit spread. If the option we are selling has a higher premium than the one we are buying, this would be a credit spread.

The fact is we understand winning trade situations, but getting the timing down to the exact second is just not possible. If you log in late to get the alert, you may get the same price, you may get a worse price, or you may get a better price.

You don’t always have to get the price we execute the trade for. Try not to get caught up on a few cents, if you are seeing a worse price, it may be worth it to just accept this new price, as another trade you will get a better price and it will all average out in the end.

However, we should also point out that patients are one of the keys to option trading. With experience, it will be a judgment call on what exactly is the best option for getting a fill.

You can place a trade any time, even the next day or days later as long as you are still getting close to the same price.  If the price has moved too much, skip it and wait for the next trade.

We offer three forms of trade alerts, you can pick the one that is best for you by clicking here.

We mainly use credit spreads, iron condors, butterfly spreads, covered calls and risk reversals. In rare occasions we may use calendar spreads, straddles or strangles.

By selling a spread for a credit, we are capping the amount of our max loss – your loss will be limited to the width of the spread minus the premium you received to take the trade. So if we sold a $5 wide spread, for $1.50, our max loss would be $3.50.

We rarely trade options that have earnings coming up, if we do, we will most likely look to get out of the trade before the earnings date.

We like to execute trades anywhere from 30 to 60 days to expiration and close to the middle of that range being the best approach. This means we like to execute a lot of trades right around the first of the month. We will then be looking to buy them back cheaper in most cases.

When first starting out it’s always recommended to start out paper trading and then graduate to real money trading one contract at a time. Once you feel comfortable with all the strategies and all the elements of the trades you can increase your contract size.

Our Executive portfolio position sizing is loosely based on an account with a $5000 balance. However, we never recommend you trade more than the contract size we are recommending, as options are extremely risky.

Ultimately, it is up to you to manage your trades and position size. If you disagree with our take on the trade, you can always skip it and wait for the next one. One good thing about trading is there’s always the next trade.

For risky investments such as options, you should lower the percentage of your portfolio at risk the larger your portfolio becomes. For example, you may want to risk up to 10% per trade if your portfolio is in the $10,000 range. If your portfolio was in the $25,000 bracket, you might move to the 5% rule. If you’re managing over $100,000, switching to a 2.5% rule would be wise.

Calculating the risk is straightforward when executing defined-risk options strategies such as vertical spreads or other strategies. For example, if you’re selling a vertical spread, it’s the point of maximum loss minus the amount you’ve collected in premium, plus transaction costs. If you wanted to sell a $10-wide put vertical for $4, your max risk would be $600 per spread. If you’re managing a $50,000 account selling four contracts would keep you under the 5% threshold.

As a general rule, it also makes sense to be more conservative with retirement accounts such as 401(k)s, IRAs, and other components of our retirement accounts. This conservative approach typically gets more pronounced as you get closer to retirement.

Remember, options are risky, so you should never risk more than you can afford to lose.

This is always a tough one as it depends on a case by case basis. In general if you have a 50/50 chance to win, you should get 100% return on your money. So for example, if you bet $100 on a coin toss and win, you would get $100. Another example would be if you bet $100 on rolling a ‘1’ on a dice role, which has a 17% chance of success, you should win $600. These are basic odds and probabilities.

Options are no different, if you have a 90% of success, you will get a 10% return on your money. If you have an 80% chance of success, you will get a 20% return on your money. However, there is one acceptation to this rule. The market maker you are trading with will take either side of any trade, but to do so you have to give them edge. This is why there is a bid ask spread on each trade, you can do either side, but you have to give up a little on each. Some bid ask spreads might only be $.10 wide, others might be $.50 wide, others can be several dollars wide. How much edge you have to give them really depends on the liquidity of the stock. So in this case, if you are making a trade that has an 85 probability of success, you may only get 10% return on your money. Keep this in mind, the larger the bid ask spread, the more edge your giving up.

You may trade options in a retirement account, except there is no margin allowed. The other restrictions is that there is no selling naked options, which is a strategy we rarely recommend ever doing anyway.

IV rank measures where current implied volatility stands in relation to the range it has been in for a given period of time. The max rank is 100 and the minimum rank is 0.

For example, suppose the past four IV readings were 19, 23, 34 and 41. A new reading of 19 IV would have a rank of 0 since it’s at the lowest end of the range, whereas a reading of 41 IV would have a rank of 100 since it’s at the top of the range.

This is important, because an option price with an IV Rank of 90 might allow us to sell an option for $1.80, where an IV Rank of 20 might only allow us to collect $1.20. As you can see, when implied volatility is high, this can make a huge difference in our profits or push our strikes out further for an increased probability of success.

We have outlined the steps need to get completely up to speed with our membership. So you get the trading, the trade updates, the accounts, setup, and the best commission rate all in one place. Just click here.

When the advanced feature is enabled, it will allow you to see the spread prices rather than each individual leg price. You can enable this by going to Client Services >> General >> Advanced Features. Here you may change to enable.

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