The Ultimate Low-Risk High-Return Trading Technique

Keith Fitz-Gerald Nov 22, 2019
36 

If you want to line up big profits, create income and keep risk low in 2020, you’re going to need a goal-specific trading tactic to get results.

I’ve got just the thing.

Today we’re going to talk about a trading tactic that you’re going to love every bit as much as I do when you understand how, when and why to use it. Moreover, you’ll also understand which stocks are perfectly suited to help you build life-changing wealth.

You’ll want to master this technique for three reasons, especially now as we head into elections and volatility picks up:

  • You don’t have to have a lot of money to make serious money.
  • You can rack up wins consistently when other investment techniques fail.
  • You keep risks low – to razor-thin levels actually.

Best of all, it takes only a few minutes of your day to really see results.

Your One Stop Shop for Power Trading Profits

It doesn’t matter whether you’re looking for growth, income, or some combination of the two. Getting there in today’s markets will require new knowledge.

Knowledge that centers around what I call the 5 Profit Pillars:

  • Trade regularly to maximize winning potential. This trading method can produce significant results that often top win rates of 85 – 90% when used consistently even in conditions that cause traditional methods to break down or fail completely.
  • Limit risk. Many investors and traders swing for the fences without realizing the amount of risk they’re taking. This trade limits that… to the penny… before you make your move. That means you’re never going to risk blowing up your account by mistake.
  • Stay in the game. Many traders make the mistake of trying something once, then move on if they don’t get the results they want. This trade is like fuel for your wallet, in that you’ll want to use it regularly because it can win consistently, in all sorts of economic conditions, over long periods of time.
  • Recognize that the markets have a very pronounced upside bias over time. The headlines, the trade wars, the election… those are all short-term influences at best. So, you want to constantly play to the upside even if you “feel” like the world is coming unglued.
  • Be strategic. This trading tactic is perfectly suited for investors who want a little more growth, higher income, or even the best of both worlds. Young or old, starting out or seasoned veteran investor, it doesn’t matter, especially if you use it to compliment an existing portfolio of conventional investments. Even if you have a limited amount of money.

[URGENT] This Woman Made $3,000 in a Single Night…Three Times in a Row

Enter the Bullish Put Spread.

The bullish put spread (also called a “credit put spread”) is a limited risk, yet very powerful option trade capable of producing profits regularly, in all sorts of market conditions.

As the name implies, it’s a “spread” – meaning there are two different options involved. Don’t let that term put you off if you’ve never seen it before. A spread is simply Wall Street speak for something like a “Value Meal” at your favorite fast food joint, in that you get more than one item for less money at the same time.

You use bullish put spreads when you expect the stocks that interest you to be neutral or to move higher.

The “spread” consists of two options – in this case put options – that have the same expiration date but at different strikes. And, in this case, you put them on – meaning you establish the trade – for a credit.

That means you’re getting PAID to trade as opposed to paying to trade. We’ll come back to that in a moment with an example that’ll help you sort all this out.

First, though, maximum profits are limited to the net credit received less any commissions paid but – and this is really important – the risks are also limited. I like that a lot, especially at the moment when the markets are trading at or near new highs and many folks are worried about a correction or a downturn as we head into elections or China pulling another fast one.

Anyway, let’s chalk up an example.

Apple Inc. (NasdaqGS:AAPL) is trading down $5 as I type this, but I still think it’ll hit $300 a share by year end, in keeping with a forecast I made in January of this year.

This trade – the bullish put spread – is an ideal way to play the opening and use the short-term selloff to your advantage while also generating some quick profits.

I suggest looking in the $240 to $245 area, an area of key support where there’s a bunch of options activity, so you know the professionals are doing the same thing.

You’d simultaneously sell 1 AAPL December 20, 2019 $245 Put (AAPL191220P00245000) and buy another 1 AAPL December 20, 2019 $240 Put (AAPL191220P00240000) for a net credit of $0.50, or $50 per contract (In this example: $1.90 – $1.40 = $0.50).

These numbers are smaller than they would be otherwise but I don’t believe in cherry picking. I’ve deliberately chosen this example at a time when the markets are running higher so that I can show you it works even when many traders wouldn’t think it would.

The profit and loss diagram is very simple to understand, something else I like a lot.

If Apple’s stock price is at or above $245.00 by December 20, 2019 when these options expire, you’ll will have captured 100% of the possible profit.

