Frequently Asked Trading Questions

Your options trading style sounds promising, but can I lose money at this?

There is only one guarantee in options trading--or virtually any form of investment for that matter--at some point, some time you are going to lose some money. One way to look at trading options is you get paid to take on risk. Once in a while a trade for whatever reason is not going to work out, the key to being successful is to make losing trades stay in the “once in a while” category instead of the “losing streak” category.

We keep losing trades to a minimum by trading with several really important “secrets” designed to help you stack the deck in your favor. Some of the more important “deck stackers” are trading in the direction of the trend (as old Sir Isaac said, “An object in motion tends to stay in motion”), getting time decay to work for you, and getting volatility to work for you. Plus we use a battery of fundamental and technical analysis.

What is the difference between Options Success and The Pearly Gates?

There are several differences between the two that really make them completely different services, which is why some traders have decided to subscribe to both.

The Pearly Gates provides two options trades per week, the information is posted inside the subscribers only section of the website on Sunday evening, and each play description is very detailed providing specific entry and exit points for the two positions. The expectations for each position are also specified along with follow-up commentary after the position is entered and up until it is concluded.

The Options Success service is different in that two stocks are presented each day the market is open about an hour before the close as opposed to only two plays presented per week on a Sunday evening. One of the stocks presented is anticipated to move in a bullish direction and one in a bearish direction with the expectation that traders will put more emphasis on the plays that are headed in the overall market direction---for example if the market is bearish a trader would put more emphasis on bearish positions.

One of the biggest differences between the two services is the amount of “hand-holding” involved—The Pearly Gates provides all the specifics for an individual play along with recommended entry and exit points—this seems to work out well for entry level options traders and folks that want as much guidance as possible in making their trading decisions.

Options Success on the other hand does not recommend individual entry and exit points and actually does not even recommend exactly what position to take, like the option strike price or month to buy. What the service does do is solve the biggest issue confronting most traders and the absolute most important issue to resolve before making a trading decision, which is---the impending direction of the underlying stock. This is an important point—if you get the direction right on the underlying everything else seems to fall in place.

Options Success is a service that has great appeal for traders who know what kind of trades to place once they find a stock they feel confident about. It is a service designed to give more opportunities per week than most traders will ever use giving them the opportunity to ‘pick and choose’ the most attractive trades based on their own trade parameters. This service has tremendous appeal for active traders that are simply looking for more good opportunities to play each week.

And what about The Winning Secret?  That’s an options trading service too, right?

The Winning Secret is like The Pearly Gates in that it provides two great well-researched trade suggestions once a week (on Monday afternoons).  Except where The Pearly Gates is focused on trading directional calls and puts with automatic style exit orders, The Winning Secret focuses on selling strategies such as credit spreads and iron condors.

The Winning Secret provides all the specifics for an individual options trade along with recommended entry and exit points. It is the perfect service for a conservative options trader who is interested in high-probability selling strategies or just wants to expand his or her investment portfolio.

 

How does the Options Success educational trading package tie in with the Pearly Gates advisory service and do I need both?

The Options Success educational trading package is designed to help traders have the confidence to take advantage of the trades provided in the Pearly Gates advisory. It is perfect for a trader who likes the idea of the specific nature of the Sunday night trades, but feels they would like more help in their ability to take maximum advantage of those trades and enter the automatic style entries and exits that are provided with each recommendation.

The trading package shows in easy to understand graphic video via the included CD ROMs the absolute best way to enter your orders with your online broker, how to always protect trading capital with the right kind of stops, and how to automate the whole process to free up time and not become emotionally involved in the process. The Trading Package is good for beginning traders but is also an excellent asset for veterans as well---it is designed to be an extremely helpful companion for both the Options Success daily advisory and The Pearly Gates advisory.

 

How much should I start with in my options trading account?

If you are just starting out trading options we recommend an account size of no more than $10,000. If that is too much for you right now you can go down to $5,000 but it is very difficult to trade with less money than that .

We also strongly recommend not putting more than 5% of your account into any one trade. If you are starting out with the minimum you can put in up to 10% on one trade but decrease that percentage as your account grows.

Even though it's extremely tempting DON'T GET GREEDY. Resist the very strong temptation to "make a killing" on one or two trades. This temptation is always the strongest after you've had a whole series of winning trades with no losers. Sometimes we have 8 or 10 trades in a row that make money! You start thinking, "Wow, I made quite a bit on that trade, imagine if I had put in twice as much money...". That kind of thinking leads to eventual heartbreak--just keep it slow and steady.

In fact the people that manage the big hedge funds and mutual funds typically only put 1% to 2% in any one trade. The reason for this is if they guess totally wrong they'll still be around to trade tomorrow (it happens to the best of them--- that's why they call it a game).

Trading with a small percentage of your account on each trade really isn't going to slow you down much. Even our absolute most conservative trades typically yield the same amount in a month as a super successful mutual fund yields in one of their very best years. Throw in the compounding effects on your profits and now you are riding the "rocket ship" to financial independence versus the "ox cart" mutual fund approach (the returns on a typical mutual fund will eventually make you rich, all you have to do is live to be 428 years old!).

As your account grows leave some money in to make bigger dollar sized trades while keeping your percentage trade of your total portfolio the same. Also take some of your profits out and put them into nice conservative interest bearing instruments, like Real Estate Investment Trusts or Income Producing Real Estate or if the interest rate is decent--bonds or notes. The idea here being to make your dream of ongoing monthly Cashflow a reality in any economic situation for years to come---the feeling of freedom and security is indescribable.

 

When I applied to open a brokerage account they wanted me to fill out a whole bunch of paper work, what does it all mean and how should I fill it out?

Opening a brokerage account can be an overwhelming and confusing experience--especially if you are new to options trading-- which is why the Options Success trading package takes you step by step through the whole account opening process.

Remember, education doesn't just take money, it takes time and a little effort. I always like to remember what Derek Bock the former President of Harvard had to say about the cost of education, "If you think the cost of education is high you should check the cost of ignorance". When it comes to options trading no truer words were ever spoken.

Do your options strategies involve selling “naked” options, because I heard that you have to have special clearance from your broker and I’ve also heard it’s pretty risky.

None of our options strategies involve selling naked options. Selling naked can be extremely risky and I’ve actually seen people lose their entire brokerage accounts and then some using what I consider to be a very reckless strategy.

I feel a big responsibility to educate people on the right way to trade---above all I don’t want anyone to get into trouble---that is why we are protected on every trade no matter what. Every trade you put on with Cashflow Heaven has a known limited maximum loss potential, you’ll know it before you do the trade and as the old saying goes, “You’ll be prepared for the worst but hope for the best”. The problem with selling naked is it is hard to quantify the downside because when you sell puts naked the risk can be extreme (from the current stock price all the way down to zero) and when you sell calls naked the risk is infinite (infinite can end up being quite a bit of money).

There is another old saying passed around among floor traders that goes like this, “When you go naked down wall street you can lose more than your dignity”---well said! Stick with the conservative options strategies and you’ll probably still blow away the returns from any mutual fund in the land and you’ll sleep better while you’re at it!