Tonight’s the night, Evolvers! I’m hosting the Shadow Trades Summit at 8 p.m. Eastern alongside the one and only Tim Sykes! There are only a few seats left … Save your spot BEFORE it’s too late!
But you might be wondering … why did I develop the shadow trades strategy in the first place?
Well, as all of you should know, one of the most difficult aspects of trading is timing.
You can be 100% right on a trade thesis, but if you enter the position too early (or too late) … you might as well be 100% WRONG!
This effect is even more exaggerated if you’re trading options. If the stock moves just a few percentage points in the wrong direction, your contracts could lose 30–50% of their value.
So I eventually got to thinking … what if there was a way to take the mystery out of timing trades?
Without giving too much away before tonight, this question led me to discover shadow trades. And once I truly perfected the strategy, it was much easier to time my trades.
Like when a shadow trade on AMC Entertainment Holdings Inc. (NYSE: AMC) allowed me to turn $86,382.01 into $140,834.72 for a gain of $54,452.71 in less than 24 hours…
Tonight at the Shadow Trades Summit, I’m gonna show you all exactly what I mean. But first, let’s go over what you should (and shouldn’t) do when looking to time your trades perfectly…
Timing is Everything
There are several ways in which poor timing can destroy an otherwise excellent trade idea…
Sometimes a setup looks like it’s building into something extraordinary, then it pauses. If the play takes one more day than you anticipated to follow through, your entry could be completely ruined.
This exact thing happened to me earlier this year when I was trading Tesla Inc. (NASDAQ: TSLA) options.
Other times, you’ll experience fakeout counter-moves before the setup you envisioned plays out.
Let’s say you’re short a stock (holding puts) and it’s stuck in a bearish channel. Even if the channel holds, you can bet your bottom dollar that there will be some relief rallies on the way down.
It sure would be a shame to buy your weekly puts on the morning of one of those rallies…
This is just one of many examples of why timing is critical for traders.
You need to read between the lines — and the charts — to find the perfect moment to strike.
How to Time Your Options Trades
Shadow trades work with both options and stocks. But if you’re reading this, you’ve shown a clear interest in options…
And one of the main reasons I love trading options is that they reward perfect timing. Let me explain…
If you get skilled at picking the right strikes and expiration dates, you can theoretically make WAY more money trading options than trading stocks.
A weekly call or put option — bought and sold at the right time — can yield single-day gains unheard of in common-share stock trading.
That said, if you’re not careful, the variety of expiration dates available can lead to poor decisions. Options chains can be overwhelming.
But don’t worry, I’m here to help. After all, this is why I created the shadow trades strategy in the first place (more on that later).
First, let’s think about a few choices you could make to help your timing…
You’ve probably noticed that I never buy contracts too far out of the money (OTM).
If you pick a strike that’s too far OTM, you’re setting yourself up for failure. This is especially true with short-dated options.
Newbie options traders love OTM contracts. Higher risk/higher reward trades tend to appeal to people who haven’t been put through the wringer yet.
Don’t be one of these traders. Instead, pick a strike closer to the money. The contracts will cost a bit more, but your chances of success will be WAY higher.
This is the real key to timing options trades — you’ve gotta pick the right expiration date.
If you have a strong conviction that the move will happen soon, you should press your edge and buy weekly options.
But for any trade where you have less than A+ confidence in an immediate move, you should buy longer-dated contracts (a few weeks out or more).
By simply making these small adjustments to your timing, you could potentially improve your entire trading strategy…
I’ve said it before and I’ll say it again … Timing is EVERYTHING!
Be very careful when you enter a position. And if you’re trading options — be picky about which strike prices and expiration dates you trade.
Luckily, shadow trades make timing easier. And at 8 p.m. Eastern, you’ll get to see what I’m talking about at the Shadow Trades Summit!