Some people calculate returns on the total amount of capital held in reserve but that’s splitting hairs to my way of thinking. But, just in case you’re interested, that’s a return of 10% in under 30 days or 121.66% annualized.

Could Apple stock drop further?

Yes, that’s always a possibility and a fair question with a great answer.

If you buy 100 shares of AAPL stock, you’re spending $26,230 at current prices. But this trade only requires $500 which is calculated by taking the difference between the strike prices and the credit received, less commissions. ($245.00 – $240.00 = $5.00).

The most you can lose if this trade blows up completely and Apple’s stock tanks is $500 versus $26,230 or your entire enchilada if you buy 100 shares of Apple. That, to return to the graphic above, would be when the price is at or below $240 at expiration. It’s worth noting, though, you’ll keep all of the initial premium you initially received which means you actually have only $450 at risk plus any commissions (which given the recent race to zero by brokerage firms may not exist at all!).

Are there caveats?

Sure.

  • Heroes or Zeros – The bullish put spread works because of a combination of time decay and price movement, meaning that the price changes rapidly as expiration approaches and volatility increases. However, win rates can and do approach 80% or more even if the markets go against you, assuming you pick strike prices properly. But, like any trade or investment, it can lose.
  • Early Assignment – Options traded in the United States are subject to something called early assignment, meaning that anybody who’s sold an option short will have no control over when he or she has to fulfill that obligation. Generally, this is a function of dividends and prices being below one or both strike prices – something that rarely happens, again, if you’ve picked your strikes properly. Thankfully, this isn’t a big deal and something that sounds a whole lot scarier than it actually is because you can close the spread to eliminate the risk of assignment.

[CRITICAL] This Man is Watching Every Market in the WORLD, And He Needs You to See This

In closing, I hear from a lot of investors and traders alike who think they can’t do something like this.

I disagree.

The beauty of a trade like this one – the bullish put spread – is that anybody can do it with a little practice. Young or old, newbie or seasoned veteran, it doesn’t matter. Even if you don’t have a lot of money to start with.

True, there might be some learning involved but I can help with that.

In fact, I’m planning to.

I’ve heard from many members of the Total Wealth Family in recently months that you’d like the ability to tap into growth consistently and generate income along the way using a limited risk, high reward trading technique.

Your wish, as the old saying goes, is my command.

Here’s what I’m thinking.

First, I’m planning to start a brand-new trading service specializing in this exact trading technique. My team and I are working very hard to get that launched by year end, including step-by-step instructions and specific recommendations you can use to follow along.

Second, I’m also planning to start an educational series that will give you the perspective you need to use this tactic on your own if you want. If you’ve been reading my work for any length of time, you know I don’t believe in holding back. A knowledgeable investor is always a better, more profitable investor!

And, third, I’m planning to conduct a series of “master classes” highlighting this technique at select speaking events around the world in 2020. I’ve got a number of details to work out but all indications are that you and I can get together for a chalk talk in person – which is always very exciting!

Now, here’s what I need from you.

  • Is this a good idea?
  • Am I missing anything?
  • Where would you like to get together?
  • What can I do to make it better?

Please take a minute to post your thoughts and comments below.

Together, we are stronger!

Be “in to win”!

Until next time,

Keith

36 Responses to The Ultimate Low-Risk High-Return Trading Technique

  1. Karen Rothery says:

    I would love to learn the Power Trading Profits. I don’t have a lot of money. I use Fidelity but I am going to another company because they won’t give me permission to use options. I am on SS Disability and make a whopping $900 per month. I have a few loopholes I want to try to increase my monthly pay. Beau Henderson sent me some retirement loopholes I want to try and Tom Gentile gave me a break to join his Fast Fortune program but that is also options. I have all day to study and try to learn. In the morning I’m going to change brokers. First Trade. Then I will transfer the cash I have and one lil stock I have. I hope I’m doing the right thing. I just want to learn from you all. Thanks for reading my rant.

    • Keith says:

      Hello Karen and thanks for taking the time to “rant.”

      Please be extra careful. Trading on a limited income means the risks can be higher than they would otherwise, which is why you want to be sure you have core investments set aside first. Work with a financial professional if needed! Of course, I will do the best I can to help you learn – and being part of the Total Wealth Family is obviously a good start!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  2. Brent says:

    This technique has been widely used for years. Newbies frequently don’t do so well because they don’t take into account the “Greek’s.” So that’s where a service can really add value.

