Credit Spreads, the Mirage for Beginning Option Traders

The Truth About Credit Spreads with Options

Credit spreads are one of the most popular instruments used in Option Trading. The question is why. It’s simple. The Credit Spread is the easiest spread to understand for beginning option traders, but does this make it a good strategy?

The truth is that Credit Spreads have a high probability to make a profit. However, along the way to realizing a gain with this trade there is a lot of risk and stress involved. For example, the average Credit Spread trader will face 100% losses on this trade several times a year while trying to make a modest 5 to 10% a month. What happens is that eventually all Credit Spread Traders meet their dooms day. Sooner or later all option traders that use only Credit Spreads wipe out their trading accounts.

Read more about Credit Spreads here

Credit Spreads

Do Traditional Option Income Strategies Really Work Anymore?

New and Popular Trade Strategies with Options: How They Hold Up

Time is the biggest difference between trading low-risk option strategies and the popular income strategies. Their recovery times from drops in the market are very different. For example, due to a recent “computer glitch”, anyone trading Iron Condors as an income spread lost about fifty to seventy percent in that two week period. When you think about it that means it will probably take about ten months or more than a year for them to make their money back. Chances are most traders won’t be able to recover from this debacle.

For those who were using the low-risk Broken Butterfly strategy, they may have only lost between one to five percent max, if they were doing them right. Personally, I experienced about 2.5% drawdown over that period. This makes the difference rather obvious. When things go bad, they really only go bad for those trading the popular income options strategies. Strategies such as Iron Condors, Calendar Spreads, Covered Calls, Credit Spreads, and Near-The-Money Butterfly spreads were devastated by the recent “computer glitch”.

If you were trading Broken Wing Butterflies, you were much better off. Some didn’t have any drawdown at all. Any who did were able to manage the losses so that they could stay in the game. Those of us doing low risk strategies were fortunate enough to make back our losses in the following month. Those trading the popular income strategies will probably never make their money back, but the sad truth is, they will keep on trading the same old, out-dated income strategies that may have worked 20 years ago, but not in today’s world.

This “glitch” was the perfect example of why I, myself, don’t invest too much money in the popular option income strategies. It’s all a little too risky for my taste. I’d prefer to make my money slower without experiencing any of the massive losses the aggressive income traders must face every year. To me, it makes more sense to protect what I have and to take whatever the market gives me. This way I know, in the long run, my option trading plan will work out much better.

Over the last few years, I’ve reworked the popular option strategies so they could initiate with lower risk. I have a different method to trade Iron Condors that is much safer than the popular Iron Condor. I’ve also developed Broken Wing Butterflies and Unbalanced Condors that have become some of my favorite overall trades. I like that I can initiate a trade with a mere two percent risk, then soon after I am in the trade, I can take off the risk almost entirely in most cases. This pretty much means I have trades that are almost risk free consistently in my portfolio. This is a great way to trade options. The only way I could ever lose on some of these trades is if the market was to drop over seven percent in one day, but if I’m loosing money, that means all those doing popular option spreads will be left with nothing at all. Even in the most extreme situations my strategies have proven much safer than anything I have seen before.

For more information about low-risk option strategies, visit San Jose Options Mentoring

What Type of Option Trader Are You?

There are a few different types of option traders. Some option traders are very aggressive, and they can really be called day traders. This type of trader uses a lot of money, and they are in and out of trades all day long. Option traders that trade this way do not usually hold a position overnight. It’s a very stressful way to trade and requires constant attention. I once had a conversation with a day trader who was working about 60 to 80 hours per week in order to successfully trade options this way. But I wonder how successful he really was. Because if he was making so much money, then why did he call me to learn a new way to trade options?

Another type of option trader is one that trades for income but is not sitting in front of the computer all day long. There are different types of strategies that an option trader can utilize to trade like this. One of the more popular strategies is called a Credit Spread. Some people do Credit Spreads on stocks and others do Credit Spreads on the indices. Either way you do Credit Spreads, they are still very risky. Credit Spreads cannot handle the large debacles that constantly occur in the stock market.

Those are the two most common types of option traders. There is another type out there which is not quite so common. This would be the option trader that trades over earnings reports. This is a pretty exciting way to trade options. It can actually be quite rewarding, but there is a lot of risk and luck involved. Back testing can help to predict what might happen over earnings, but there is still a lot of uncertainty involved with this type of trade.

All of the above-mentioned styles involve a lot of risk. There is another type of option trader who is managing his savings account. This type of trader would normally wish to take on less risk than other types. We find two of the lowest risk strategies that she we will ever find with options is the Broken Wing Butterfly and the Unbalanced Condor. These two strategies can allow an options trader to construct trades that begin with very minimal risk. In most cases only 1 to 2% risk is theoretically taken on a given trade.

San Jose Options offers a course focused on the low-risk type of option strategies mentioned above. While some options mentoring courses are slowly starting to catch on, San Jose Options has been training students on these strategies for many years. They specialize in the Broken Wing Butterfly and Unbalanced Condors. Their course is designed for those who are retired and those who wish to invest with options without risking as much as the usual option trader does. If you would like to learn safer option strategies, then I highly recommend that you check out their options mentoring program.

For more information please visit San Jose Options

Low-Risk Unbalanced Condors

Is This Option Trading’s Best Kept Secret?

Today I’m writing an article about the generally unknown strategy known as the Unbalanced Condor. Although this strategy has been around for a while, for some reason, it’s not very popular. On my own, I’ve studied options for over a decade now and took many of the popular courses that can be found on the internet. After spending nearly $50,000 on my options education, I find it puzzling and rather erroneous that most option courses are not teaching this strategy.

