First, I hope everyone had a wonderful Thanksgiving! We sure did.
Now, I don’t know about you, but the days after Thanksgiving feel so chaotic.
People are rushing around trying to score holiday shopping deals, and it seems like every year I’m hearing about another Black Friday brawl in some Midwest Walmart.
That’s why I wanted to bring you a little bit of zen after Thanksgiving.
And since I’m a big advocate for self-help (just ask my life coach), I thought I’d pass on seven lessons from Sun Tzu’s The Art of War that apply to both life and successful options trading.
Sit back, take a deep breath, and let me demonstrate how this ancient Chinese manuscript can make you a lot of money.
Sun Tzu wrote the most influential, long-standing document on military strategy ever: The Art of War.
While the Chinese general lived over 2,000 years ago, his principles can be seen in several decisive battles and wars throughout history, including the invasion of Normandy in WWII and the Vietnam War.
His philosophies don’t only apply to the literal battleground, though.
They can be used in many aspects of life, including winning at trading stocks and options.
1 – The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.
In a nutshell, Sun Tzu is saying that preparation is the key to victory.
That is also applicable in trading stocks and options successfully.
Not only do traders need to do thorough research on a stock before speculating — detecting support and resistance levels, knowing upcoming events like earnings that could move the shares, etc. — they need to be properly educated before trading options.
Options are intimidating — trust me, I know firsthand.
When I first began buying options, I lost a lot of money.
Thankfully, trading legend Jeff Bishop took me under his wing, and I discovered the power of trading vertical option spreads.
And as a former school teacher with a Master’s in Education, my goal is to pay it forward and teach other would-be option traders about my winning “casino strategy” that’s helped so many Weekly Windfalls premium subscribers bank big bucks in short order.
Not only do I already have several educational videos available, but I just started hosting a live Ask Jay Q&A session on Twitter each week.
Tune in and ask me anything you want about stocks or options, or our array of unique RagingBull services, and if I know the answer, I’ll be happy to assist.
Further, I’ll be announcing my new mentorship service soon — and any Weekly Windfalls lifetime clients will get it for free!
I also just began using TastyWorks as a trading platform, and I’ll be hosting tutorials very soon — stay tuned for details.
2 – There are not more than five primary colors, yet in combination, they produce more hues than can ever be seen.
Here Sun Tzu is saying that once you understand the building blocks of something, there are countless paths to victory — in both war and trading.
As far as options are concerned, of course, you can simply buy calls if you’re bullish or buy puts if you’re bearish.
But again, that tactic didn’t work very well for me.
There are also several option combinations that other traders use — things like the iron condor or the butterfly spread or the long straddle.
As for me — I prefer to keep the butterflies in the garden and the irons on the ironing board. (I won’t get into where to put a straddle…)
Those strategies just seem too daunting — at least right now.
I’ve made my bread & butter with one simpler options combination — the vertical spread I use in Weekly Windfalls.
And since I’ve been employing this strategy, I’m on pace for my best trading year ever, and 2020 is set to be even more lucrative for me and my premium subscribers.
The strategy is relatively simple — I sell calls on stocks I think will run into resistance or stagnate and sell puts on stocks I think will move higher or stay range-bound.
What’s more, sellers of options win roughly 70% of the time! That’s why it’s called “the casino strategy” — because you’re essentially “the house.”
I then pair the sold options with bought options. This limits my risk in case the stock moves against me.
By only buying calls or puts, the trader faces MUCH steeper losses.
3 – In the midst of chaos, there is also opportunity.
Warfare is about surprising the enemy — catching them off-guard and at weak moments.
But there is also opportunity during stock market chaos.
The vertical spread strategy I use in Weekly Windfalls can be utilized profitably in any market condition.
In fact, there are three ways this strategy can make money: if the stock goes nowhere, if the stock moves a little, or if the stock moves in the right direction.
An option buyer needs the shares to move in the right direction, and fast.
- Should President Trump announce a trade deal with China, sending stocks skyrocketing, I can use a bull put spread to capitalize on an uptrending stock.
- Should the Fed do something unexpected, sparking a market sell-off, I can use a bear put spread to take advantage of dropping prices.
- Should stocks churn around the same levels, the vertical spread can still make money.
- Should Wall Street’s “fear index” — the VIX — skyrocket amid market panic, that’s OK. A higher VIX means higher implied volatility, which means bigger premiums for my Weekly Windfalls subscribers!
4 – Opportunities multiply as they are seized.