  3. Alibaba says:

    How interesting! And what if Apple stock is at 241$ on Dec 20th? The 245$ put oblige you to buy AAPL for 24,500$, while your 240$ put expires worthless. If you sell immediately those 100 shares, you’re in the hole for 350$ (50$ profit, 400$ loss). Nice shot!

    • Keith says:

      Howdy Alibaba!

      Yes, that is correct and you make a great point. Respectfully, however, the probability of profits can be 85% or higher on trades like this when placed which can improve an otherwise unfavorable trade to risk to reward ratio. The same is true for diligent risk management if a spread starts to run against expectations.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  4. Virgil says:

    It’s a very good idea, I’d be interested in using the strategy to sell weekly bull put spreads for income. Thank you for sharing.

    • Keith says:

      Great to hear, Virgil!

      Thanks for the feedback and perspective. I can’t wait to roll this out and am very excited by all the work we’re doing right now behind the scenes!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  5. Jim says:

    Keith This is exactly the type of trading service what I was hoping you could provide. Can’t wait to see the finished product.

    • Keith says:

      Thanks for the kind words, Jim!

      I will do my very best to ensure it exceeds expectations. Please keep me posted as we draw closer with any ideas you have on how/what you’d like to see. The Total Wealth Family is one of the savviest groups of investors I’ve ever run across and that means we could really have something powerful together will all the brain power you and your colleagues bring to the table!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  6. robert wolcott says:

    Hi Keith, I always wondered why you didnt do this along time ago, with your knowledge, I think you would be really good at picking credit spreads. Like you said, picking the right strikes is the key. Ive done a few spreads with Adam Mesh, so I am familiar with it. Ive had a very bad year so far, so I need to start slow, and work my way back up again. I trust you, and I know you can get me back on track. So, im all for your new program. The one thing I know that I have done wrong is not using limits, and ive lost a lot of complete trades, not so much with credit spreads though. Anyway im interested in hearing more when your ready. also, what I know about you is, that you don’t rush into trades unless your confident about it. less trades is better than more with a lot of losers.

    • Keith says:

      Hi Robert and thanks for the kind words!

      I will do my very best to live up to the trust you place in me. Bear in mind, though, that I am not infallible – I, too, can hit a stinker every now and then! Fortunately, that doesn’t happen very often but still…!

      I also want to say thank you for recognizing the very deliberate nature of my analysis. There’s a big difference between placing very well thought out and analyzed trades based on careful research and raw speculation. And, I’m glad that shows through!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  7. Carl says:

    I use this method now and have a success rate of around 90% with returns of around 520% per year. I don’t have a great exit strategy when the stock fluctuates wildly. Do you have a method to rescue the few losing trades that occur?

    • Keith says:

      That’s fabulous, Carl! Way to go!!

      The short answer is – yes. I have several methods that can help avoid massive jumps in volatility that I anticipate making part of this service. Still, sometimes the you know what hits the fan which is why we’ll also concentrate on proper position sizing BEFORE each trade!

      Incidentally, that’s constantly one of the most popular lectures I deliver when I’m speaking on the investing circuit and perhaps we should make it a key part of the welcome package. What do you think?

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

      • Carl says:

        I try to make all trades the same size since I never know which trade might go bad. Besides avoiding weeks with earnings released, what else are good rules to follow?

  8. Ken says:

    Sounds good, how much will your brand new trading service cost?

    • Keith says:

      Awesome and thanks for taking the time to let me know, Ken. As for cost, I have no idea – that’s my publisher’s decision and I don’t have any control in that process whatsoever. I wish I did… but I don’t.

      We’ll get there one way or another, though!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  9. VINCENT LEPORE says:

    This is excellent keith. I would love your insight on options, and exactly how to execute these trades.

    A video of each trade would be nice, so we are sure how to execute properly. Also, many of us can’t afford high prices on your service, so please keep it low. When services like this cost too much, it will draw people away. Thats not what you want. You want your subscribers to stick with you

    • Keith says:

      Roger that, Vincent!

      Thanks for the great input. I wrestle with video constantly because filming even a short one can slow down the recommendation process. Would it be okay if I did a video showing each technique rather than each trade? That way I could make it part of a library of trades, of sorts, and something you could refer to as needed.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  10. Gerald Benichak says:

    The Put Spread technique sounds especially well-suited to someone just starting in trading options who does not have the capital to invest in large dollar buys. I personally would be interested in a service that could guide me in the selection of the Put Spreads.

