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<\/p>\nI was only 19 years old when I made my first options trade.<\/p>\n
I had a gut feeling the market was going to go higher… so I bought four S&P 100 call options at $1.50 – a total investment of $600. A few hours later, the options were trading at $4.50. I sold and took the $1,200 profit – a 200% gain. And I was hooked on options forever.<\/p>\n
My next trade was in IBM. I bought 10 calls for $1. This time, it took a couple days to double my money. Next, I bought Digital Equipment put options… which nearly tripled in just a few days.<\/p>\n
I made 17 trades during my first six weeks as a trader. Every single one was a winner.<\/p>\n
Going 17 for 17 was a remarkable feat for a rookie trader – especially since I wasn’t using any sort of fundamental or technical analysis. I was just going with my gut. But I was careful not to put more than $1,000 or $2,000 into any single trade. And I still managed to turn my $5,000 brokerage account into $50,000 in just six weeks…<\/p>\n
And then I decided it was time to get serious. No more tiny trades. I was too good for the small stuff. For whatever reason, I had figured out a way to beat the market. Heck, I had just rattled off 17 straight triple-digit winners. So I decided to take the $50,000 in my account, add to it my $25,000 in savings, and put it into a handful of options trades.<\/p>\n
You can probably guess what happened next.<\/p>\n
The stock market has a habit of humbling folks who think they’ve figured it out. For me, the humbling started right away.<\/p>\n
At first, the positions started slightly moving against me. It was nothing to be concerned about. One good day would put everything back in the profit column.<\/p>\n
But then, one by one, each position blew up on me. It was too painful to watch. I kept the television off and avoided reading the newspaper for fear I’d see something bad about the stock market and my positions. When I finally got up enough courage to call the branch manager and check on the status of my account, I learned all the gains I had built up over the previous six weeks were gone.<\/p>\n
“Just sell everything,” I said.<\/p>\n
That was an expensive lesson to learn. But it’s one every options trader learns at some point. I was just fortunate it happened to me early in my career.<\/p>\n
You see, that experience changed how I looked at trading. Instead of using options as vehicles for speculation – a way to juice my returns and get more bang for my buck – I started using them the way they were intended to be used: as a way to reduce risk.<\/p>\n
Today, I still do my fair share of speculating. But I’m not focused on how much money I can make. I’m focused on how little I can lose.<\/p>\n
That’s a huge difference. It has allowed me to trade options successfully for nearly three decades. And it allowed me to retire at 42.<\/p>\n
Best regards and good trading,<\/p>\n
<\/p>\n
Jeff Clark<\/p>\n
P.S. <\/strong>Like any honest trader will admit, this is far from the only horror story that’s occurred over my career. But my favorite story, which started out just as scary<\/a>… ended quite differently.<\/p>\n You see, I’d learned from my previous mistakes… and turned what was almost a devastating loss into one of the biggest wins of my career.<\/p>\n Click here<\/a> to hear all about it, and see how you can use the same technique to book life-changing gains in your own portfolio.<\/p>\n Today, a reader’s take on the unusually high number of call option buys<\/a>…<\/p>\n Seems to me it should be seasonally related to earnings. I’m thinking traders may be seeing some upside earnings surprises.<\/p>\nReader Mailbag<\/strong><\/h2>\n
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