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5 Ways to Beat the Fed (and Crush Inflation)
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options trading

Best Options to Buy This Week

More people than ever are learning how to trade options. But knowing the basics of options trading is only half the battle: You need to know how to find the best options trades to make money.

That's exactly what you'll find here.

We'll show you the simple steps you can take to find profitable options trades.

Plus, we'll also show you the best options trades you can make right now, courtesy of the options experts here at Money Morning.

Speaking of experts, here's Money Morning's options trading specialist, Tom Gentile, with a brief overview on what makes options trading so phenomenal, plus why this is one of the best places to learn the ropes:



Why Options Trading?

Options are exploding in popularity because retail traders have seen their profit potential.

Stock options give you the right to buy or sell shares of a stock by a certain date. Since you don't actually own the stock, just the right to buy or sell it, you can control many more shares of the stock for a fraction of the price of owning them outright. That's called leverage. And it lets you amplify the profit potential of stock trades far beyond what you would see from simply buying and selling shares.

For even more detail on how this works, make sure you check out our guide on how to trade options.

What many new traders have found out the hard way is that there's more to making money with options than buying a call on a stock you like and waiting.

You need to find the right combination of a stock, the strike price of the option, the expiration date, and the cost of the contract to consistently find profitable options trades.

Here's how you can do it.

Finding the Best Options Trades

While there are a nearly limitless combination of options traders can use to create a strategy for any situation, we want to focus on finding trades using simple calls and puts.

There are three elements to key in on to take your trading to the next level.

Find the Right Strikes and Expirations
There are many variations of strike prices and expiration dates for every stock with options. A one-sized rule is nearly impossible.

But a few guidelines can help you find the best options.

First, look for strike prices just out of the money.

Options already in the money will be very expensive and that will cut into your potential gain.

Options far out of the money will be much cheaper, but the stock will have to move dramatically in order for you to make any money.

The best idea is to look for options one or two strikes out from the stock's trading price. This will give you the best combination of affordability and potential to hit.

Second, look for expiration dates three to six months out.

This is a broad rule since six months can be a lot of time, but you likely don't want to tie up your money any longer than that. And plenty of traders make good money with weekly options, but you'll want expert help before you dive in.

Similar to finding the right strike price, expiration dates nearer the current date will be cheaper if the options are out of the money. But you have little time for the stock to move, raising your chances of losing money. And if the option is in the money, close expiration dates will be very expensive.

Options with expiration dates far away will be more expensive since the stock has more time to get in the money too.

But an expiration date three to six months out is the sweet spot between giving the trade time to work – the stock moving into the money – and affordability, lowering your risk and maximizing your upside.

Trade Liquid Options
One of the most important factors new options traders overlook is liquidity in the options market. Liquidity simply means there are many buyers and sellers for a particular options contract. That means prices are accurate, and most importantly, you'll be able to sell your options contract when the time comes.

When the market for the specific options you're looking at isn't liquid enough, it means the price you see on you trading screen might not be the price you end up paying. It may even mean there are no sellers at all for the contract, meaning you can't enter the trade.

It also means that when you buy the contract, you may not be able to sell it. Imagine buying a call option on a stock that soars higher, seeing a profit on your trading screen, and not being able to sell the option for a profit.

The way to find options with liquidity is to look at the bid-ask spread. Options with close spreads are typically liquid enough to trade. If you see a wide range, or a range that includes $0, then the option is unlikely to be liquid.

That may eliminate little-known stocks from your plans, but that's all for the better. As Money Morning's options trading specialist, Tom Gentile, says, "98% of stocks and ETFs out there simply aren't worth a single penny."

But "the big banks and brokerage firms want you to gamble your money on all of them," says Tom.

That's why looking for liquid trades can go a long way toward making your moves more profitable.

Manage Your Risk
Options are great at helping you trade while lowering your risk, but that can go out the window if you aren't careful.

First, make sure you use limit orders when buying and selling options.

The options market can be fast-moving, and using a market order could mean you end up paying more for a trade than you initially expected. It may also mean you sell your contracts for less than you hoped. But using a limit order can make sure you get into and out of trades at the price you want.

Second, don't chase trades.

You may be dying to open a position on a particular option and see that your limit order isn't filling. Stay disciplined, and don't change your entry point just because the market isn't cooperating.

