My wife is generally a play-it-safe type of person. I am, too. But she’s also the worrier.
One of my favorite stories she tells is of a time when she was around five years old. Her parents took her on vacation to the beach, but before she’d agree to get close to the water (even safely atop her dad’s shoulders) she asked:
“Dad, what’s the scariest animal in this water and what’s the worst thing it could do to me?”
I’ve always thought that a funny, somewhat morbid, question from a five-year-old. But a wise one, nonetheless.
Given my wife’s innate risk-aversion, you might imagine how our conversation went when she curiously asked me about stock options once.
“What happens if you’re wrong,” she asked.
“I’ll lose money,” I replied.
“Potentially all of it,” I admitted.
And that’s about where our conversation ended. Of course, there’s more to this story.
Today I want to walk you through one of the most important concepts in investing — particularly the type of investing we do in my Cycle 9 Alert service and one you’ll learn more about during my live webinar on November 19th.
The concept is…
The Asymmetry of Risk and Return
In short, I’ll show you exactly how we make money year after year with Cycle 9 Alert, despite the possibility that we may well “lose it all” whenever we buy an option contract.
You see, the absolute best thing about our option-buying strategy is that it completely limits the amount of money you can lose on any one position.
You cannot get that level of risk-protection buying stocks. If your portfolio is fully invested in stocks, you could lose a full 100% of your entire portfolio — or more if you’re buying on margin.
You cannot get that level of protection when you sell options. With option-selling strategies, your risk is completely unlimited. You can lose everything in your account and more. Seriously, your broker could call and demand that you send them more money than you have!
But with Cycle 9 Alert, we only buy option contracts. Our risk on any given position is completely limited. It’s impossible to lose any more than the cost of the option contract, at the time of purchase.
Taking losses is an unavoidable cost of doing business. Even though Cycle 9 Alert has a strong win-rate of 73%, about three out of every 10 trades we make will go sour on us. And some of them have resulted, and will result, in full individual position losses.
But that’s perfectly fine. Our strategy is fully designed to absorb all losses, including those.
Because, while our potential losses on any given trade are fully capped at 100%, the potential profits we can earn on any given trade are truly unlimited, and I’ll show you exactly how my innovative timing strategy makes that possible on November 19th!
Consider Two Recent Examples
I designed a Bear Market Action Plan for my Cycle 9 Alert subscribers at the start of the year. That included making bearish, “short” plays via the purchase of put options.
But as is sometimes the case, one of the short plays I recommended turned into a “dud” for us. We found ourselves short as stocks were rising, and then a surprise earnings report made the stock we were short pop higher – a move that meant we’d eventually take a full 100% loss on the position.
That was a bummer, of course. But as I said, my system has no problem overcoming occasional losses in the long run. And that’s why we don’t let them knock us off our game!
After that dud, I recommended another bearish “short” play…
That trade was a bet against the health care providers industry via put options on a diversified ETF. I identified this group of stocks as the market’s “weakest link” in late February, and it almost immediately began tanking!
My Cycle 9 Alert readers had the chance to buy into this position on February 26…
Just six days later, I recommended they sell half of their position for a 100% profit…
And then just six weeks later, I told them to sell the second half for a handsome 268% profit.
All told, there was a 184% net profit in that play… enough to fully make up for the prior “dud” trade… and more!
And that’s exactly what I’m talking about when I say we’re using the “asymmetry of risk and return” to our advantage.
When we buy options — even put options, as we did on these three bearish plays — our potential losses are completely limited to 100%. But our potential profits are completely unlimited, and fully capable of reaching 200%, 300%, 400%, and greater!
Our most recent profit on the health care sector short was a big one! But it’s not the only one we’ve captured with my Cycle 9 Alert system.
And over the past seven-plus years, we’ve captured a number of profits well over 100%!
We’ve made gains of 430% on grocery distributor’s stock, 407% on a Consumer Discretionary sector ETF, 344% on a Canadian dollar ETF, 336% on shares of Pan American Silver Corp, 316% on a volatility ETF, 201% on U.S. Steel, 197% on Rockwell Automation, 191% on Royal Dutch Shell, 140% on Titan Machinery, and 125% on Merck & Co., just to name a few.
All told, the success of Cycle 9 Alert over the last seven years comes down to the asymmetry of risk and reward. Essentially, we’re exposing ourselves to small (limited) risks and positioning ourselves for large (unlimited) returns.
If that approach makes a lot of sense to you, click here to learn more about the service.
P.S. If you haven’t already, click here to register for my free, live webinar on Tuesday, November 19th, at 1 PM ET. I’ll go into detail to show you how one of my favorite, time-tested timing strategies has been handing investors unbelievable profits, including returns of 331% over the last seven years! You don’t want to miss this!