One of the Simplest Trading Strategies to Double Your Money When Volatility Strikes

Money Morning's options trading specialist, Tom Gentile, just showed his subscribers one of the simplest trading strategies that can allow you to book 100% gains when volatility hits the market.

In fact, once the trades were made, all subscribers had to do was... nothing. No following, no worrying, and no selling. The trade progressed completely on its own, and when it was over, subscribers merely had to check their accounts for their profits.

Options

It was no fluke, either.

It's what Tom calls a "loophole trade," and it's designed to put time to work for you instead of against you.

And Tom's track record speaks for itself...

Through Tom's various strategies, followers had the chance to pocket gains of 195.36% in 16 days on Priceline Group Inc. (Nasdaq: PCLN), 193.39% in 16 days on SPDR Gold Trust (ETF) (NYSE Arca: GLD), 100% in eight days on International Business Machines Corp. (NYSE: IBM), and even 248.42% in 17 days on SPDR Dow Jones Industrial Average ETF (NYSE Arca: DIA).

Here's a closer look at how Tom's loophole trade works...

What Is a Loophole Trade?

A loophole trade is a vertical spread trade using either puts or calls. The "loophole" allows you to play stocks and ETFs with less risk (and cost) than you would with a single options trade. Plus, gains can be maximized in a perfect scenario if you let the option expire. That means you won't have to pay commissions at the end.

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The unfortunate part is that the ideal setup only comes around a few times per year, but it can lead to extremely lucrative gains of triple digits.

Here are two reasons to consider the loophole trade.

  • The options you are looking to buy have too much implied volatility and are deemed expensive, and/or
  • To hedge a straight call or put option. Creating a loophole trade further reduces the cost of a straight option purchase, thereby reducing your risk in the trade.

Have you ever bought an option on a stock and had the stock move in the direction you anticipated, and the option barely move at all?

Even if a day goes by, and the stock stays at roughly the same price, you should only suffer a bit of theta, or time-value loss. However, if the option was too expensive to begin with, it could lose more in that situation.

Here are the exact mechanics behind one of Tom's favorite trading strategies and an example of how you can profit 100% using it...

The Mechanics Behind One of Our Favorite Trading Strategies

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The loophole trade can be either bullish or bearish, but let's focus on one example.

Let's say you are bearish on a stock trading at $60 per share. You can use a bearish put spread, also called a "debit put spread," by buying the $65 strike price option and selling the $60 strike, both for the same expiration date.

The higher strike is in the money, so it costs more than the lower strike, which is at the money. The trade costs money up front - a debit.

Basically, you use the short put to help finance the long put. You also have limited risk - the debit. However, since nothing is free, you also have a capped profit potential.

If you're right on your stock forecast and the stock falls below the lower strike price by expiration, you earn maximum profit. The profit will be the difference between the two strike prices minus the debit, or what you paid for it.

You want both options to expire in the money, or at least at the lower strike price.

If you are bullish on a stock, you do the opposite with a bull call spread. You buy the at-the-money call and sell the out-of-the money call.

Three Key Takeaways:

  1. The underlying stock has to be moving in the right direction (up for calls, down for puts), and your options need to be in the money (ITM).
  2. A put spread (or "red loophole") is ITM when the underlying stock is below the strike price of the option you sold to open. A call spread (or "green loophole") is ITM when the underlying stock is above the strike price of the option you sold to open.
  3. If you want more bang for your buck, you can close half of your position when it doubles in value and hold the rest for even bigger profits. To do this, you'll need more than one contract.

It All Starts Again on Monday at Noon... It's the fastest way to make money we've ever seen. And for anyone who is following along with Tom Gentile, these moves are paying off big time. Just recently, Tom recommended a fast-moving pick that returned 100.79% total profits in just four days. Now, the fast-moving action behind Tom's all new way to make money starts again on Monday at noon. Don't miss your chance to learn how to grab extra cash faster than ever.

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