Start the conversation
We've all had "that feeling" about a stock...
You've done your fundamental and technical research, you've narrowed down your choices, your account balance is looking good, you've got capital ready...
And now you've got "that feeling," backed up by data, that the stock you've picked is going to move - up or down, bearish or bullish.
Now it's time to play that stock for the biggest, fastest profit possible.
But for a lot of traders, that's easier said than done.
That's why I want to show you the simple trick that makes choosing that trade much easier...
This Is What Options Trading Is All About
One of the coolest things - maybe the coolest thing - about trading is that it gives you the ability to control big positions instocks for pennies on the dollar.
If you wanted to buy 100 AMZN shares, that'd set you back $274,809 at today's prices.
Now, I'll just pick an Amazon.com Inc. (NASDAQ: AMZN) option at random to show you.
Let's say the AMZN July 2, 2020 $2140 call.
That call option is trading for $540.15 right now, or $54,015 for 100 contracts. Because options are a kind of leverage tool, you get control - in the case of the call option, the right to buy at the strike price at expiration - over the stock for a fraction of the price.
And that leverage means the stock underlying the option often only has to move a few percentage points for you to pocket double what you paid for the option.
In other words, you don't need the stock to double to make a 100% gain on your options. In fact, you can bank that gain if the stock moves just 3%, 7%, or sometimes even less. The profits come much faster, too. Amazon shares took months to double for the first time.
And that gets at the heart of what I want to show you today: how to look at an option and tell how much the stock needs to move for you to potentially pocket 100%.
How to Find Your "Percent-to-Double" Number
Here's a screen grab of what my proprietary "Double Finder" tool would show you. I'm looking at VZ July 24, 2020 $59 and $60 calls.
You can see in the second row from the right the "Call % to Double." That means, as of today, Verizon Communications Inc. (NYSE: VZ) stock only has to move up 2.91% by expiration for that $60 call to double in price.
Now, my best subscribers get research from the "Double Finder" and all sorts of my proprietary tools, but I can tell you how to find this for yourself. Here's the calculation - I'll walk you through it:
The option premium is really easy: That's the price you pay for the option if you're buying, or the price you collect if you're selling.
Now, "delta" is one of the "options Greeks." Delta is a ratio that compares the change in a stock or asset's price to the change in its derivative (the options on the stock) price.
Delta can be positive - from 0 to 1 - if the option is a call, or negative - from -1 to 0 - if the option is a put. It's negative because as the price of the stock increases, the value of the put goes down.
Your options trading platform should be able to give you a full readout on delta or any other Greek you're interested in finding for a particular option.
You can do the simple calculation for any option you're interested in, and you'll find the lowest percent-to-double easily.
Now, it's worth mentioning, percent-to-double is a handy tool, but it does have some limitations.
Like I said, an option's delta measures the change in the price of an option relative to the change in price of the underlying stock. But the delta is dependent on the time left until expiration.
So if you're looking for a stock to make a move within a few days and you choose options that expire in a week, any move the stock makes in your direction could be negated by the loss of value in your options as they approach expiration.
By keeping that little caveat in mind, you'll find that percent-to-double is a nifty money-doubling tool to have in your options trading toolbox.
And in the meantime, don't forget to check out my presentation on this fast money move that could make you $4,238...
You see, I've gone live on camera to show readers how they can make hundreds, even thousands, of dollars in extra income.
That's right - I've found a way to predict the future buying patterns of nearly every stock on the market. And with this trick, I'm lining up major payday appointments left and right.
We're talking about cashing in on some of the biggest stocks on the market: Netflix, Apple, Facebook, even Amazon.
The best part is this options trading strategy is super easy to understand and even easier to put into action.
All it takes is three simple steps, a few clicks of your mouse, and you're on your way to what could be life-changing wealth...
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.