Trading Options on outperforming Stocks

Low Risk Options For The VALE Stock

Want to identify more trading opportunities? Learn to understand and utilize an exchange traded fund (ETF) In this example, the ETF is SLX (which is the steel ETF) and is signaling a buy in the VALE mining company stock.

How did we know that? 

By looking at SLX, we were able to identify VALE as a relative outperformer. At $185 per options contract, this was another low-cost and low-risk trade. We sold at $290 — that makes for a $105 profit per contract. The trade is an optimal setup for a small account where two contracts is the right amount of risk.

In a large account, the principles all remain the same except you’re able to afford to buy more contracts. As an example, a larger account may have been able to buy 10 contracts. Risk would have been $1,850 and total profit potential would’ve then been $1,050.

It’s all about scalability and not different techniques for different account sizes. Check out this video to get the details.


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