The market is a a remarkable psychological beast.
If you find yourself asking questions such as …
“How much higher can it go?”
“How much lower can it fall?”
Not only will the market show you, it will surprise you.
“That stock just went from 20 to 50, it can’t keep going up can it?”
Next thing you know, it’s at 80.
That’s why when a stock is on the move, I go with it.
However, it’s probably moving around pretty fast so I use options to limit my risk.
This week it worked out as good as I could have asked for.
I was trading one of the “pot stocks”.
They have had a really positive trend but because they had gone up so much, there was a risk they could come back.
The stock I was trading was CRON.
It had just gone from 6.77 to 12 but then Citron Research issued a report that it was going to 3.50.
It went down a little and settled at 11.50.
Now, I thought the report was fake news.
My 9 year old could have written it and there was an agenda.
The guy disclosed he can take a position in the stock before issuing a report. So it seems obvious he’s short CRON and writing this report so that it goes down.
It made me want to buy more but that $3.50 number was scary.
For every thousand shares I traded, a move to $3.50 would mean an $8,000 loss.
So instead, I used an option technique I learned here.
CRON was on the move and it was either going up big or down big.
The thing was, I didn’t want to lose big if I was wrong.
So I bought options to own CRON at $11 for $1.
If I’m wrong $1 was my max loss.
If I’m right, I have unlimited upside.
The next day I awoke to see markets across the board down big but to my very pleasant surprise, pot stocks were still surging and CRON was above $13 per share.
I finished the trading day up over 8k.
All the reward without all the risk.
That’s the power of options.
Start small and let’s see where this journey takes you!