Listen to the audio version of this article (generated by AI).
In just a few hours, my “12 Trades to $1 Million” challenge will be launching… so I hope to see you there.
We are going to attempt to take $5,000 and turn it into $1 million in 12 trades or less and in six months or less.
Check out the video below, or keep reading for the breakdown of this Challenge.
Before we get started, let me say upfront that this is not my typical style of trading. I’m a conservative trader. I take small bets. I use options to generate income, and I use options to speculate and add a little pop to an otherwise conservatively structured portfolio.
Using options in the manner we’re going to use them in this challenge is a little unusual for me. But I think the timing is right because there have been periods during my four decade career when the market has provided opportunities to take bigger swings, be more aggressive, and ultimately achieve better results by being aggressive.
I think the market is giving us one of those opportunities right now. You see stocks moving 10%, 15%, 20%, even 30% in a single day. The market doesn’t offer those kinds of opportunities very often. So I think we have a relatively tight window where we can take bigger swings, and that’s the idea behind this challenge.
(And if you haven’t signed up to see what it’s all about, you can do so immediately right here.)
The main purpose of this challenge isn’t just to turn $5,000 into $1 million. It’s really to help educate you and teach you about trading – trading options, understanding the options market, understanding liquidity behind the trades, understanding the patterns and setups I look for, premium allocations, and all of those sorts of things.
By the time we’re done with this challenge, whether we’re successful or not, you’ll have learned enough to take some of these ideas and apply them to your own style of trading and your own portfolio for a lifetime.
I’ve been trading for 42 years. This is my 43rd year trading options, and it’s something I love. It’s something I expect to do for the rest of my life, and I’d love to share that passion with you.
Now, understand the probability of actually turning $5,000 into $1 million. First of all, I wouldn’t try it if I didn’t think it was possible. But possible doesn’t mean the odds are high. It’s possible to win the lottery, too, but the odds aren’t high. I think the odds here are better than the lottery, but I don’t want you thinking, “I’ll go buy that Lamborghini now because six months from now I’ll have a million dollars.”
That’s not the mindset that works here. What we’re trying to do is take a small sum, turn it into a large sum, have a little fun along the way, and learn a lot in the process.
Now, having said all that, let me give you some guidelines for this challenge.
We’re going to start with $5,000. If $5,000 is all you have in the world, do not do this challenge. That amount should represent a relatively small portion of your overall portfolio. You do not want to risk a large percentage of your portfolio because when you’re buying options, you can lose 100% of the funds invested.
If $5,000 feels too steep, you can do this challenge with $500 or even $200. The idea is that whatever we put into the first trade, we attempt to double it. We’re aiming for a 100% gain on each option trade.
So if you start with $500, it becomes $1,000. Then we exit that trade and move to the next one. The downside is that if we lose 50% on any given option position, we exit the trade as well.
We never want the entire account exposed to one position, and we never want to hit zero. So if we put $5,000 into the first trade and it gets cut in half, we’re down to $2,500 and we exit immediately.
Then we move to the sidelines and look for another opportunity.
Yes, there will be times when we cut a loss at 50% and the trade later reverses in our favor. That’s going to happen. But, we can’t focus on hindsight.
The rules are simple – we enter an option trade, and if it doubles, we exit. If it gets cut in half, we exit.
If we’re correct and the trade doubles, that means we can actually lose two trades for every one winner and still break even. That’s only a 33% win-rate. Historically, we’ve done much better than that in my services over time. I think our average win rate is around 70%, so I like the odds of this working in our favor.
That’s the long and short of it for now. I expect we’ll have the first trade recommendation out within the next few days. I’m waiting for a setup that I believe is an absolute no-brainer before we jump in.
I’m not going to force these recommendations. If we sit in cash for a while, I’m perfectly okay with that because I want this challenge to be something we can look back on six months from now and say, “What a fantastic run that was.” Not only because we made money, but because we learned a lot, too.
So I’ll leave it there for now. If you haven’t signed up to join, you should see what it’s all about at 10am ET today.
I’m excited about what’s ahead over the next several weeks and months, and I look forward to seeing you there.
Take care, folks,
Jeff Clark
Editor, Market Minute