Markets have been ripping higher since they reached a bottom around October 27th.
But most traders will admit that something’s changed recently.
That strong upward push has slowed, almost to a stop.
As Warren Buffett famously said:
“Only when the tide goes out do you discover who’s been swimming naked.”
So today I wanted to share with you a breakdown of the trade I did last week that let me win even when the market turned against me.
Overview
Last week, on Tuesday — as I do every week — I placed a trade that let me collect instant income from the market.
That income is what I collect in exchange for making a promise.
But here’s the great part. These trades I place on Tuesday always expire on Friday!
So my exposure to the market is less than 4 days.
If the stock doesn’t drop to the price I promised to buy it at within those 4 days, I’m off scot free.
And my 97%+ track record speaks for itself. These trades are designed to win consistently.
So why did I start by talking about the market turning against me?
Well, to understand that, you need to understand how the trade works.
Inner Workings of the Trade
As with most of my income trades, when I place these Tuesday trades, I am looking for a stock that is in a strong upward trend.
Momentum in the market is a real and powerful force.
And knowing that a stock is in a powerful upward trend lets me confidently place trades that bet against the stock going down.
But here’s the thing: I don’t NEED the stock to continue the uptrend.
Because the kind of trade I place has some leeway… a built-in “cushion” so to speak.
So even though I’m betting the stock will not go down… my trade is safe if it goes down a little bit.
Sometimes it can drop as much as 5%-10% without the trade going against me.
To summarize: With these trades, I win whether the stock…
- goes up
- moves sideways
- goes down a little bit
Consider that most directional trades only win if the stock goes up.
But the way I place these trades, it’s like having 3 times as many chances to win the trade.
So What Happened Last Week?
This past week, using my WOP strategy, I placed a trade on NVDA.
Unless you’ve been living under a rock, you’ll know that NVDA has been in a strong upward trend for most of this year.
And last week, NVDA was trading at about 480.
The trade I placed on Tuesday was a promise saying that if NVDA dropped below 457.50 by Friday’s close, I would buy it at 457.50.
It seemed like a safe bet. The powerhouse stock would have top drop nearly 5% in 4 days (more than 20 points) for the trade to go against me.
For Tuesday and Wednesday, the trade was doing just fine. The stock moved more or less sideways all through Wednesday’s close.
But then Thursday morning markets opened up and BOOM!
NVDA was down almost 3.5% in just the first half of the day.
Any trader who had played NVDA by buying it outright… or even buying bullish stock options would have been rocked by that news.
Instantly they would have been in the red.
But not me.
Because as I said before, with this strategy, the stock can move against me and I’ll still be fine.
As long as it doesn’t move too much in those 4 days, the trade still works out in my favor.
And as it turned out, the sharp downward move that NVDA made on Thursday was basically all it did for the rest of the week.
It essentially traded sideways through Friday’s close. And with that, the stock closed well within the safe zone, allowing us to keep the income we had collected…
While the promise we made expired worthless.
Lessons Learned
I’ve said it before: I love income trades because I don’t need to be 100% right.
I just need to avoid being 100% wrong.
And avoiding being completely wrong is a much easier game to win than trying to be completely right.
We do this by combining two powerful techniques:
- by picking a strongly trending stock
- and trading it in such a way that the stock can go up… go sideways… or even go a little bit down…
Three completely different outcomes and we still get to win our trade.
It’s a remarkable way to trade and it’s the reason my win rate is as high as it is.
It’s not because I’m staring at charts all day long and making crazily accurate predictions.
It’s because the strategy I use stacks the odds in my favor, allowing me win the vast majority of my trades.
And that, my friends, is how wealth is built.
Bit by bit… Week after week… Consistently.
Trade well,
Jack Carter
P.S. I recently went live with Norman Hallett to share how the Fed’s changing stance on interest rates could supercharge this strategy. If you didn’t get to catch it, I recorded it for you. Click here to watch it now.
