When you've tried almost everything what is it going to take to finally SUCCEED?

When you've tried almost everything what is it going to take to finally SUCCEED?

"You can have all the knowledge and skills in the world, but if your
"blueprint" isn't set for success, you're financially doomed."
--T. Harv Eker



T. Harv Eker is a bestselling author and one of the world's top trainers. His newest book, Secrets of the Millionaire Mind, is a publishing phenomenon, reaching #1 on the NY Times, Wall Street Journal and USA Today bestseller lists in its first week out! In the book, he reveals 17 specific ways that RICH people think and act differently from POOR and MIDDLE-CLASS people.

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"Give me five minutes and I can predict your financial future for the rest of your life!"
--T. Harv Eker


Sound unlikely? Well it's true. In just a few minutes of conversation, T. Harv Eker can predict your financial future by identifying what he calls your "inner blueprint" for money and success.

Right now you're probably trying to figure out whether your own blueprint is set for wealth, moderate success or poverty. The answer is simple! Look at your results in the real world: your income, assets and net worth. Your results reflect your inner blueprint.

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At the Millionaire Mind Evening seminar our trainers will:

• Reveal the root causes of money problems


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For dates, venues and to register your seats today please visit:
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If you are not able to attend one of the live events presented by T. Harv Eker or one of his Master Trainers, you can participate in a LIVE TeleClass from the comfort of your own home. For information on the next scheduled class, please visit:
http://www.millionairemind.com/a/?wid=382990&page=/preview/preview

At this powerful three-hour seminar you will learn to identify the childhood conditioning that created your personal money blueprint. You'll learn that even if you have extensive marketing, sales and other business training, you will never achieve the level of success you desire without updating your personal success blueprint.

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Register for the city of your choice here:
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An Actual Covered Call Option Example.

On June 27th I purchased 1,000 shares of ATI stock with the intention of writing a covered call against these stocks. The stocks after all commissions and trading expenses cost $14,945.00. The option premium was $1.00 and net proceeds after all costs was $965.00. The strike price was for $15.00 and expiry was for the third Friday in July, the 18th of July. This call option contract was sold on the same day as the stocks were purchased.

On the Friday the call was to expire the stock surged in price closing well above the strike price. I was unable to determine until after the market closed when it was revealed that AMD was rumored to make a bid to purchase this company. However, since I was unsure of why the stock price was surging I let them be called away. I could have purchased enough call options to cancel that ones I had sold earlier but choose not to. The proceeds of the sale of the stock was $14,965.

My profit on this trade was (14,965+965-14,945) $985 dollars. This represents a return of 7.04% in a one month period, or an equivalent annual return of 84.5%. ( I do not put very much stock in annual returns since it assumes you can repeat this trade each month and that in my opinion is rarely the case.)

A final note on this particular trade. The following Monday AMD did in fact announce that they were going to purchase ATI Technologies and the stock jumped up immediately over $3.00. In hindsight, I would have been very smart to have purchased the canceling call options on that Friday or possibly never sold options on this stock at all. However, you can always do better after the fact. I made this trade based on the fact that I expected it to meet or exceed the rate of return I had for the month based on my goals that I had set much earlier.

You can learn more about using options and optons trading by reading this blog or by purchasing Stephen Cooper’s course. I recommend doing both.

Profitting in a Down Trending Market

People seem to have a more difficult time understanding put options. I do not fully understand this as it seems no more difficult than call options. In Canada you cannot use put options in your registered retirement account at all and in the United States you can only purchase put options in your IRA account. It is very odd, that Canada disallows even the purchase of put options since this can be a very conservative strategy. I suspect that this is because options and put options in particular are not understood by most investors.

The most conservative put option strategy is to use put options as insurance. Suppose you own Stock in ABC company and are concerned that it may fall in price. You could sell your stock and thus avoid the fall in price, however, if the stock continues to increase in value you will miss out on those profits. You could also purchase sufficient put options to cover all of your stock with a strike price at which you would want to sell the stock in the event of a decline. The premium or cost of this put option contract is usually quite small and insures that you can sell ABC stock for the strike price until the expiry date of the put option contract. This is a defensive strategy and is designed to prevent a loss and will not make you a profit.