"If you do, you could end up buying at the high or near the high of the day only to see the markets calm down and the option prices start coming down," Tom tells us.

Third, stick with your plan.

Set aside a percentage of your portfolio you'd like to use for options trading and stick to it. It's tempting for traders, especially new traders, to make a ton of trades and chase bad money with good. That's only increasing your risk.

Tom tells us a simple strategy to managing your risk is to keep your risk the same on each trade. Even if you feel like the trade is going to be a home run, don't be tempted to increase the money you're putting in. Stick to your plan.

And never trade with money you can't afford to lose.

Best Options to Buy Right Now

Options trading is fast-paced, so you'll need to act quickly when you find the right trade. Not only do options change price as the expiration date nears, but changes in the underlying stock price can cause options prices to shoot higher or lower.

That means if you're looking for options trading recommendations, you can't rely on an idea that's out of date, even if it's just a few weeks.

Here at Money Morning, we publish options trade ideas multiple times a week.

You can find our latest trades right here…

Why Earnings Season Is the Most Wonderful Time of the Year for Traders Like Us

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - July 20, 2015

Chipotle earnings

If you've traded for more than a few months, you've seen how earnings season can really move share prices - in both directions.

If you hold, say, a blue chip and it hits on earnings, you can book some nice single- or double-digit gains. Or, if there's a miss, you might take a loss.

In fact, earnings season trading is one of the most volatile strategies you can use. It's not for the faint-hearted.

So, let's "scout" my earnings chart to see exactly where our next winning trade is...

Grab Triple-Digit Returns on the Euro's Freefall

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - July 13, 2015

euro fall

I just came back from an Alaskan cruise where I paid up and bunked on the top floor.

For these "special" guests, they offered a private courtyard, private fitness center, private showers and steam rooms, 24-hour butler service - the works.

I was able to connect with several foreign business owners and chief executives, and even a fellow trader who happened to be aboard ship.

And it's in my new friends' biggest worry that our triple-digit profit opportunity lies...

A "Euro-Proof" 50% Gain in Less Than a Month

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - July 8, 2015

euro-proof graph

Forget about Greece, Portugal, China, and every other country that's making news these days...

The fallout from current (and likely future) debt crises will lead to turbulence in the markets, but it's the inevitable recovery that interests me right now.

We've seen this setup before. In every case where financial misadventure leads to bailouts, one thing is clear: Though the short-term movement of the stock market might lurch to the downside, it has always recovered.

And the American blue chips always lead that recovery. That's where our big opportunity is today...

How Halliburton (NYSE: HAL) Gave Us a 70% Return in 3 Days

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - July 6, 2015

Using our Money Calendar tool, we take a look at Halliburton Co. (NYSE: HAL) stock back in April. It looked incredibly promising.

Even better, this Money Calendar tool shows the moves to be 90% reliable in nine out of the last 10 years. The time frame on average for the move was nine days.

Here's why Halliburton stock made the anticipated move in one-third the time expected...

How to Double Your Money with This Expert's Trading Secrets

By David Zeiler, Associate Editor, Money Morning • @DavidGZeiler - June 23, 2015

top investing strategies

Knowing how to double your money - and do it consistently - is the Holy Grail every investor seeks.

And that's just what Options Strategist Tom Gentile's service, Power Profit Trades, delivers. His system uses options to produce large gains in a matter of weeks. Best of all, it's free.

Here's why Gentile's system is such an effective way to double your money...

The Key Steps to Your First Options Trades

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - June 15, 2015

options trades

During the past month we've welcomed in thousands of new subscribers over at Power Profit Trades.

Many of you have started out with "paper trading" on my picks and are excited at the prospect of pocketing the gains in real time.

Taking advantage of technologies that veterans like me didn't have when we started trading is a great idea! I know it's not like real trading, but one of the things using a "virtual" account will do is help you get familiar with order placement through the platform you intend to use BEFORE you commit real money.

For those of you already on "live" platforms, congratulations! You're already enjoying gains.

Beginners are also working through the "how to get started" phase of investing in options. In fact, the most common question I get is "how do I open an account?"

For those of you not yet receiving Power Profit Trades, or for anyone who hasn't traded yet because of concerns over opening a live account, let me take the fear out of what is an easy process.

Just follow my lead...

