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I trade with a market timer that mirrors the S&P 500. The SPX is an ETF (Exchange Traded Fund) that tracks the S&P 500. Think about the chart of the SPX. The market remains in a downtrend. The timer suggests a bearish signal at the start of the decline on November 11th 2008. At the bottom of the chart, there is a yellow histogram that shows the percentage points gained as the trade progresses. It shows the portion gains of the SPX during a timer signal; the white horizontal lines are at the 5%, 10% and 15% gain levels.Gains of 5% have actually been frequent over the years; 10% gains take place less often and are frequently accompanied with a pull-back; gains of 15% are irregular and generally short-term. This money management technique capitalizes upon stock price excursions. The Options Money Management Method DescribedThis in ‘Grab the Cash and Dash’ strategy is straight forward. We are going to buy an Out of the Cash call [at least $1.00 OTM] with a minimum of 45 days to expiration. If the OTM strike is $1 listed below the next strike which strike is a numerous of 5 then take the higher strike. Ex. If the OTM strike would have been $44 then take the $45 strikea) When the SPX has actually gained 5% sell 25% of your contracts.b) When the SPX has gained 10% sell half your remaining contracts and roll the other half to 1 start out of the Money.c) When the SPX has actually gotten 15% sell half your staying contracts.Table A Gains without cash managementWe are going to purchase 16 March agreements of SDS for $19.98 on 11/11/2008. This costs $31,968. If we didn’t use any cash management method, we would have experienced a small gain of $299.20. Gains utilizing money managementLook at what occurs if we utilize a trade management method.1. On 11/12/2008 the SPX has gained over 5%. We will sell 4 contracts at 27.30 for a gain of $2,928.00 [400 * (27.30 – 19.98)]; we still have 12 agreements.2. On 11/19/2008 the SPX has gained over 10%. We will offer 12 contracts at 34.50 for a gain of $17,420.00 [1200 * (34.50 – 19.98)] and purchase 6 March 115 agreements at 27.05; we still have 6 agreements.3. On 11/20/2008 the SPX has actually gotten over 15%. We will sell 3 contracts at 37.95 for a gain of $3,270.00 [300 * (37.95 – 27.05)]; we still have 3 agreements.4. On 11/25/2008 we offer to close the staying 3 agreements. We offer 3 agreements at 17.30 for a $2,925 loss [300 * (17.30 – 27.05)] Summing up the profits acquired in steps 1 through 4 above, we reveal a total choice profit of $20,697.00. This represents a gain of 64.74%. This gain was recognized by closing contracts at proposed levels to benefit from the cost relocation. This circumstance is not uncommon. Sometimes we discover that the market enters our instructions. Nevertheless, before we understand that the instructions has modification, we offer back some of our hard-earned profits. By capturing the money when it is offered, we turn an OKAY trade into an excellent trade. It is critical for financiers to take earnings when they provide themselves. The concept of contributing to a trade as the trade advances includes considerable threat. In addition, in these unpredictable markets, it is essential to have a finance method that decreases threat rather than increasing danger.
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ABOUT THE AUTHOR.
My web website, SPXTimer.com is committed to assisting financiers hone their investment performance using the SPXTimer integrated with tested money management. We intend to understand remarkable gains while keeping safety primary. Our methods have been developed principally for Individual retirement accounts. These strategies show you how to safely profit in both bull and bearish market. Our market timer is unique because it includes market belief when computing the market direction.