A profit making strategy is to purchase this put option contract without owning the underlying stock. ( In this case you are said to be “naked” on this contract.) In this case you are expecting the price of the stock to fall and you intend to be able to sell the put option contract before expiry at a profit. Your entire capital at risk is the cost to acquire this put option contract and this is the maximum loss you can occur if you allow the contract to expire worthless. If the stock price does not go down as you expected then you may want to attempt to sell the contract early and recoup some of your loss. This is a fairly low risk strategy in that the capital at risk is fairly small. Compare this to a covered call writing strategy where you must hold the underlying stock and risk much more capital.

Another profit making approach is to sell a put option contract. Two slightly different strategies can be at work here. One approach is to use this technique to purchase a stock you desire at a discounted price. For example, you wish to purchase ABC stock but think the current price is a little to high. You could sell a put option contract with the strike price at a level at which you would be willing to purchase the stock. You will get a premium for selling the put option contract that can also be applied to the purchase price of the stock reducing it even further. However, the purchaser may not choose to exercise the option and you will only have the option contract premium. ( A good thing, you have made some profit but you don’t have your stock. yet. You can repeat the process once the option expires. ) If the price of the stock is above the strike price the option contract will not be exercised. You need to have enough capital in your account that you can honor the contract and purchase the stock or your broker will not allow you to write this contract.

The other approach is to simply sell the put option with the expectation of the stock price continuing to increase. Here you expect the option to expire worthless. If the stock price goes down you will be expected to honor the contract and purchase the stock or purchase a canceling put contract. If the stock price goes up you make a profit, and if the stock price goes down you will realize a loss.

Humbled by a 4 year old

This is an off topic post but I think it is an important lesson. Was for me anyway.

I have recently had a couplee of humbling experiences as a result of the actions of my four year old daughter. My spouse and I frequently discuss financial topics and the children are often present and apparently listen in. The other day my four year old daughter was discussing money issues with me and while I do not remeber exactly what lead up to her remark, I definitely remember her words as they caught be very much by surprise. She said, " Daddy, I am already rich, I just need some more money." Where does a 4 year old get insight like that?

The other incident that is very memorable occured on father's day and has been in my thoughts regularily since then. We were going to go strawberry picking but since it has been an unusually cold spring it was to early. She was very upset. She insisted that I stop what we were doing and talk about it. "Daddy we need to talk. Now." She didn't give me much choice and nor was that request that unusual. She regularily needs to talk about something but this was the first time when she was upset with something. So we sat right there on the stairs and discussed this. In a few minutes, we had sorted this out and she was OK with it and happily went off and played.

My spouse came by and said: "Oh I am glad that you were able help her out by discussing this."

"Yes. But she is only 4! How does she know to do this?"

"Well, she has been watching us."

My spouse and I work hard at resolving our difficultites in this way but it is still a bit of struggle for us. Our daughter at 4 years of age mastered it in her first attempt somehow. I really hope that she continues to solve many of her problems like this. It has definitely been both an inspiration and motivator for me to put more effort into resolving my difficulties in this manner.

Using Naked Call options.

You are doing your stock analysis and looking at the option bid and ask prices when you notice something. The stock price is trending down and yet someone is bidding on an option with what certainly seems like an unrealizable strike price. To use an example from today’s charts, Whole Foods ( WFMI ) has been drifting down mostly for the past 3 weeks. It is trading today in the $64.00 range. Yet you notice that there is open interest of over 3000 units for the June 70 call option. The June call option expires next week Friday and it seems very unlikely, well impossible for the stock price to soar to $6.00 to reach $70 by then. The June 70 call option seems certain to expire worthless. However, there are buyers bidding 0.05 per stock for this option, and sellers asking 0.10. It certainly seems possible to be able to sell 100 contracts and realize a quick $500 profit. ( 100 contracts times the call option premium of 0.05 times 100. Remember call option premiums are quoted per stock but always sold in lots of 100. I am ignoring commissions, which could be as low as $6.00 with a discount broker.) If you decide to implement this strategy without owning the underlying 10,000 shares of WFMI you are said to be writing a naked call.

