Listed below are some of the most common question we get about the Blank Check Trading System.
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1. Isn’t oil very volatile?
Oil is volatile, but not as much as you are led to believe.
Oil only makes news when it is very high or very low. Otherwise you never hear about it. And most of the time, it is not very volatile.
But even when it is, those are great times for option traders because:
a. You get to sell farther way from the money
b. You get more premium/credit/cash for selling options
But you might think that high volatility is dangerous for traders.
Actually it is not.
When volatility in oil picks up, the exchanges that oil trades on (NYMEX) will increase the margin required for trading. Thus you will automatically be limited in the number of options you can sell and get in trouble with.
The #1 risk to an oil options trader is over-trading (trading too many contracts).
The best way to limit your risk in high volatility environments is to trade fewer contracts. And the exchanges have a system in place that does that for you automatically.
It’s a build-in safeguard to protect traders.
2. I don’t think I have enough money to trade this way.
It takes no money to papertrade.
That’s what you should do first anyway until you master the rules and feel comfortable with the trade. Once you build up a track record you will have the confidence needed to trade real money properly.
I think $3-5000 is fine to start.
But even if you have nothing, if you can show a friend/relative/rich uncle your track record, you can find someone to put up a few thousand to get you started.
You split the gains until you have enough to trade on your own.
3. I am scared of trading naked options
I totally understand.
I have heard the comparison that selling puts on stocks is like picking up nickels in front of a steamroller. Eventually the steamroller is gonna squash you!
And that is possible with stocks and equities. A stock can go to zero or drop 50% in a day. Or more like in the famous Flash Crash.
But not so with oil.
A few reasons
A. Oil is a tangible thing with a purpose. Oil is used to make things. It is needed to make the world work.
It CANNOT go to zero!
B. Large institutions like manufacturers, refiners, airlines, transportation companies, and many more hedge their businesses with oil.
When oil drops they start buying to lock in cheap prices.
C. There is a cost to drill for, pump out, transport, ship, store, and insure oil. Its costs money to get this stuff.
This essentially puts a floor under the price of oil.
D. The exchanges limit large daily moves.
There is something in futures markets called “Lock Limit”. If oil moves up or down a certain amount in a day, the market and price will be “locked”. But options are not locked, so even if oil moves against you on a lock limit day, you can still exit your option positions. This is the ultimate protection against Black Swan events.
Plus, when you are using the Blank Check Rules, your options will never get close enough to the money. The rules keep you safe.
And lastly, if you are still afraid of naked options, then sell spreads. That will limit your loss to what you feel is acceptable.
Trust me, there are several safeguards in place with this trading system to make sure you sleep well at night.
4. I am too old for this
A wise man once said, “every day that you are alive on this earth, is a day that must be lived.”
Truthfully, there is no age requirement for this trade.
If you can follow the rules, you should be OK.
Now, if you do not need the income this system provides, that’s great. Have fun at the beach.
Otherwise, you should probably give it a shot.
Everything in this system has been designed to be as simple to implement as possible. I’ve taken out all the complicated stuff you don’t need.
5. I don’t want to trade futures
That’s cool because we are NOT trading futures, we are trading futures options.
In my opinion futures have gotten a bad rep.
Most individual investors don’t trade them.
Why? I think it’s because they don’t have the facts.
There are several reasons futures are preferable to trade
A. Huge Liquidity
Oil futures and options have so much liquidity that it dwarfs even the largest companies in the world.
You never get “stuck” with a position in oil.
And you can always get great prices.
Futures markets use margin. But not the same margin as in stocks. You don’t pay any interest when you use this margin.
In stocks you get 50% margin. So $1 can control $2 of stock.
In futures $1 can control $5 in oil or more.
This means, you can make a much larger return on your money.
You actually need less money to trade futures than you do stocks.
C. Great Premiums.
Futures options are worth a lot more than equity options.
Selling a .30 oil option puts $300 into your pocket as soon as you sell it.
This allows you to sell just a handful of options a month for a very nice monthly income.
D. Futures Trade Almost 24 Hours a Day.
If something bad or good happens overnight, you can take advantage of it right away instead of having the market gap open on you in the morning.
And this allows you to trade Oil all around the world, no matter what your time zone.
E. Uncorrelated to the Stock Market
Oil is uncorrelated to the stock market. That means they do not trade together. If the S&P is up or down makes no difference to oil.
This provides great diversification for those of you who already have large stock portfolios.
F. Quick Moves
When I first started trading oil options, I was pleasantly surprised by how short the trades were.
The average trade takes only 14 days.
In many trades I am out in 2-3 days with very nice profits.
And then I am able to jump back in a couple days later and ride the same trade again.
It’s like instant replay for traders. Except you make twice as much.
I teach this entire method in the course.