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What GEICO can teach you about options

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Do you ever wonder why there are so many insurance commercials on TV?


It is because they are making literally billions of dollars a year by selling policies to people like you and me.


It is a fantastic business, and if you have a billionaire uncle, I would really suggest you start an insurance company.


The next best thing is learning how to sell options to other traders.


Insurance companies make calculated odds against people making claims.



Option sellers bet against buyers making profits. 


76.5% of all options held to expiration at the CME expired worthless. 


That means if you bought an option and held to expiration, there was about a 24% chance of a favorable outcome.


BUYING: you're betting on something to happen 👍.


SELLING: you're taking those bets and saying something WON'T happen 👎.


Options trading works best for sellers because:


  1. Options are time-limited, expiring trades.

  2. Near expiry, the trade "decays" with less change for buyers to make a profit.

  3. This "time decay" is why 76.5% of options expire worthless. 

  4. The steepest decay for buyers occurs in the final 5-7 days.

  5. This also brings the greatest chance for option sellers to benefit. 



For those reasons, I believe SELLING options is the best way to grow a small account.


Let's look at the 3 trades I've made in the "$2,000 JOURNEY" and 3 different ways to visualize how selling options works.  



Warren Buffett owns GEICO and said it's his favorite investment ever. When Warren SELLS you insurance, he gets paid today, right? 


Trade #1 (January 4 - 6) 

AAPL put credit spread


Tip: the buyer is buying the options from the seller so the seller collects the credit on day 1. Remember, when Warren SELLS you insurance, he gets paid today, right? 


The buyer paid me $952 on January 4… then 3-days later I paid him back $476, and kept the $476 as my profit or 50%.   


      Put Credit Spread          Day 1 Collect Credit    Time Decay (Theta) Favors Seller


Visual not meant to imply the seller always wins. The seller has a higher probability of winning, collects a credit or premium up front, and benefits from time decay.


Trade #2 NFLX (January 20 - 23)

NFLX put credit spread


Tip: the buyer is buying the options from the seller so the seller collects the credit on day 1. Remember, when Warren SELLS you insurance, he gets paid today, right? 


The buyer paid me $1,120 on January 20… then 4-days later I paid him back $420, and kept the $700 as my profit or 63%.  


        Buyer Paid Me $1,120            I Paid Him Back $420 I Kept $700 Profit


Visual not meant to imply you will make money. The big pile of money on the left shows how the buyer gets paid the full credit or premium, $1,120, up front. As time decay erodes the value of the options, the seller can exit anytime with a win by paying the buyer back $420, or what the options are now worth. The seller keeps the difference or $700 profit.  


Trade #3 TSLA (January 26 - 27)

TSLA put credit spread


Tip: the buyer is buying the options from the seller so the seller collects the credit on day 1. Remember, when Warren SELLS you insurance, he gets paid today, right? 


The buyer paid me $1,740 on January 26… then 2-days later I paid him back $890, and kept the $850 as my profit or 49%.


Buyer Has 1-Way To WinSeller Has 3-Ways To Win   I Had ~70% Probability

(TSLA down sharply)(TSLA down a little, sideways, or up)   (seller had ~30% chance to win)



Visual not meant to imply 3-ways to win means you will always win. It is a fact most traders lose money. It is also a fact 76.5% of options held to expiration expire worthless. Wouldn't you rather start trades with 3-ways to win, versus 1-way? Did you know the co-founder of TD Ameritrade and TastyWorks teaches people to SELL options? He's seen all the data and knows the odds favor sellers. So why does anyone buy options? Same reason they play the lottery and go to casinos.


Now that you understand how the strategy works. Let's look at the first 3 trades I alerted in the $2,000 JOURNEY, which is up 101% in January.



$2,000 JOURNEY GUIDELINES


Best companies in world: AAPL, NFLX, TSLA

Technical analysis defines stop at sold strike

30% of width defines entry

Full allocation for each trade

5-7 days from expiration (theta decay)

1 trade a week on average

Hold times range from 2-4 days


Trade #1 (January 4 - 6) 

AAPL put credit spread

Trade #2 NFLX (January 20 - 23)

NFLX put credit spread


Do you see the $1.60 CREDIT I received?


Do you see the $.60 DEBIT I sent back to the buyer?



Trade #3 TSLA (January 26 - 27)

TSLA put credit spread





Wall St. Bookie subscription: 


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P.S.  If you have any questions at all regarding this offer and your options, you can contact Jeff Brown (your BOOKIE concierge) at (800) 585-4488. Or email him at jbrown@ragingbull.com 



Jason Bond



RagingBull, LLC
62 Calef Hwy. #233, Lee, NH 03861

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