😰In The Trade

Trading options successfully is all about winning big and losing small.

Winning big means taking winners to 100%+

Losing small means cutting your losses at 10 - 20%.

Every trader has a different style and profit they are searching for and this takes time to develop.

In this module we’ll cover winning and losing.

Getting max gains with free contracts (the best way to learn).

Runners are “free” contracts meaning your profit. If they go to zero, you lose zero.

Example:

Let's say you buy 2 SPY 510c and you are up 50% on them.

You can take a 50% profit on both or you can sell 1 contract at 50% and let the other contract run for free.

This is the best way to learn how to trade options.

Reason being:

You won't know what you'll do with a 100% trade until you get there.

You won't know what you'll do with a 200% trade until you get there.

The best way to get there is with free runner contracts.

Prepare to exit at the strike price

Strike prices (dollar levels for SPY and QQQ) are incredibly important!

When price reaches a strike one of three things will typically happen;

1.) it rips through going much higher or much lower

2.) rejects and reverses (if up it goes down, if down it goes up)

3.) chop at the strike (price moves slightly above and slightly below) You can see all of this happen within a span of 45 minutes on SPY 3/14/24.

Price rejects and reverses at 513, rips right through at 514 and then chops before reversing at 515. General tips:

If you're in calls and it doesn't hulk past the strike, take profit and go to runners.

If you're in puts and it doesn't nuke lower through the strike, take profit and go to runners.

Always FEAR that price will move against you at the strike

If it’s not going your way, you will get killed

When to hold at strike prices:

Getting 2+ strikes is how you get 100%+ returns (or 1-strike later in the session)

The best time to hold is when:

1.) Volume is over 110%

2.) You are at the blue line or 1-strike beyond

3.) Price is just ripping and it looks like a trend day

It sounds more difficult than it is. In a few weeks, you'll be a pro at knowing hey we are up 2-strikes, I'm in calls I should take profit. Or we're down 1-strike and it's not going any lower I should exit these puts.

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Losing trades strategy:

Trading is hard because not only do you have to beat the market but you also have to beat your own human psychology.

Our monkey brains force us to do two things:

1.) Add to losing trades to get back to even

2.) Take profits early when you start winning

Of course this is the opposite of what we should do and doing them will absolutely destroy your account.

YOU MUST DEFEAT THE MONKEY BRAIN.

If you can break these TWO HABITS… you can do this successfully.

This sounds simple, but it’s not.

The right way to lose is cutting losers quickly.

If your option is down -20%, don’t wait a little longer for it to go into profit.

Your ego and bias will always get in the way and try to stop you from just taking the loss and moving on. Don’t listen. Lose small.

How do you know if you’re in a losing trade?

If you are “hoping” that price will move in your direction, you are going to get killed.

There is no hope.

If you are in a winning trade, it will go quickly. You will know almost instantly.

Learning to lose is probably more important than winning. Be terrified of losing and mindful of protecting your account. Do that and you'll be here for a trend day where the biggest mistake you can make is selling 100% trades that go 500%.