Here I believe Sun Tzu is talking about momentum.
When an armed force seizes an opportunity in war — perhaps catching the enemy in a compromising position — it can be the start of a heavy rock rolling downhill.
The enemy grows weaker and weaker, and the winning troops continue to pick up steam.
In stock and options trading, getting one solid win can also be the start of something huge.
Take me, for example. I used to be just another underpaid teacher, but as I started trading small-cap stocks, my account grew bigger, and I had more money to trade with.
But I had to SEIZE the opportunity first, guys and gals.
I had to make that leap from being an educator to trading stocks — and now options — full time.
Today I’m a multi-millionaire.
So I implore all of you to seize the opportunity and upgrade to my premium Weekly Windfalls service. It could be a life-changing decision for the better.
5 – Sometimes you need to lose the small battles to win the war.
Do you think the brave Americans who stormed the beaches of France in WWII marched directly into Paris without another German shot fired?
There were battles lost along the way — but the Allies didn’t just pack up and head home at the first setback. They marched on.
When trading stocks and options, losing trades are inevitable. But you shouldn’t get totally discouraged and give up on your first loser.
No, in the words of the great Aaliyah (RIP), you need to dust yourself off and try again.
For instance, earlier in November, I had a rough trading week. What started as a solid few sessions turned into a sh*t-show by Friday.
However, as I told premium subscribers: I can’t change that now, so I’m letting it go, learning from it and setting out to hit a nice windfall next Friday and the Friday thereafter.
The following week, I booked a cool $25,000 in profits.
It’s also important not to risk all of your disposable income — or, God forbid, your life savings — on one trade. Risk only a fraction of what you’re able to lose and still be comfortable.
And for those of you (myself included) with a relatively low tolerance for risk… as I mentioned earlier — option sellers don’t lose nearly as much as straight option buyers.
In fact, sellers lose just 30% of the time.
I think Sun Tzu would like those odds.
6 – There is no instance of a nation benefiting from prolonged warfare.
This quote is pretty self-explanatory, as far as military strategy is concerned. (If only LBJ had read Sun Tzu… Hi-yo! #TooSoon)
When it comes to investing in stocks and options, it means don’t wait too long to take profits or cut your losers.
With my Weekly Windfalls options trades, I often cash in my chips when my position is up 50% or more. I don’t always — or often — wait until options expiration.
My premium service also ONLY recommends weekly options, so I’m in and out of trades relatively quickly.
I’m constantly stalking my portfolio, too — and subscribers can even watch me trade in real-time — and they’re notified immediately when I’m pulling my money.
As for managing losers… if you double down on a losing trade and it doesn’t pay off, you’ll hate yourself.
The good news for Weekly Windfalls subscribers is the vertical spread comes with capped risk.
So, let’s say I place a bearish call spread on Apple (AAPL), expecting the stock to end the week beneath $265.
The shares then skyrocket all the way to $300.
There’s a LIMIT to how much I’m in the hole, thanks to the “options insurance” provided by the purchased call. In fact, AAPL could soar all the way to $1,000 and I’d still be staring at the same loss.
And if this all sounds confusing, don’t worry — like I said earlier, I’ll walk you through everything you need to know to successfully trade options.
Which brings us to the last gem from Sun Tzu…
7 – Weak leadership can wreck the soundest strategy.
Sun Tzu has many quotes about leadership that I really love. Along with the quote above, he opines that good leaders:
- lead by example, not by force;
- know when and when not to fight;
- and understand that a team cannot be successful without clear communication from the top
As much as I love the vertical spread options strategy, without good leadership it’s doomed to fail.
But, as I recently told an Ask Jay Q&A viewer, the first step in successfully trading options is to find a good mentor.
It doesn’t have to be me, but I’d be beyond happy if you chose *thumbs* this guy as your “options leader.”
I do, in fact, lead by example. Subscribers can not only watch me trade in real-time during market hours, but I’m putting MY OWN MONEY into these trades.
I also know when and when not to trade options on certain stocks.
I have been successfully trading momentum stocks at Jason Bond Picks for nearly a decade now, so technical analysis runs through my veins.
And finally, I promise to clearly communicate everything I’m doing and more. Whether that’s via emailed trade alerts, live Q&A sessions on Twitter — where I do not shy away from the hard questions — my live trading feed, or providing you with the right educational materials to make you successful.
I’m not saying I’m the next General Patton, guys and gals, but I do believe I have the tools, the might, and the knowledge to lead you to your best trading year yet with Weekly Windfalls.