How My Subscribers Made 350% in Just Over Two Weeks
So far, my biggest trade of the year for my Commodity Trend Alert subscribers has been a 350% gain in just over two weeks.
Part of what made this trade so successful was knowing it was time to pull the trigger and close our position.
It starts with how markets act. Rallies generally unfold in five distinct phases. The first phase of a rally almost goes unnoticed. It’s usually a rally due to short sellers being forced to cover their positions.
Phase two is the pullback, where the stock makes a low that at least holds its former “lowest low” but often forges a slightly “higher low” than the former lower low. This is the first real sign of life for those that are paying very close attention to what the price is doing while ignoring what the news media is saying about the stock … because at this phase, the news is still bad for the stock. This is the phase where we bought a call option on Coeur d’Alene Mines Corp. (CDE). Check out the chart below to get a better visual of this.
Phase Three … the Call Option Buyer’s Dream Comes True
Phase three is often the most powerful part of the uptrend because the most people jump on board as the new trend has finally become obvious at this point. Also, the volume tends to grow ever higher during this phase too. This is where the bulk of the option contract’s gains will be had because of the sharp moves higher in such a short amount of time, and where we generally want to pull the trigger on an options contract.
After this phase, you hit the first good-sized pullback, or a sideways consolidation, and an option begins to give back some of its gains. After that, strong momentum is lost and the stock creeps only slightly higher as it heads towards its first real, hard correction lower. If you’re still in the trade at that point, you can give up all of your gains and even begin to lose some of your premium as the stock drops hard and fast and the option’s premium shrivels up quite quickly.
In our CDE trade, I was able to watch the charts to see the development of these phases. That’s what let me know when we were in phase three, and that’s where our 40 cent option went to $1.80 in just over two weeks for a 350% gain. That’s where we took profits.
When buying options, you want to enter when pessimism is still strong and volatility is low, and you want to make sure you don’t stay in the trade too long or risk giving up your gains. Watching the charts closely to track these phases is part of my strategy when finding option trades for my Commodity Trend Alert subscribers, and it’s something you need to consider when doing your own options trading.
Have a great week!
Editor, Commodity Trend Alert