A Simple Options Strategy That Even The Most Advanced Trader Can Appreciate.
PLEASE NOTE: Options are suitable for only very aggressive investors. While this is a simple strategy that is used by many GorillaTrades subscribers, it is important to reiterate the inherent risk involved with ANY options trade. Please keep in mind that a stock’s price and option’s price are directly correlated. If a stock’s price falls 1%, the option’s price could fall 10%; and vice versa. Keep in mind that if a stock drops significantly, you can lose your entire initial investment.
Unlike the Gorilla’s Option Idea of The Week, which provides the exact parameters of each recommendation; this strategy is simply explained on this page for you to execute on your own. You will have to use your own discretion to determine the exact entry and exit points of each trade. When reviewing new trading ideas for purchase, pay the price that coincides with your desired exit strategy; consider patience during volatile market periods.
With that said, the Gorilla now introduces his newest feature for aggressive investors, the Gorilla’s Express Picks:
- Purchase options after the stock has confirmed within the GorillaTrades portfolio, IE: Use Confirmed Stocks Only.
- The investment size will vary based on your available capital as well as the cost of the underlying stock, as the price of the stock will affect the price of the options.
- Buy in the money calls that expire three to four months out. For example: If a stock confirmed on February 1st, your target expiration date would be sometime in April or May.
- For this strategy, it is preferred to purchase “in the money” calls that are closest to the current stock price. For example: If the current stock price is $50.50, you would look to purchase in the money calls with a strike price of around $50 (or as close as you can get to the current $50.50 stock price). The further “in the money” you go, the more expensive the calls become and there are fewer buyers willing to step up to the plate.
- You will have to set your own price targets, and exit strategy for each individual trade. A less aggressive target gain could fall within the 10%-20% range, while a very aggressive target could fall within the 50%-100% range. For example: if your target gain was 10% and you bought an options contract for $100, you would look to sell your position once the options price rises to $110.
*Please Note: If the particular GorillaPick you are interested in does not have any options available within the three to four-month window, you may go as far out as six months. Three to four months is the ideal time frame, and no further than six months out.
The Gorilla has comprised a spreadsheet of some examples from 2015, to show how effective this strategy can be when used properly (similar to the Closed GorillaPicks Transactions page).
*For the sake of the analysis, the option was bought at the ask price, and sold at the bid price.
*For the sake of the analysis, the option was sold at the designated target gain. If a position sold for much higher than its target, it’s because that option price jumped significantly and that was the closest price to the target gain. For the purpose of this analysis, the option was never intended to sell for less than the target price. Therefore, if the target gain was 20% the option was never sold for less than a 20% gain.
*IMPORTANT: For the purpose of identifying the success of this strategy there was no review of any losing trades. There was no review of any losing trades, simply because if a stock stops out of the GorillaTrades portfolio the option price will likely drop significantly, even to near zero or zero. Thus, it is again important to reiterate the inherent risk involved with ANY options trade.
Please see either of the below links to view the information:
Both versions provide the same information.
If you have Microsoft Excel, you may choose the link to the Excel spreadsheet. If you do NOT have Microsoft Excel, please click “Web Format Only.”
– To save to your hard drive, right-click and choose ‘Save Target As.’
– To open straight from the web, many users must first open Excel.
– During high website traffic, save file to your hard drive before opening.