Option Millionaires

[retiredMM]

Vish

If my direction is right it is easy. Even if I start off wrong I avg down to a good price and then when it turns my way I ride the options until I can make a good sale that I can get credits or very low debits. I have been lucky with my directional calls lately so I have amassed a lot of credits.

As to why I create spreads and not book the profits.....
2 reasons...
#1 - if I think the stock is gonna to still go my way but I want to take money off the table I can sell puts against my long puts to get the money back I paid for the long puts or even get a credit. Therefore what I just did was guarantee myself a profit and if it continues in my direction I can still profit further or if the stock goes against me I've already made some money and taken my risk off the table.

If the stocks goes well past the strike of the short Put, yes I've limited my profit potential but I have also lowered my risk to nothing if it didn't.


#2 - if I have $1125 PCLN Puts for example at $4 and PCLN drops and I can sell the $1105 Puts @ $4.50 I now have a .50 Credit. If PCLN goes to $1100 to $1105 I can now sell that PS theoretically for $20 with a cost of .50 Credit effectively selling at $20.50 for each put. So if I owned 10 spreads I would make $20,500 total. After creating the spread my risk is zero and I have already captured $500 no matter what happens. Now let's say I didn't create a spread and I just rode the Puts if the stock went to $1105 and turned I would theoretically have been able to sell the Puts for $20 for a sale price $20000 but I only would have profited $16000. So I made $4500 more by creating the spread but more importantly I did it with no money on the table, instead of making 5x my money I made an infinity Bagger because my cost basis was zero (or less) and it freed up the $4000 to use on other trades.