How Options Can Transform Your Financial Future

At my S&P Trader trading advisory, I set out with one goal…

To continually beat the previous year’s performance.

Last year, subscribers could’ve earned $11,456 just trading a single contract on each trade.

That means if they traded two, they could’ve made $22,912… and so on.

And have I been able to achieve that goal?

Well, we’re only a little more than halfway through the year…

But here’s what one reader recently wrote to me…

Hello Larry, your S&P Trader daily recos are making a significant difference in my family finances, and I just wanted to share the excitement… I had my biggest trade profit day today. Put $65,000 to work and made a 30% net profit on it!

For June, my trading averaged $4,200/day. That includes three losing days of -$26,000… Did I say life-changing?!

Larry, I am a small-time newbie at this type of options… I LOVE IT. The winning strategy by putting the trades on EVERY DAY, EVERY TRADE!

It’s working after more than three decades of net losses. I could write a book on how NOT to trade the stock market from my own experiences…

Thanks again for introducing me to your winning options trading system! I was only able to launch in a serious way in April, after selling a property. Started with $37,000 in my trading account to reach Level 3. My first month was a great learning experience with the $21,000 drawdown. Then bounced right back and ended the month flat. Today, my account is sitting at $110,000!

Thank you, Larry! 

– David W.

It’s always amazing to hear about my readers’ successes. It truly means the world to me.

One of the main reasons I switched from managing a hedge fund to running my current trading advisories was that I truly wanted to help regular people achieve their goals.

And David’s message illustrates how the right trading strategy can make a dramatic difference in your financial future.

So today, I want to dig in a little further… and show how I turned my 40 years of options trading experience into results like his.

I aim to teach you everything you need to know about how options can help you manage risk… and ultimately outperform the market.

Options Are a Powerful Trading Tool

The beauty of options is they allow traders to control their risk.

This might seem opposite to what you’ve heard before. But it’s true.

On the most basic level, an option allows you to place a bet on which direction a stock is going to move.

And when you buy an option, you immediately know what your max loss will be.

For example, say you open the following trade:

Buy to open the DIA July 19 $391 calls for up to $3.50.

(Note: Though we’re just using this as an example, this was a real trade to my subscribers. We made 113.3% back in June.)

In this instance, we’re spending $350 to buy one options contract. (Remember, each contract controls 100 shares of the underlying asset, so $3.50 x 100 = $350.)

If we buy two contracts, we’re spending $700. And so forth.

That’s also the most we can ever lose on that specific trade. Whatever you spend to buy the contract(s) is your max loss.

So whenever we buy an option, we can set our position size to whatever amount we’re comfortable risking.

And it’s a similar concept even when we begin using a more complex options strategy…

Trading “Spreads”

In The S&P Trader, we take options to the next level.

Rather than simply buying options, we use a strategy called a “spread.”

This is the way David was able to achieve the results he described above.

Let me explain with an example…

Say we’re going to trade the S&P 500 (SPX).

At the beginning of the day, SPX is trading around 5471. And we don’t think SPX will trade below 5455 when the day ends.

Using our spread strategy, we can enter a trade with two parts.

First, we sell a put option at the 5455 level. This earns us some money in exchange.

Second, we take part of that money we just earned and buy a put option at the 5435 level.

In the end, let’s say we end up with $263 in our pocket for making this trade.

Sounds pretty great, right?

As long as the market closes above 5455, then that’s it. You just made $263 for each contract you traded. Easy income!

But just like I explained above, the real power of options is being able to control your risk.

In this scenario, you might wonder why we entered the second half of the trade – the put at 5435.

Risk management is the answer.

Consider if this example trade went against us…

Instead of staying above 5455, what if SPX plunged to 5435… or even lower?

Ouch. We could face essentially unlimited losses depending on how far SPX tumbled.

But by buying the second leg at 5435, we limit our losses.

Even if SPX utterly crashed, we wouldn’t be responsible for losses below the 5435 level.

In fact, the most we could lose on this trade would be the difference between our two strike prices. 5455 – 5435 is 20 points apart, so our max loss would be $2,000.

Except we still earned $263 for making the trade, so in reality, we’d be risking up to $1,737 per contract.

And if the details of this strategy sound confusing, don’t worry…

The main idea I want to impress on readers is this: Options are an incredibly powerful tool.

They let you make very nuanced bets on the market… and know exactly what you’re risking upfront.

And when you use them well, you can make life-changing profits, just like S&P Trader subscribers…

An 83% Win Rate

One final note…

You might look at that $263 in hand vs. the potential $1,737 loss and wonder if that’s a good setup.

That’s where I come in, with my decades of using this strategy…

Spreads are one way I went 20 years without a losing year in my hedge fund days. Plus, they’re a big part of the $95 million profit my firm brought in during the 2008 financial crisis.

And we’re seeing similar success now.

Over the first half of 2024, The S&P Trader banked 83.45% of our 139 trades as winners.

So even if we have a losing trade on occasion, our wins make up for it.

Over the first half of this year, folks trading just one contract could’ve made $5,836 using this strategy. So if you traded two contracts, you could’ve raked in $11,672… and so on.

That means we’re well on our way to beating last year’s performance.

By building up these profits over time, you can truly achieve amazing returns… and know exactly what’s on the line each and every time you place a trade.

Happy Trading,

Larry Benedict
Editor, Trading With Larry Benedict