An option is simply a contract
It gives the buyer the right to buy or sell a specific stock at a set price. For this right, the buyer pays the seller up front.
At the end of the contract term, if certain conditions are met, the buyer can exercise the option. In this case, the seller must provide or accept the stock. Otherwise, the contract simply expires.
The lingo is easy
If you want to bet the stock will go up, you buy a call option; if you want to bet a stock will fall in value you buy a put option. The agreed upon price is the strike price. The price paid for the contract is the premium (like in insurance).
Options can create or mitigate risk
Options buyers are speculative and take on large risks. Sellers, on the other hand, have lower risk of losing their capital. That’s why we only sell.
First, predict the bottom
Our sophisticated analytics are the key to our success. We spend months or even years tracking falling stocks. When we predict that they’re about to rise again, we take action.
Then, sell a put
The first move is to sell a put. We put up some capital (in case it gets exercised) and receive the premium. If the stock rises above the strike price, the option expires, and we get our capital back in full.
This is almost always what happens — our predictions are extremely accurate. But even when they are a bit premature, we still win.
If needed, sell a call
If the stock doesn’t rise enough before the expiration date, the option gets exercised, and the stock is put in our account. Some traders see this as a negative, but for us, it’s an opportunity to make money again.
When we sell a call, we collect another premium. If the stock rises above the strike price, it gets called away from our account, and we get our capital back again. If not, we continue selling calls until it does, collecting a premium each time.
The capital always comes back
Using this strategy, we have very low risk of losing any capital at all. Occasionally it gets tied up for a bit longer than expected, but we usually make more within a few months.
20%+ returns are the norm
Here’s a common scenario: you sell a put option for $1000, putting up $5000 in capital. The contract lasts six months, so in that short time you’ve already made a 20% return. That alone would be a good year, but the year's not over yet.
You get paid more than once
Now, your capital is free to go to work again. You could potentially make two such trades in a year, which would mean $2000 received for your $5000 investment – a 40% annual return! Our actual average return is 18.7% in 6.5 months, so this example is close to what our clients truly experience.