A lot of you guys ask how I maintain win rates over 90% on some of my services.
So today I wanted to share with you some of the behind-the-scenes magic.
Yes, part of it is what I’ve told you many times before:
When you turn the tables and switch from buying options to selling options, you automatically up your odds.
Because options buyers need their picks to work out in two ways:
- in terms of direction
- and in terms of time
Think about it: Let’s say XYZ stock is trading at $50 right now.
You buy a $55 option that expires 2 months from now.
Not only do you have to be right that XYZ is going to start heading up.
You ALSO have to be right that XYZ is heading up pretty quickly.
Because if it doesn’t get there by expiration day, all that money you spent on the option is gone.
But remember — that money you spent goes to SOMEBODY… and that somebody is the options seller.
Every time an options buyer loses, an options seller wins.
And it’s said that more than 80% of options expire worthless.
I’ve covered this many times before, so I won’t bore you with more detail.
“Secret Sauce”
But one thing I haven’t talked a lot about before is how I know which stocks are the best to sell options on in the first place.
Because if I sell a put option on a stock that ends up going down, that’s not a win for me. (unless I purposely sold it to get assigned while lowering my cost basis, as I discuss in this Naked Puts discssion)
So how do I find trending stocks? And how do I know which trends are the strongest — and therefore the likeliest to keep going?
It might not surprise you to find out that the answer is something called TrendPoint.
It’s my custom-built software that literally points me to the strongest trends in the market.
That way, I know at any given moment which stocks give me the best odds when I sell options on them.
Example:
Exactly 1 week ago, on January 31st, I was on Nate Tucci’s new Publisher’s Roundtable show with 3 other traders. We were sharing our best $500 trade idea.
The trade I gave out was on AVGO.
Now, I’ve heard it all about AVGO: “It’s come so far already. It can’t possibly go any higher!”
I heard it all last year. And I’ve been hearing it all again this year.
Meanwhile, AVGO keeps trending higher and higher:
I can’t tell you how many people have missed the powerful trend on this stock…
All because at every new high, they were scared that it was the “last hurrah”.
But nearly 4 decades of trading has taught me one thing: The Trend Is Your Friend!
I pretty much won’t trade a stock unless it’s in a trend.
So back to the $500 trade idea.
How did it work out?
The trade I gave out was this:
At the time, AVGO was trading between 1180 and 1190.
And with the trade idea I gave out, I was basically banking on the fact that AVGO would close above 1132.50 by Friday (just 2 days away!)
Over the next 2 days, AVGO went nowhere but up.
So those options expired worthless and anyone who took that trade would would have walked away with $500 for just 2 days in the market.
What If…?
But let’s talk for a moment about “What If.” Namely, what if AVGO had gone sideways… or even down!?
That’s the beauty of using spreads. I’m basically drawing a line in the sand.
In the example above, you saw that I drew that line a hair over 4% below where the stock was currently trading.
That means the stock would have to go down more than 4% for this trade to turn against us.
And remember, it was expiring in 2 days. That’s pretty rare for a stock like AVGO to drop that far that fast.
But using the spread to trade it, rather than buying a call option or even buying the stock outright…
Lets me win whether the stock goes up, sideways or down less than 4%.
That’s a winning strategy.
My Winning Formula
That’s the power of spotting a powerful trend and using spreads to trade what you see.
Each of these things ups my odds of winning the trades I place.
And TrendPoint is at the heart of it, letting me do these things with confidence.
I recently pulled back the curtain on Trendpoint with a class I’m calling “The 3 Click Method For Picking Your Top Stocks of 2024“.
I’d love for you to check it out so I can show you exactly how TrendPoint simplifies my trading.
Click here to check it out now.
Trade well,
Jack Carter
