Market Beating Options: 400% Return In Three Short Years!
Our Aggressive portfolio turned in another exceptional year in terms of performance. We trade mostly options in this portfolio and our returns have truly been exceptional. Yes, there is higher risk with this portfolio, but so are the returns. We have earned 400% on this portfolio in just three short years! That is truly phenomenal over what has been a very difficult investing environment. We do take bigger risks in this portfolio, but we also seek higher returns to compensate. We spent much of the first half of 2009 on the sidelines given the uncertainty over market direction. However, by mid-year, we became more confident in the market stability and began to get more active with buying long call options. For example, just last week we entered a new spread position against the Natural Gas Index. We think Natural Gas Prices are near their lows and expect prices to rise in 2010 as industrial and residential demand improves with the economy. We bought the January 2011 call options with an exercise price of $11.00. To reduce our investment and risk, we also sold the January 2011 call options that have an exercise price of $16.00. This means our initial outlay is reduced along with our risk. However, that also means that we are capping our potential gain at 45% ($16 Divided by $11). We were able to get into this spread position with a net debit per contract of only $1.00, so in our minds the risk reward payoff is very good on this trade. We are also looking to take similar spread positions in options against industrial and/or precious metals. As for 2010, we think the New Year will provide ample opportunity for trading long call options. We expect volatility to remain at lower levels from what we experienced in 2008 and early 2009 and that should help keep option premiums more reasonably priced. We also plan to continue writing short term options against the market index and volatility index when opportunities present as that income will supplement the returns in this portfolio. We also plan to opportunistically take short term positions whenever the market overreacts or moves to aggressively in one direction.
Portfolio Details Available Online At: http://www.marketbeatingstocks.com
Saturday, January 2, 2010
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