It’s easy to make money in the stock market – if you just keep it simple.
Think about it this way… The stock market only moves in three directions. It moves up. It moves down. And it moves sideways.
So, really, all you need to do in order to profit is to utilize a strategy that takes advantage of moves in those three directions.
You don’t have to create a trading algorithm… You don’t have to hire a team of high-priced analysts… And you don’t have to sit behind a computer all day, every day, following hundreds of stocks…
Because it’s not about the stocks. It’s about the strategy.
And in today’s Market Minute, I’ll reveal how I’m using this strategy to teach folks about the least-risky, most profitable way to make money in the markets – no matter which way they turn.
In fact, I’ll bet that anyone can become a successful trader by following as few as just three stocks. That’s right… three stocks.
You can pick any three stocks you like. In any given year, just about every stock will experience several week-long periods of rallies, declines, and consolidations. All you have to do is spend a few moments each day determining which patterns the stocks are in.
Then, you implement an option strategy best designed to take advantage of those patterns.
Why options? Because options are designed to reduce risk.
Sadly, that concept is lost on a lot of novice traders. They use options to increase leverage, to get more bang for their buck, and to try to get rich quick. That rarely turns out well. Most of the time, trading options in this manner ends up creating large losses.
But, if you use options the right way, you can end up making more when you’re right – and losing less when you’re wrong – than in owning (or shorting) the underlying stock.
For example, let’s say you wanted to trade one of my favorite stocks, the VanEck Vectors Gold Miners Fund (GDX). It’ll cost you about $2,600 to buy 100 shares of GDX.
Alternatively, you could buy a call option – which gives you exposure to 100 shares of GDX – for about $100.
If you’re right and GDX moves higher, you’ll make a much larger percentage return on the call option than you will on the stock. And if GDX moves lower, the most you can ever lose is the $100 you paid for the option. In other words, if GDX falls 50%, all the way down to $13 per share, you’d lose $1,300 if you bought 100 shares. But, if you bought the option, the most you could ever lose is the $100 you paid for the option.
The mistake many novice traders make is that instead of taking $2,600 and buying 100 shares of GDX, they take the $2,600 over to the options market and buy 26 call options – which gives them exposure to 2,600 shares. In other words, they use options to leverage their trade to 20 times the normal position size.
That’s just stupid.
Successful traders don’t do stupid things. We use options to reduce risk rather than increase it.
Best regards and good trading,
P.S. If you’re interested in learning more about a conservative options trading strategy, that anyone can use to make money in the market, then check out my trading service Jeff Clark Trader.
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