Hey Traders,
Last week, while turkeys were being prepared and families were traveling to gather for Thanksgiving, I placed a trade.
And it brought me a nice chunk of change by week’s end.
So I thought it would be good if I recap that trade for you and show you how I pull money from the markets every week, using the same exact strategy.
The Trade Breakdown
Last week, we focused on AVGO. Our strategy is to collect premium by selling a put below the current stock price and buying the next lowest put.
This is called a Bull Put Spread and it’s the strategy we use when we trade a stock with a strong bullish trend.
In order to spot AVGo as a stock with a strong bullish trend, I used my proprietary TrendPoint software.
But if you don’t have TrendPoint, you can do something similar using this technique I’ve previously discussed.
That particular article talks about spotting a trend in the major indexes, but you can apply that same method to individual stocks to find stocks with a strong trend.
The Execution
As I mentioned, we decided on a Bull Put Spread because AVGO was in a strong upward trend.
I trade spreads that expire at the end of the week. And I like to enter these weekly trades on Tuesday.
So that reduces my time in the market to just 4 days (most week). But because this week was a short Thanksgiving week, I was really only in the market Tuesday, Wednesday and half day on Friday.
So this is how the trade looked:
AVGO was trading at about 985 when I entered the trade.
I sold the 930 put and bought the 925 put. Because I entered them on a single order, I was able to get a net credit of 25¢.
That might not sound like much, but when the difference in strike prices is $5 (930 – 925 = 5), a 25¢ net credit is 5%. Not bad for a week’s work.
So how did it work out?
The Outcome
This trade turned out to be a resounding success. AVGO never dipped below 966 all week.
As with all of these spreads I do, the goal is to let them expire worthless. I collect my premium up front on Tuesdays and just sit back and wait for the option to expire worthless on Friday.
And the 95% win rate I have on these trade is a testament to the strategy’s effectiveness.
Key Takeaways
I always say that I like my trading to be boring. Some people get hooked on the excitement of placing a trade and then cheering as it goes up and going into a depression as it goes down.
That’s not me. I like to trade in a way that allows me to live my life and not be glued to the computer all the time.
I spend the summers up in Colorado fly fishing. That wouldn’t be possible if I was stuck at a computer worried about every little piece of news that comes out.
I prefer to trade in a way that is a lot more consistent and boring.
In some ways, it’s like becoming a casino. Rather than gambling on whether a stock is going to go up or not… I simply play the odds and collect a fairly consistent return every week.
Yes, on rare occasion I lose a trade. It’s true — no strategy wins 100% of the time.
But when you learn to tear yourself away from trading for excitement and you learn to trade the boring, consistent way… that’s how wealth is created.
Not with long-shot trades that could just as easily bring you 100% losses as bring you 300% returns.
Wrapping Up
One thing I like to say is that after a few years, the way you trade reveals a lot about who you are as a person.
People who like this style of trading are my people.
The gains may be “small” by some standards (usually 5-10% per week), but the consistency over time is something that only a certain kind of person can appreciate.
Stay tuned for more updates and trade recaps. Until next time…
Trade well,
Jack Carter