    • Keith says:

      Yes, it is, Gerald and nothing wrong with starting out. I still prefer spreads even though I’ve been 36 years in global markets at this point. Limited risk, high probability of winning, consistency… all of which are words I love to associate with profit potential.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  11. CLAUDE BOUSQUET says:

    TRÈSBONNE IDÉE ON NE SAIT PAS ÉVALUER UN CALL OU UN PUT ALORS NOS REVENUS SONT MÉDIOCRE VOIR NUL.
    MERCI.TANKS.C.B.

  12. CLAUDE BOUSQUET says:

    À CAUSE DE NOTRE PAUVRE ENGLAIS NOUS AVONS DE LA DIFFICULTÉE À VOUS SUIVRE MAIS LE PEU QUE NOUS COMPRENON NOUS EST BÉNÉFIQUE. MERCI.

    • Rachel Pfeffer says:

      BY OUR POOR ENGLISH IT IS SOMETIMES DIFFICULT TO FOLLOW, BUT THE LITTLE WE UNDERSTAND, IT IS BENEFICIARY. THANK YOU.

  13. CLAUDE BOUSQUET says:

    HEUREUSEMENT QU `IL Y À DES GENS TEL QUE VOUS QUI ONT LE COURAGE D`AIDER DES PLUS PETITS À POUVOIR EU AUSSI POUVOIR ACCÉDER À QUE CHOSE DE MIEUX CÔTÉ CONNAISSANCE FINANCIÈRE.

    • Rachel Pfeffer says:

      LUCKLY THAT THERE ARE PEOPLE SUCH AS YOU WHO HAVE THE COURAGE TO HELP SMALLER POWER TO ALSO ACCESS TO THAN BETTER THAN SOME FINANCIAL KNOWLEDGE.

    • Keith says:

      Merci beaucoup, Claude. Je m’excuse pour mon terrible français. Je ferai de mon mieux pour vous. J’apprécie votre gentille réponse.

      Cordialement et merci de faire partie de la famille Total Wealth, Keith 🙂

  14. RAVI PATEL says:

    It is a great idia,for person like me at the age of 72 and just starting investing in market

    • Keith says:

      Thank you, Ravi.

      This can be a great way to invest in the markets but please be certain you trade only with money that you can afford to lose. Even a conservative method like the one I am proposing involves the possibility of loss so, again, please make sure you follow along using money that’s set aside as a complement to your regular investing portfolio. Work with a financial professional to establish an appropriate balance for your individual investment objectives and risk tolerance, if needed.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  15. Patrick Miller says:

    Now, here’s what I need from you.

    Is this a good idea? YES!!!
    Am I missing anything? Online training videos?
    Where would you like to get together? At your own trading summits.
    What can I do to make it better? Live demonstrations?

    • Keith says:

      Hello Patrick and thanks for taking the time to comment.

      Copy all and standby… wilco!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  16. Rob Stewart says:

    Hi Keith, I too am very interested. I have been following your column for years now but due to living in New Zealand have not had the confidence to do anything due the the zone time difference and the restrictions of access to US brokers. Is there any advice you can offer to help please? Look forward to your reply, cheers Rob

    • Keith says:

      Hello Rob and hope you’re having a fabulous summer!

      Thanks for the kind words and for being part of the Family! I will do everything to ensure your trust is well placed.

      Speaking of which, the brokerage landscape changes regularly as financial regulatory structure is adapting to modern markets. I think the best thing to do is to contact a few US listed brokers familiar with global markets to see if they will house offshore accounts like yours. Not all will despite the fact that many used to. Interactive Brokers, for example may be a good place to start. I hear from a number of folks who also like ABN AMRO or UBS, too.

      Please keep me posted – putting together a list of offshore capable brokers has been a goal of mine for some time now but I just haven’t gotten around to it yet.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  17. Ricky Tee says:

    I’m very interested. I really sleep better since joining the Money Map Report group a couple of years ago, and very recently added High Velocity Profits now that my As are in place. I am 61 and very close to replacing my current income level when i do retire, so far…. BRING IT ON!!!!

    • Keith says:

      You just made my day, Ricky!

      Thank you for the kind words and for letting me know what being part of the Family means to you. Please let me know if there’s anything I can be doing better, differently or if there just something you want to see covered that’s not presently on my radar!

      I will do my best to ‘bring it on!”

      Be “In To Win”

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

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