New Year, New Gains
Editor’s Note: Yesterday, we sent around an update on our Qualcomm trade, letting you know to close it out. We want to congratulate our readers on a double-digit gain on their first Weekly Options Corner trade! If you missed the alert, you can view it here.
We hope you were able to take advantage and that you learned something while you did. And as a Weekly Options Corner member, you’re now more educated than most of our new Quick Hit Profits subscribers. So, we’ve put together a special offer for you to take even more advantage of these kinds of trades. Click here.
— Annie Stevenson, Managing Editor, American Investor Today
A new year means new goals…
Sometimes, it’s not even about starting something new. We have to realize it’s also about adapting the ways we have been doing things to make room for improvement in the months ahead.
That may look a little different for some of us, but the bottom line is: I know we are all leaving a wild 2020 behind us … ready to better our lives. Because the new year is all about improving. It’s about improving in our places of work, in our investments, in our relationships, in our attitudes…
There’s room for improvement in everything. Especially after we have achieved success.
My options strategy had a phenomenal 2020. We had a 60% win rate with 39 profitable trades. And 15 of those trades went to triple-digit gains or more on the second halves of our positions. All told, following my recommendations in Quick Hit Profits, you would’ve grown your portfolio by more than 60%.
And still, after examining the track record, I realized a small adjustment could’ve boosted our overall returns by more than 50% over the past four years.
Any time I can improve my results by more than 50%, I’ll bite.
That’s a difference between growing your wealth by more than 200%, or just over 100%. That’s the difference this simple change can make.
So today, I wanted to share with you what we are planning to adapt in Quick Hit Profits (and any trades we recommend in the Weekly Options Corner) to boost our returns in 2021…
Even Good Strategies Can Hold You Back
Back in 2016, we implemented an approach to sell the first half of our Quick Hit Profits trades when they reached 50%. We did this by placing a sell limit order on half portions of our new trades that was 50% higher than our open price.
Effectively, this gave us an automatic safety net on each trade — making sure we locked in any gains in a volatile market.
We did this for two reasons…
One was managing our capital.
By taking some profits off the table, we reduce our risk but still allow the rest of the trade to climb higher.
The other was capitalizing on any quick movements in the options market.
By having these orders in place right away, we’ve been able to capture quick 50% gains in just a day or two.
But remember, we were only doing this on half portions of the trade.
So, if we placed a trade and it reached 50%, we would sell only half of our position. The second half of the trade would still be open and ready to capture any additional gains in the market.
And our strategy has handed us plenty of triple-digit gains on the second halves of those trades … enough to average at least one every month.
Here’s how that math works out: If we hit a 100% gain after we sold the first half of the trade at a 50% gain, we have an overall return of 75% — not too bad.
On a $1,000 investment, that would leave us with $1,750 overall.
But we could’ve done even better…
The Best Way to Stay Ahead
We’ve had recommendations climb as high as 200%, 300% and even 500% in the past five years.
But selling the first halves of those trades at 50% means our total returns were capped at 95%, 125%, 175% … and just 275% for that 500% winner.
With these numbers laid out, you can see that even though we had good reason to implement this approach to sell half our positions at 50%, it was really holding back our profits.
I’m not against selling half of a position in general. Anything that helps ease your mind at night by locking in some profits on a big gain is more than okay.
The problem we had was following a blanket rule. As we go from week to week in our Weekly Options Corner, you’ll realize that adapting to what the market is giving us is crucial. Whether it’s adjusting a buy signal or extending our exits, the market is always evolving.
It’s our mission to keep up with it and maximize our results.
Having a profitable strategy is the best way to stay ahead.
Chad Shoop, CMT
Editor, Quick Hit Profits
Investing has consumed my life since college. While double majoring in finance and economics at the University of North Carolina at Greensboro, I founded the university’s economics club, joined the finance club and participated in the Chartered Financial Analyst research competition to represent our school.