Best Option Trading Strategies

What Are Structurally Advantaged Trades?

I talk a lot about "structurally advantaged option trades" in relationship to value investing with options.

So what exactly is a Structurally Advantaged Trade?

Structurally Advantaged means that I can make great returns when I'm "right" on the trade, and still make decent to good returns if I'm "wrong."

So what exactly does that mean - being "right" or being "wrong?"

Betting Mr. Market

If you think about it, every trade or investment is a kind of bet on something.

For an investment, the bet is that the value of the investment is going to increase over time, or that it will increasingly distribute more and more dividends over time (or both).

And for a shorter term trade - especially when options are involved - you can make any number of bets: that the stock will trade higher by a certain date, lower by a certain date, or even that it will remain within a certain trading range.

Now, the way most option trades are structured, you make money when you're right and the stock behaves the way you believed it would during the period of the trade.

But if you're wrong and the trade doesn't behave the way you believed it would, that's when you lose money.

That almost sounds like an oversimplification, but it really is the rationale for pretty much all trading systems - maximize your returns when you're right, and try to minimize your losses when you're wrong.

And if you're good at both trade selection and trade management, the idea is that your winning trades will hopefully produce more than your losing trades lose.

A Different - and Better? - Way

I structure my trades differently.

Or rather, the primary strategy I use and teach can be customized and structured in such a way that the usual "Heads I Win, Tails I Lose" rules don't apply.

The primary option strategy I teach and use in more than 90% of my personal trades is a customized put writing strategy.

When you write or sell puts, you can view the trade in one of two ways:

#1 - As though you're an insurance company collecting premium income for insuring the share price of a stock.

#2 - Or as someone who is getting paid to make an offer to buy a stock at a certain price.

So when I write or sell a put, the bet I'm making is that the stock won't trade below a certain price (the strike price) by a certain date (the expiration date).

And if I'm right, I make lucrative returns.

I personally target 15-25% annualized returns on my put writing trades.

That's a great source of high yield, low risk income, and as we've seen, an equally great source for funding open market stock purchases.

(That's also why I never want to be assigned the shares I'm writing puts against - not only can I make more money selling puts, I can also get bigger accumulated discounts on my favorite stocks vs. the one-time discounts a lot of put sellers settle for.)

You can check out the complete list of 2018 closed trades inside the Leveraged Investing Club and see for yourself.

What if I'm Wrong?

Now here's the cool thing and where we really start stacking the Structurally Advantaged deck in our favor.

Even if the shares are trading below the strike price I initially chose, the trade itself is so flexible, about the only time I'm going to get assigned is if I allow myself to be.

I can almost always squirm my way out of the situation and repair and improve the trade over time through a combination of lowering the strike price and continuing to collect additional net premium.

There's a term I use for these adjustments and repairs:

Renegotiation.

What makes these trades truly Structurally Advantaged is that they can, in effect, be renegotiated to my longer term advantage - and not one time either.

They can be renegotiated again and again and again - as many times as necessary until I finally exit the trade profitably.

Want More?

Renegotiating these kinds of trades with Mr. Market is just one of the many pragmatic tricks, tactics, and techniques I teach in the self-paced (and user-friendly) Sleep at Night High Yield Option Income Course.

When you think of all the ways that global markets are set up to the individual investor's detriment - from high frequency trading to orchestrated short attacks and activist investors legally manipulating the prices of individual stocks - you realize how critical it is to develop real, proven skills and personal advantages.

It's like every other area of your life - the more skills you have, and the better skills you have, the more control you have.

And once you have those skills, no one can take them away - not even Mr. Market himself.

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