Trading Lesson 11: Ratio Spreads

Sponsored by www.speculatoracademy.com 

O.ther P.eople's M.oney: Ratio Spread

by

Noble DraKoln

When it comes to trading, so many people are so clueless that it begs the question why do they bother. What motivates you money, knowledge, security? If you don't know why you are trading you are doomed to repeat the same mistakes over and over again.

95% of traders blow out their account within six months and within 18 months they are opening another account, with another broker, only to blow up another account. The cycle continues on and on. Why this occurs I can't say for sure. But what I have found time and time again is a thorough misunderstanding of what futures and forex trading is and the mistakes reverberate from there. I suggest you find an education course that is going to do better than pick a couple of "good markets" it's going to teach you a way of trading that can change your life. Which leads me to OPM.

In the first lesson you learned about cost less, risk free trading using the Collar. Now let's look at Ratio Spreads.

It is no secret that 80%-90% of options expire worthless. But it is also no secret that when you sell an option you have unlimited risk, with limited profit. If I could show you a way to collect premium and expose yourself to the potential to profit using O.ther P.eople's M.oney how often would you trade that way?

In the example charts (provided upon request) we did just that. In the bond market we sold 1 call option at the money, 110 level. We took that premium and bought 2 call options out of the money. We sold and bough on strength. The options that we bought cost us nothing. The premium took care of it. When the market shot up we made $2,400 for one of the options. The second option covered the "unlimited" risk of the option we sold and we subtracted the difference in loss from 110 to 111 from our profits, netting $1,400.

Could we have lost on the trade, of course. If the market did nothing or collapsed we would have collected the premium and our calls would have expired worthless. So be smart and come up with a technical analysis system that will tell you "Where the market is going, how fast it is getting there, and when will it arrive." If you your system doesn't teach you that learn from our "3 Steps to Trading Success" program.