It’s always good to play to your strength...
As an example, while at the University of Michigan, it used to take me weeks to study for an accounting test.
Every page would take me over 10 minutes to dissect.
I was used to getting A’s but in accounting a B was a win.
It didn’t come easy to me.
At the same time when it came to writing and speaking, I could effortlessly produce high quality work with minimal effort.
An amazing conversation with my dad where he encouraged me to “play to my strengths” resulted in me focusing on what came natural to me.
Not only was I more successful, I had more fun.
In fact, this wisdom worked everywhere EXCEPT one place.
With my trading …
You see, I am also an emotional person by nature.
I love to win and I hate to lose.
These tendencies have caused me to hold on to trades I needed to let go of and let go of things that I should have held onto.
The problem was that I hated losing which caused me to actually lose more when I got down because I couldn’t accept a loss.
That was until I learned one strategy that changed my trading FOREVER.
A super successful option trader taught me about credit spreads.
It’s a specific option trade where you have 3 ways to win and only 1 way to lose.
Let me give you an example:
Let’s say AAPL is trading at 229.
I like it at that price but I don’t know how much higher it can go.
So how can I make money in AAPL?
I can sell a PUT in AAPL at 225 and buy a PUT in AAPL a 222.50.
The 225 allows me to collect premium and the 222.50 (which is further away from the current price) is my protection so that I have defined risk.
I can collect around .60 for this spread.
My risk is the spread (225-222.50) 2.50 - .60 (the credit collected) = $1.90.
On 1 contract my total risk and the total amount of money needed to put this trade on is $190.
That means I can make 31.57% on my money within weeks.
All I need is for AAPL to go up, stay at 229 or drop down but not more than $4.60.
3 DIFFERENT ways to win.
The nest part is the next number …
There’s over a 70% chance I am profitable on the trade.
That’s the magic ingredient.
All of my biggest flaw, EMOTION, is removed from this trade.
It’s now just MATH.
There’s over a 70% chance I’ll make over 30% on my money in just weeks.
I began using this strategy in 2013 and I’ve had tremendous success.
You can actually access all of my credit spread trades here.
In life, playing to your strength is a great thing.
In trading, eliminating emotion and using the math to put the odds highly in your favor is the most profitable way to go.
That’s my secret to trading success.
Here’s to making you a better individual trader.