I guess all of you have heard about investment being High Risk High Return. You must think what a big boast for me even to say this. I can understand and I’d have also thought this way if I didn’t know what was involved. But I hope you can understand me better after you read the following.
Is high return always associated with high risk? Usually it is, especially for retail investors. But I have learned a special technique, with which I have truly got high return with very low risk. You may have seen a few examples I discussed in the past. Here is another example regarding Boston Scientific (BSX). I entered this position less than 2 years ago, when BSX price was around $7. After almost 2 years, its current price is around $6, about 14% decline. You may think that I must have lost money for this trade, right? Just opposite. See below the trade I have closed with a 62% profit recently:
BSX120121P00005000 | -100 | 0.22 |
| 0.59 | 2899.999512 $3,700.00 | 62.71% |
It is hard to believe, isn’t it? This is the unusual technique I have mastered which will allow you to do the following:· you will definitely make money if the stock price increases
· you will also make money if the stock price does not do anything around your entry price level
· you can still make money even if its price declines within certain range (depending on how you specify your price range)
· the worst case scenario is that you buy the stock at a much lower price desired by you
Isn’t amazing? Yes, it is. Actually believe or not, the worse the overall market goes, the better and easier money you can make with this technique. That’s why I’m quite happy to see the plunging of the stock market which is currently ongoing, since I know more money I can make from it. So what is this special technique I’m talking about? It is called put selling, an option strategy. I’m not going to attempt to explain the dynamic of it as it requires quite good understanding of stock options. For those who do understand the option concept, it should be easy for them to know how to sell puts. But I must warn you that it is not a given that you will automatically make money with selling puts. Actually if is not used appropriately, you may lose a lot of money, potentially big time. So it is very important that you do NOT try it if you don’t know it well. For an effective use of this technique, you need to have all the conditions in place: a good company with a good valuation, for which you want to own anyway at the current price; a good strike price with a reasonable maturity date; an appropriate position size without over leverage. You see, to make it “operationable”, many things have to come together. It took me over 3 years with a lot of trying and testing to finally become confident with the technique. After you really understand the essence of it, the odds are very much in favor of your success. Why? Two major reasons: (1) Among the 4 outcomes as outlined above for buying a stock, you have got 3 of them leading you to make money, a 75% chance in favor of you; (2) Statistically, about 80-90% of any options will expire worthless, which is what you want to see when you sell an option.
So what is the business plan I’m thinking about? I was asked by a few friends whether I could manage some of their money for investment. My initial response was absolutely NO NO NO! While I thank them for their faith, I don’t want to take this kind of responsibility, which is rather heavy. However, as time passes by, I’m kind of thinking about it, pondering this may be something I can consider. While I’m definitely not interested in managing others’ money individually, there may be a way by setting up a company to pool the money from those who are interested in to invest collectively. With this technique, the bigger the capital base is, the more effective and efficient it becomes in terms of the profit margin. Of course, it is just a thought at the moment and I will need to sort out relevant legal and accounting issues first before this can really become operational. I don't know how long it will take for me to be prepared, as my daily job is also very demanding. If I want to do it, I want to do it successfully and I definitely don’t want to let my friends down. I will show you in the future more of my such positions when they approach the maturity date. I literally have dozens of such very profitable positions reaching to the ultimate target and waiting for my harvesting. I’m talking about tens of thousands of profits on the paper to be taken. This is just too powerful not to be proud of. After all, following years of learning and practicing, which involves a lot of painful failure, I finally know how to make high returns with low risks.
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