Pigs Get Fed, Hogs get slaughtered!

As many try to makeup for the market downturn, remember that pigs get fed and hogs get slaughtered. Our philosophy at optionsdojo is a little bit more.  If you are a good math student you may be familiar with the rule of 72. For those of you who are not familiar it is a math formula to figure out how long it will take $1 to become $2 over time. Let’s say you are earning 6% on average, your money doubles every 12 years, however if we can boost you to 8%, your money doubles every 9 years. So a little bit more can make a great impact over time.

Yesterday before close I bought some AMZN calls in hopes for a short term pop, I got that pop and the return was roughly 30%, however had I waited longer I could have gotten 50%.  If you are like many you would figured I lost by selling out early, this is not our philosophy. We believe in targets and making a profit. Options can turn back the other way, so we seize opportunity when it’s provided.

As always, consult your advisor before investing of any kind. options are NOT suitable for all investors and people can and do lose money. Optionsdojo offers no warranties or guarantees with our opinions. Invest at your  OWN risk.

Do you follow the same pattern for every trade?

One of the major mistakes made by investors is not keeping the same pattern on every trade. In other words, you need to have a strategy that you use on every trade so that you can see if it’s a winning strategy. If you constantly try to time the trade you’ll have a tough time. 

An example would be selling calls and trying to buy them back. In most cases we advise against that strategy. Now on occasion you may see an opportunity on an abnormal day, one where volatility is very high, but for the most part you sell the call in hopes of getting called away to maximize profits.

As always consult your advisor before investing of any kind. Options are NOT suitable for all investors and people can and do lose money. We give no warranties or guarantees regarding our opinions. INVEST AT YOUR OWN RISK

Bank On It, JPM

If you listen to the CEO of JPM you’ll find a sense of direction affirmed throughout the company. Dimon runs that company from the top but always with concerns for the whole. It is our opinion that it is one of the best managed firms in the world.

The target on JPM is $120 within 12 months. In an effort to get some yield we are looking at selling the January $110 for roughly $4.60. That’s a max price of $114.60 just slightly under the target. Based on the current price of $99.40 that gives you a yield of 15.20% on the call if called away, plus 3.30% dividend during the year, for a total of 18.50 %. We like this approach.

On the downside the breakeven would be $94.80 and the dividends would lower that to $91.60.

As always consult your advisor before investing of any kind. OPTIONS are NOT suitable for all investors and people can and do lose money. Optionsdojo makes NO warranties or guarantees regarding our Sensei’s selections.