Give Me Your Best Stock Idea – I’ll Give You a Better Options Trade

After spending over four decades trading options there are two things I can say with absolute certainty…

1. Show me your favorite stock, and I’ll show you an option strategy that will be more profitable and carry less risk than the stock.
2. Any trading strategy – no matter how aggressive or conservative – can make you rich as long as you implement a discipline that prevents you from blowing up your account.

I will dedicate my Market Minute essays over the next few weeks to proving those points. But, I’ll need your help to do that.

Let me explain…

Most people think trading options is risky. They’ve either had a poor experience on their own, or they know someone who lost a boatload of money trading options. So, they’ve closed their minds to any strategy involving puts and calls.

They ignore the main purpose of options – which is to reduce risk – and they consider anyone trading options to be a gambler.

I Don’t Gamble – Here’s How I Use Options

I use options to generate income, to enhance the potential rewards on “big picture” stock ideas, and to speculate on short term ideas.

“Aha!!” you might be saying, “You speculate!! That’s the same as gambling.”

It’s not.

When you gamble, the odds of success and the potential payout are slanted against you. When you speculate, the odds and the payout are slanted in your favor.

For example, betting $1 to win $0.90 on a coin flip is a gamble. You are guaranteed to lose money over time.

Betting $1 to win $1.10 on a coin flip is a speculation. You may not win on an individual toss, but you will win over time. The trick is to stay in the game long enough to profit – which is why you need a discipline that prevents you from blowing up your account.

Send Me Your Favorite Stock to Buy or Short Right Now

Over the next few weeks I’ll share the strategies I use to make money with options. First, though, I want to prove I can craft an option strategy that beats your best stock idea, and carries less risk.

To do that, send me a message at [email protected]. Give me your favorite stock to buy or sell short right now. Provide the ticker, your target price, the time you expect to be in the trade, and the maximum percentage you’re willing to risk on the position if you’re wrong.

I’ll select a handful of the ideas to use as examples of how I would structure an options trade to increase the potential reward… and at the same time, reduce risk.

These will be hypothetical examples, of course, since I can’t provide individualized investment advice.

But, they will illustrate the power of using options the “right” way. And, maybe we can put to rest the misplaced idea that option traders are gamblers.

Best regards and good trading,

Jeff Clark
Editor, Market Minute