Since moving to New York City back in the early 1990s, I've witnessed incredible changes in brokerage firms and the financial services industry.

Back then, it took weeks to get an account opened, most trades were done over the phone, and commissions were unbelievably high.

In the last 20 years, however, due to competition and technology, all three of these things have drastically improved for the retail trader. Competition has driven commission prices down to levels that are barely factored into risk and reward these days, and technology has allowed us to get instant quotes and fills in the blink of an eye.

For the new options trader, it all starts with opening your first options account. The good news is that opening up an options account online is quick and easy.

But before you get to that step, there are a few things you need to understand first...

How to Profit from a Pattern Few Others See

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - May 19, 2015

how to invest

In a moment I'm going to show you a chart for EOG Resources.

As I looked at the chart for this oil and natural gas development company, and positioned myself for a possible trade, an old song happened to come on the radio. It's a catchy tune that my friends and I used to "try" to dance along with.

Fast-forward to today, and as the song plays in my head, I'm almost moved to dance again by the profit pattern I'm seeing develop for us on this chart!

Options Trading Strategies: What You Need to Know About LEAPS, Spreads and Straddles

By Michael C. Thomsett, Money Morning - August 31, 2012

There are hundreds of option strategies. And they can be vastly different in terms of tactics and desired outcomes.

But in fact, there are really only a few basic strategies, and everything else is built on these in some form. This range of possible strategic designs is what makes the options market so interesting, challenging, profitable... and also nice and risky.

Are you surprised by my characterization of risk as "nice?"

Well, "risk" and "opportunity" are really the same thing, and every option trader needs to accept this.

Because if you want to go fast and get some serious movement, well, you have to climb on board the rollercoaster first, even if it scares you a little bit.

In my last options trading strategies article I took the mystery out of long calls, long puts, covered calls, short puts and insurance puts.

But the truth is those are only five of the eight general strategies (and "families" of strategies) we use here At Money Map Press.

Today I'd like to tell you about the final three, explaining what you need to know about LEAPS, spreads, straddles.

Let's get started with LEAPS.

Understanding LEAPS Options

This strategy can be an attractive alternative to the otherwise very short lifespan of most options. And the potential for gains in either long or short LEAPS trades is substantial.



To continue reading, please click here...

Options Trading: How to Read an Options Listing

By Michael C. Thomsett, Money Morning - August 3, 2012

Ahh, the options listing... Trust me, it isn't as bad as it looks.

It starts with understanding a rather long set of symbols that looks something like this:

GOOG120317P600000

This code is simply the ticker symbol for your option. And once you break it down, you'll find that it holds a wealth of information, including all the "standardized" terms we talked about in this article.

The first three or four letters are just the stock ticker for the specific underlying stock, in this case, Google Inc. (NasdaqGS: GOOG):

GOOG
120317P600000

The next two digits tell you the year the option expires. This is necessary because long-term options last as far out as 30 months, so you may need to know what year is in play. In this case, the Google option is a 2012 contract:

GOOG120317P600000

The next four digits reveal the month and the standard expiration date. The expiration date does not vary. It's always the third Saturday of the month. And the last trading day is always the last trading day before that Saturday, usually the third Friday (unless you run up against a holiday). In this case, you've got a March contract (03). And the third Saturday of March 2012 is the 17th.

GOOG120317P600000

Now you'll see either a C or a P, to tell you what kind of option you're dealing with - a call or a put. This one happens to be a put:

GOOG120317P600000

After that comes the fixed strike price, which is 600:

GOOG120317P600000

Finally, any fractional portion of the strike is shown at the end. This comes up only as the result of a stock split, where a previous strike is broken down to become a strike not divisible by 100:

GOOG120317P600000

Now that you're a pro, let's take it a step further.

To continue reading, please click here...

Options Trading: The Most Important Piece of Advice for Beginners

By Guest Editorial, Money Morning - June 6, 2012

Here it is. The most important piece of advice I have for anyone thinking about options trading.

Don't let the red tape hold you back.

A lot of experienced and sophisticated investors shy away from anything that involves paperwork.

They think they're not qualified or ready, or simply that it's not worth the trouble.

Don't be one of them.

Yes, you will have to fill out an options application with your broker, but it's easy.

