{"id":19427,"date":"2022-02-17T07:30:38","date_gmt":"2022-02-17T12:30:38","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19427"},"modified":"2022-02-17T07:30:38","modified_gmt":"2022-02-17T12:30:38","slug":"three-truths-for-the-most-rewarding-game-on-wall-street","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/three-truths-for-the-most-rewarding-game-on-wall-street\/","title":{"rendered":"Three Truths for the Most Rewarding Game on Wall Street"},"content":{"rendered":"

When most people think of options, they think of risk, dangerous leverage, speculation, or gambling.<\/p>\n

For novice investors, it certainly may feel that way.<\/p>\n

See, most people don’t understand options.<\/p>\n

The reason they were created in the first place is to reduce risk. In fact, options were designed to help investors hedge their portfolios against big declines in the market.<\/p>\n

Unfortunately, what’s happened over time is what happens to a lot of good ideas on Wall Street… Options have morphed into a commission-generating vehicle they sell to folks as a way to get rich quick.<\/p>\n

If you think trading options will help you get rich quick, I’ve got some bad news for you… While using options can make you a lot of money, it’s not going to happen overnight.<\/p>\n

Trading options is a process. And if you want to be in the options market for any length of time, you have to do it the “right way.”<\/p>\n

The “right way” involves a little extra effort. But I can help you master the basics, as I’ve been trading options for over three decades.<\/p>\n

During that time, I’ve also been teaching folks just like you how to reduce risk with options and add a little bit of “pop” to an otherwise conservative portfolio.<\/p>\n

So before you get started, here are a few things you must keep in mind…<\/p>\n

Truth No. 1: Buying and selling options is about the least risky and potentially most rewarding game on Wall Street.<\/h2>\n

Options master Victor Sperandeo racked up a nominal rate of return of 70.7% without a losing year between 1978 and 1989. With his astounding track record, we’d be foolish not to pay attention to what he has to say…<\/p>\n

Options are, many say, the riskiest game in town. Certainly, they are by far the most challenging, flexible, and potentially profitable financial instruments available.<\/p>\n

But if you trade them prudently, if you apply sound principles of money management, trade only when the risk\/reward ratio is highly in your favor, and execute your trades with diligence and patience… Then, in all likelihood, you will be profitable over the long term.<\/p>\n

I can say, conservatively, that at least 40% of all the returns I’ve made in my life have been with options.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Truth No. 2: Want to be a winner? Watch your losers!<\/h2>\n

To succeed in trading options, you really need to limit your trading to opportunities that have at least a 3-to-1 payout. At minimum, you want to have the potential to pocket $3 in return for every dollar you risk.<\/p>\n

This also forces you to think in terms of reward and risk, which is extremely important.<\/p>\n

Most failed options traders – even ones that may have had good trading systems – fail because they didn’t pay enough attention to risk. If you’re willing to lose 50% on a position, you’d better be expecting a gain of 150% or more – at least. That’s a tall order.<\/p>\n

If you’re willing to lose it all (meaning have the potential for a negative 100% return on a position), then you’d better be expecting a 300% to 500%-plus gain in that position.<\/p>\n

When you see it in terms of risk versus reward – and you realize that 500% winners don’t come along every day – you can see that “risking it all” is a bad bet.<\/p>\n

Options are a lot like poker – your hand is only a small portion of the battle. Betting appropriately for the entire game is really what’s important, which leads us to…<\/p>\n

Truth No. 3: Big winners make small bets.<\/h2>\n

You’ve got to know when to hold ‘em and when to fold ‘em. But you’d sure hate to fold ‘em and take a total loss with a big bet on the table… So don’t ever put yourself in that situation. Limit the size of your positions.<\/p>\n

You should only have 2%-3% of the money you’ve set aside for trading at risk on any one trade. We really can’t imagine any combination of circumstances where you should consider putting more than 10% of your trading money on one play. Don’t do it!<\/p>\n

To end up like Victor Sperandeo over the long run, you’ve got to stick to the program, limit the size of your positions, and limit your downside by never allowing a small loss to turn into a big loss.<\/p>\n

Traders who follow this have a chance of being winners in options over the long run. Those who don’t will be quickly taken for every penny.<\/p>\n

Best regards and good trading,<\/p>\n

\"signature\"<\/p>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

What has been your experience with options trading? Have you mastered these three truths?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Most people don\u2019t understand options…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19427","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19427","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19427"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19427\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19427"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19427"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19427"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19427"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19427"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19427"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19427"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}