While all eyes are on the FOMC today, as the Fed is set to announce its first interest rate cut in over a decade, I want to shift the attention onto something I see working in the market right now…
I’m referring to my Weekly Windfalls options strategy, which has produced unrivaled results since its inception just three weeks ago, going 14 for 14 and racking up more than $21,000 in trading profits.
(14 for 14 on Weekly Windfall trades thus far, my next alert is coming today, if you are not a client yet and would like to start getting my alerts, then click here to get started now)
And while the strategy has been “can’t miss” lately… there are several people still on the sidelines– not in on this.
No, it’s not the fear of making an extra $10,000 a week that is holding them back…
It’s the fear of:
– Losing money at something new
– Unaware of the risks involved
– Making mistakes managing the trade
– Failure and feeling like a sucker
However, it’s good to have doubts and be skeptical when it comes to the stock market, investing, and trading.
The best way to overcome fear is to arm yourself with knowledge. For example, my Weekly Windfalls strategy is risk-defined, produces a high-win rate, is easy to manage, is scalable, and a whole lot more.
But instead of just firing off all of its benefits, I’m going to explain to you how to calculate break-even, and equip you with the knowledge, so you too, can see that this is one of the safest and most compelling strategies that are working in today’s market.
When you’re trading options… it pays to know where your breakeven points are.
Well, think about it like this… let’s say you’re in an options position and you’re up money… you decide to take some profits off the table… and let the rest ride.
However, you don’t take into account your breakeven point and you end up turning a winner into a loser.
Not only that, having a break-even point lets you know when you’ll start losing money on a position.
With that being said, knowing where your breakeven points are can help you achieve profitability… and when you’re trading options, specifically options spreads, you know where your breakeven point is off the bat.
Calculating Breakeven for Bull Put Spread
This has been one of my money makers recently, and if you want to learn how I use the bull call spread to my advantage and generate profits like these…
… all while stacking the odds to your favor and placing “safe” bets… then click here to learn more.
Now, when I’m trading this strategy I know exactly where my max loss, max profit, and breakeven are at all times.
For example, here’s a look at the risk profile (profit and loss chart) for the bull put spread strategy.
With this strategy, you sell puts at strike price B and buy the same number of puts at strike price A. Generally, you want the stock to be trading above strike price B.
If you look at the chart above, you’ll notice an encircled area. Well, that’s your breakeven point. Typically, your brokerage platform will let you know your breakeven point before you place the trade.
However, if your broker doesn’t show where your breakeven is… it’s actually simple to calculate.
For example, let’s say a stock is trading at $100, and I’m bullish on it based on a chart pattern. Well, to put on the bull put spread, I would look to sell puts with a strike price of $95 and simultaneously buy puts with a strike price of $90.
Now, let’s say I received a credit of $2.00 for placing the trade. That said, my breakeven point will be strike price B ($95 in this example) minus the net credit received ($2.00 here). That means if the stock falls below $93… I would start losing money.
Why is this helpful?
Well, even though you know your max loss for the bull put spread… maybe you don’t like taking on a whole lot of risk… so you could set a stop-loss, where you would close out the position if the stock trades at $92, rather than holding onto the position and potentially get to the max loss.
Now, let’s look at another spread strategy and how you can calculate your breakeven point for it.
Bear Call Spread Breakeven Point Calculation
With a bear call spread, also known as a short call spread, you buy calls at strike price B and simultaneously sell calls at strike price A.
Typically, you would want the stock price to be trading below strike price A. That said, this means you’re neutral to bearish. In other words, you think the stock will trade above a specific level.
For example, let’s say you notice a bearish chart pattern in a stock that’s currently trading at $47. Now, you think the stock will stay below $50.
That said, the bear call spread could be set up by selling $50 strike price calls, while simultaneously buying calls with a strike price of $55. Now, let’s assume you were able to place that trade and receive a net credit of $1.50.
That said, your breakeven is equal to strike price A ($50 in this example) plus the net credit received ($1.50 here). That means if the stock starts to trade above $51.50… you would start to lose money.
So if you’re risk-averse and like to play it on the safe side… maybe you set a stop-loss so that if the stock trades above $52… you would close out the position for a small loss.
Now, if you’re looking to trade options – or options spreads – it pays to know where your breakeven points are because it allows you to manage your risk properly and protect your portfolio… in case things turn sour…
…most people are scared of options because there is fear that they could lose a lot of money.
However, that’s why I developed Weekly Windfalls… allowing you to set those fears aside and remain safe while trading options spreads.
From the moment you put on the trade, you control your risk, and you’ll even know where you’ll know your breakeven, which can ensure safety.