In fact, you had to file a similar form just to open your trading account in the first place. Now, if you want to upgrade your account to be "options approved," it's just another small step away.
Admittedly, the application may look intimidating at first glance. It is full of disclosures, legal qualifications and the kind of small print that is worrisome.

Yet the purpose of the application is simple enough.

Your broker just wants you to state that you know enough about options to make your own trading decisions.

And not to worry... It's not a quiz.

The disclosures are designed to gauge your level of experience. But their real goal is to let the brokerage firm off the hook in case things go terribly wrong. Of course, that's not going to happen to you.

But if a broker lets anyone trade without at least appearing to check them out first, they could be liable for your losses. And no one wants that.

Because options are by definition speculative, the New York Stock Exchange (NYSE), Financial Industry Regulatory Authority (FINRA), and National Association of Securities Dealers (NASD) all have rules and policies about "suitability."

That's the real reason you have to go through this (very small) hoop.

So you'll fill out the application. They file it away into the "just in case" drawer and you're ready to trade.

What's on the Options Trading Application?

The options application will ask some questions you would expect: Name, address, employment and employer name, annual income and all sources of income. They also want to know your net worth and liquid net worth, marital status and number of dependents.

Then there are a few questions you might not expect.

To continue reading, please click here...

Options Trading Strategies: Slash Your Risk and Make Money

By Guest Editorial, Money Morning - May 31, 2012

If you feel like Alice in Wonderland when you start to look into options trading strategies, you're not alone.

Even so-called "experts" struggle with options. It gets even uglier when they attempt to bring it down to earth for their readers.

Yet, if anyone can do it, I can.

I've written six books about options, and have been trading options myself for more than 35 years.

It means that I have already made every mistake in the book so you don't have to.

So why should you learn about and invest in options?

Done right, you can use options to create a virtual cash cow - often quickly, and often with very little risk.

Options Trading in Action

Consider the case of the SPDR Gold Trust (NYSEArca: GLD). A year ago, GLD shares were trading for about $130.

Say you felt pretty confident GLD was going to go up in the next 12 months. You could have gone "long" GLD by buying 100 shares.

Of course, you'd have to be ready to plunk down about $13,000 for them. But if you had that kind of cash you would have done pretty well.

A year later, GLD was trading at $160, and your 100 GLD shares were worth $16,000. That's a nice 23.7% gain.

But you would have done even better if you had used options.

Let's say, instead, you bought one $135 call. (A "call" is just a bet on the price of GLD going up from $130; the same thing you're betting on when you buy the stock.)

A year ago, GLD calls were trading at $9.00. So you would have spent about $900 to initiate the trade. Yet by the expiration month, the price of the calls had risen to $28.00.

That means the price of the option "contract" you bought was now worth $2,800-giving you a 300% gain on the very same price move in GLD.

Now where I come from, 300% is much better that 23.7%. That's the power of options.

And there's more...

To continue reading, please click here...

Options Trading: Three Ways to Win Big with a Bearish Calendar Spread

By Larry D. Spears, Contributing Writer, Money Morning - May 8, 2012

Think some of Wall Street's higher flyers look vulnerable to a broad market pullback?

If so, they could be perfect candidates for a low-cost, low-risk options trading strategy that could pay off big time if we get another move like last Friday's 169-point Dow plunge.

The strategy is called a "calendar put spread," and it works like this:

  • You sell a slightly out-of-the-money put option with a strike price just below the current market price of the underlying stock - with a near-term expiration date.
  • You then simultaneously buy a put option with the same strike price but with a more distant expiration date.
The cost - and the maximum risk - is the difference between the two option premiums, referred to as the "debit" on the spread. But because the longer-term put you buy "covers" the shorter-term put you sell, there's no added margin requirement.

It may sound complicated, but it's not once you understand how to employ this bearish options trading strategy.

Options Trading Primer: A Potential 900% Gain in Six Weeks

Here's how a bearish calendar spread might work with Exxon Mobil Corp. (NYSE: XOM), which has held up better than many other oil stocks in recent weeks, closing last Friday at $84.57, barely $3.00 off its 52-week high:

To continue reading, please click here...

An Options Strategy That Will Save You Some Money

By Larry D. Spears, Contributing Writer, Money Morning - January 10, 2012

Whether you credit a Santa Claus rally, an early January Effect, or some other driving market force, there's no disputing the strong finish posted by stocks in 2011 - or the healthy 2012 opening advance added in the first week of January.

