Trade Findings and Adjustments 3-10-2020
In ALL Honesty the market is stacked against you
You buy a position and you have a one out of three chance to make money IF the position goes up
IF it is sideways or down you lose money 1 out of 3 = 33% chance to be profitable
IF you trade only options you have 1 out of 5 chance with volatility, time decay, theoritcal data
WHAT do you do to beat the market odds
The reason why we collar trade is some form and add shares with long put profits
80% of the Portfolio should be in collar trades
10% Spreads and 10% cash
Collar trading and/or long put profits
Stock purchased @ $100 per share and 1000 shares = $100,000
Loses 10% = 90,000
Loses 20% = 80,000
Loses 30% = 70,000
Loses 40% = 60,000
Loses 50% = 50,000
SO let’s BTO a long put for earning roughly 3 months out in time 6%
We buy a $100, 3 month out in time long put for $6,000
So we lose 35% like BA, F, AAPL, BAC,
Stock is worth $65,000 or $65 per share of stock
IF you have the long put it will worth at least $35,000
That if the long put value is 38,000 you have the opportunity to add more shares
WHY is this important?
IF you take out the cost of the long put you have 32K in profit
NOW IF you DON’T add shares and the stock gets back to 100K you will have 132K or a 32% ROI
Here is your SECRET
32K/65 = 492 shares of stock
You add 500 more shares of stock to your position
You now have 1000+new almost 100% paid for 500 shares and the stock takes off
1500 @ 80 = 120K
1500 @ 90 = 135K
1500 @ 100 = 150K
THIS IS the POWER of the Collar Trade
You need at least 300 shares to expect to add shares when collar trading
ANYTHING you make to the downside is profit when stocks come back up
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