Hopefully, since you are reading my article, it will inspire you and others to begin their own investigations into this technique. I personally think the Unbalanced Condor should be the most used strategy for retail investors. I hope word spreads about the wonderful qualities of this option spread.

How would you like to trade options in circumstances where it’s nearly impossible to lose money in one direction while having a near one hundred percent guarantee that you will make money in another direction? Sounds ideal to say the least right? What if I told you that you can even make money on your trade of the market doesn’t move at all? It looks like the perfect strategy on paper. It would appear there’s no way to lose!

Well, if you don’t know what you’re doing, it is possible to lose something on this trade. In fact, you could end up loosing quite a bit. If you’re too aggressive in your trade and try to make money too fast with it, you can lose a lot. Patience is the secret to the Unbalanced Condor. Once you’ve learned the simple adjustments that go along with the spread, your worst-case scenario would result in a mere one to two percent loss.

We are proud to say San Jose Options is an expert on this strategy. It’s one of their specialties and, currently, I am unaware of any other course that teaches this strategy at all! They’ve been developing and redefining this strategy over the years and developed ways to manage this trade over different types of markets along with ways to lock in our profits as they come. They teach ways to neutralize the Vega position on the trades while maximizing the Theta. They fondly refer to this strategy as the “Revolver” since it can be used to combat any market.

To learn all the nuances on this rarely talked about and relatively ignored strategy, San Jose Options is not only the best choice, but your only choice to do so. They offer hundreds of recorded classes along with written, step by step instructions, on this strategy, with everything you need to know about this uniquely low-risk, nearly unheard of option trade. When you’re ready to have Maximum Safety, Maximum Reward on your side and see what option trading is all about, the San Jose Options is the best choice. Look us up on the internet; it’s fast, easy, and convenient.

For more information about Unbalanced Condors, please visit San Jose Options.

Why Most Option Traders Fail

You know, I’ve been trading options for about 13 years now, and during this long time endeavor to achieve success on the stock market, I’ve made a lot of friends along the way. I’ve met numerous option traders, probably somewhere in the hundreds, and the truth is, there has only been a handful that were making money. So I wonder why there are so many people out there investing in the stock market when most of them only lose their capital.

This is a very interesting topic. I think part of the reason is that people actually enjoy the challenge. As a trader myself I certainly do. I like doing the research. I like to analyze trades. I like to look at probabilities. To me working with options and the stock market is actually a lot of fun, and the fact that it is very challenging, keeps me going. I always feel that I have room to improve.

Another reason why a lot of investors stick with option trading even though they do not find immediate success is because it’s a profession that involves a lot of creativity. There are literally an infinite amount of option strategies that can be created if you have an open mind. This to me makes option trading a never ending world of exploration.

But the question remains. Why are there so many option traders out there that do not make money? The common answer to this question is that your average option trader does not know how to properly adjust an option position. While this statement is somewhat true, I don’t think it’s actually the answer that we are looking for.

Recently I’ve come to realize the real problem. Option traders in general do not fail because of their adjustment strategies. In fact, most experienced option traders are excellent at money management and make very intelligent adjustments to their portfolios. The failure begins at the beginning of the trade. No matter how good of an option trader you are and risk manager, you will most likely never have long-term success trading options unless you learn to construct option trades that are low risk from the beginning. This is the key to becoming a successful option trader year after year.

I’ve recently come to this realization by studying with San Jose Options. Through their course I’ve learned to construct trades that are safer than anything I had ever seen before, and even though the risk is much lower, the probability is still very high and the return is as well. So if you feel that you are making all the right adjustments on your option trades, and you are still losing money, then most likely the problem is not in your adjustments. Your trades are set up for failure once they are initiated. Good luck with your option trading, and once again, it’s very nice to have met yet another trader along the way.

Visit San Jose Options for more information on maximizing safety with options.

Connie’s Comments

“HI Morris, here’s my input: I’ve been a student of Morris Puma’s San Jose Options Mentoring program for several months. I was attracted to this progarm because:

1. His goal of “max profit, max safety”
2. The extensive, self paced 15 step foundations program. It’s much more complete and extensive than other programs I’ve taken in the past.
3. The M-Th nightly classes wherein the current market and trade management is discussed. It’s not just selecting a good trade, it’s knowing how to manage it for max profit & max safety.
4. The Alumni program, where graduates can network with other traders focusing on similar strategies.
5. The good value for services delivered. The price is VERY reasonable for the amount of education delivered. Furthermore, it’s a one time cost with no ongoing fees. And, one on one training is included for those who need it (like me).

In summary, the program tuition is an excellent investment, and if his training keeps me from making one bad trade, it will pay for itself immediately.”
- Connie – CA

Steven from Ohio

“I just want to say that your option strategies are the best by far that I have ever seen, and I have taken a few other courses. Thank you so much for teaching me a safer way to trade. You’ve made a huge difference in my trading.”

- Steven M. – Ohio

William in California

“I have to say that I love your broken wing butterfly strategy. It’s a great way to take advantage of this bearish market with very little risk. I had never heard of this trade before I found your course, but it’s now my favorite strategy. Thanks for all the hard work you’ve put into teaching us.”

- William B. – California

Barry from Hawaii

“Morris, I like the fact that you tell us everything we need to know and not try to sell more seminars or services like other companies do. I truly believe you are sincere in helping your students succeed as traders. San Jose Options is the best!”

- Barry – Hawaii

Listen to Thomas

“Hi Morris, I have to say that your Iron Condor strategy really is the best I have ever seen, and I’ve seen them all, the CBOE videos, Investools, etc.. You were right, I really am surprised, and it’s something I had never thought of before. Your strategy is really amazing, and I am sure the whole world will be trying to copy you soon.”

- Thomas. – Canada