To be specific, stocks - as measured by the Standard & Poor's 500 Index - rose from 1,204.00 at the close on Monday, Dec. 19, to 1,257.60 on Friday, Dec. 30, then jumped to 1,280.15 at midday yesterday (Monday), a gain of 6.32% in just three weeks. The Dow Jones Industrial Average did almost as well, climbing from 11,751.96 on Dec. 19 to 12,398.29 in Monday trading, a 21-day gain of 5.50%.

While those short-term moves are certainly impressive, they're hardly unique in today's volatile market environment. Three similar advances have occurred in the past five months alone - in late August, early October and late November - but each was followed by a sharp short-term pullback that wiped out much of the value gained in the rallies.

And, while few things in the market are certain, there's a strong probability this current market advance will also be followed by a sizeable retracement in the very near future.

So, how do you protect your most recent gains?

One answer is to turn to the options market.

A Defensive Options Play

As veteran Money Morning readers know, two of the most effective and often-used strategies involving options are writing covered calls to bring in added income and buying put options as "insurance" against possible price pullbacks.

As such, investors would typically look to the latter strategy - buying puts - for protection in the present market situation. However, there are times when unusual conditions can force investors to take an alternative approach to option strategies - and that has certainly been the case recently, thanks to the market's extreme short-term volatility.



To continue reading, please click here...

Don't Get Duped by Derivatives

By , Money Morning - September 7, 2011

It recently came out that a $1.2 billion derivatives portfolio that Goldman Sachs Group Inc. (NYSE: GS) managed for the Libyan government lost 98.5% of its value between 2004 and June 2010.

If a firm like Goldman will sit idly by while a client eats about $1 billion on a single investment, where do you think you and your portfolio land on Wall Street's list of priorities?

The message here is simple: You can't trust Wall Street - not with a $10,000 investment, a $100,000 investment, a $1 million investment, and especially not with $1 billion investment.

Goldman Sachs claims that the Libyans were picking the derivatives trades themselves. But that's exactly what they would say.

After all, if it got around that Goldman's ace traders were capable of losing virtually all of their clients' money, bonuses would fly out of the window along with most of the business. I'm sure the Libyan government would have offered a rebuttal if it weren't being toppled in a civil war.

The Libyans no doubt did much of the investment decision-making themselves, but the real problem is that there was no basis of comparison for the prices of the derivatives products they were being given.

And that's where there's a lesson to be learned. As a retail investor, you have to be able to determine a two-way price quote for whatever investment you buy.

The investment landscape is littered with the wreckage of failed structured investments.

Between 2008 and 2010 already-strapped cities and states had to pay Wall Street $4 billion in termination fees to get out of various interest rate products that had gone wrong.

For example, there's the exciting 2007 "Abacus" deal by Goldman Sachs trader "Fabulous Fab" Tourre, which lost European banks a total of $1 billion.

The investors in Fabulous Fab's Abacus deal had no independent means of assessing the value of the subprime mortgages in the pool. These were large, "sophisticated" banks, but they deluded themselves with the risk/reward tradeoff they were taking on.

Losses are not confined to the notoriously murky derivatives investments, either. I would bet that the special Goldman clients who earlier this year bought privately offered shares of Facebook Inc. at a $60 billion valuation will end up losing big on their investment as well.

As investors, most of us are not rich enough to get Wall Street's attention, but we should stay informed about how these firms are luring their clients into spectacularly bad deals.

That way we'll all know what to avoid.



To continue reading, please click here...

Two Options Strategies That Can Turn Short-Term Price Gyrations Into Big-Time Profits

By Larry D. Spears, Contributing Writer, Money Morning - June 1, 2011

Everyone acknowledges that at its most basic level the stock market is driven by fear and greed. And, in the past, the immediate impact of fear has been far more dramatic than the short-term effect of greed.

In other words, stock prices have historically tended to fall faster - and further - when investors are running scared than they rise when investors get a pleasant surprise.

Lately, however, with Treasury yields still near all-time lows, commodity prices hovering near record highs, and little else offering significant potential, there's a lot of money out there in mutual funds, exchange-traded funds (ETFs), retirement accounts and other institutional portfolios that's looking for a place to go.

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