Can you do this? Possibly but it is unlikely. The broker that you are using is unlikely to be as optimistic as you are that the price of the stock will stay under $70.00. Say the price actually goes to $71.00 by next Friday. You would need to be able to buy 10,000 at $71.00 each, an expenditure of $710,000. You would then be required to sell them to the investor who purchased your call options for $700,000. You would be out $10,000 plus significant commission costs. ( Actually, in this case you would more likely purchase 100 June 70 contracts to cancel out the ones you had sold. This would also set you back $10,000 but the commission costs would be lower.) If the broker is certain that this is the maximum price the stock will reach and you have $11,000 in assets in your account, then you could make this trade. The problem is that the broker has no idea as to what the possible stock price might be next Friday and as such has no way of knowing how much money you need to be able to come up with to ensure that you can meet your obligations should things go wrong. For these reasons you are very unlikely to be able to make this trade.

There is a way to get around this sometimes, and that is by using a call option spread. In this strategy, you sell the 70 call option as before but at the same time purchase the 72.5 call option. You have now limited your loss if things go wrong to $250 per contract. If you have sufficient assets in your account to cover this loss you will likely be able to proceed with this trade. For this to work the premium of the 70 call option must be higher than the 72.5 call option. Your profit is the difference in price between the call option premiums should the stock price remain under 70.00 by the expiry date. In the example I used today, this strategy will not work since the premiums of the two call options are identical. However, the strategy may work at other times or with other stocks.

I have paper traded this strategy a few times. My experience has been that it is difficult to find a call spread that has a decent profit for the risk level assumed. I have found that other strategies work better for me and are a more effective use of my time. I have included this post for completeness. I have also found that sometimes something that didn't work for me in the past later makes sense and works well. Some of you reading this may see something here that I do not see.

Using Option Calls as a Highly Leveraged Investment for Above Normal Returns

Today’s entry is about using call options as a leveraged investment. This is something I have only started doing very recently and am mostly still doing on paper. This is much riskier than using covered calls and requires more effort but the returns are also much higher. It is possible to get a 1000 % return on a single trade for which you are in the market for less than a year! However, these are the exception rather than the rule. However, the occasional trade that that does work with this approach I suspect is used by some less the fully honest options course marketers to promote and increase sales of their course. There may be get rich quick schemes out there but this isn’t one of them. However, some traders do make a decent living using this approach so I think it is worth looking into.

In this approach you are looking to buy call options and then sell them a short time later for a significant profit. For this to work you need to locate a stock that is about to increase in value and then purchase an “at the money” call option on this stock. If the stock does increase in value, the option will also. An example may be helpful here. You do some market analysis and come to the opinion that Microsoft stock is about to surge upward. If Microsoft stock is currently selling for about $23 you could purchase 100 shares for $2,300. If Microsoft stock does in fact surge upward by say $3.00 in the next two weeks, you could sell your Microsoft shares for 26.00 each and realize a quick 13% gain and net cash increase of $300. However is you had instead purchase 1 option contract ( remember option contracts are always sold in lots of 100 shares ) which was selling for perhaps 2 dollars with a strike price of 23.00 and an expiry date at least 1 month away, then two weeks later you call option would be worth about 5.00. You total investment would be $200 and your return in two weeks would be $500. A return on your money of 150%. Significantly better.

What could go wrong? Two things basically. Microsoft’s stock price goes down instead of up or stays the same. Actually, a third thing can and does go wrong with option investors. The stock could increase to $26.00 and then immediately drop back to $23.00 before you sell your options. If you are an options investor and this happened you would lose you initial $200 investment. That is the full extent of your risk. If you are a stock investor your entire investment is at risk, however you have no real time limit in which Microsoft stock’s price needs to surge upward. ( There is some opportunity cost involved if it takes a year before it goes up, but your stock certificate will not expire.) If you own the option, the stock’s price must increase beyond $25.00 in this case before the two months are up or you will take a loss on this investment.

So how do you know that Microsoft stock is going to go up? You don’t! Anyone who tells you otherwise is not being honest. You can however do a market analysis and increase the likelihood that your opinion that the stock is going up has some validity to it. This is the domain of technical analysis and I will write more about this in another post sometime.

There are also many sites on the internet that will help you learn this. You can also find books on this in the library. Two site that I have found helpful on the internet are Insight: Online Stock Trading System and Stephen Cooper’s course ( Full disclosure: I get a commission if you purchase the program through this link.) Of the two I like Stephen Coopers approach much better. This is a much more thorough course and system and he starts with the very basic concepts. ( He also includes a free course on effective daily money management with money saving tips etc.) You can also access his forum though I have yet to find this helpful. Students do post their trades but rarely provide very helpful reasons if any. I am mostly paper trading this approach since until recently I thought this was too akin to gambling. My spouse and I work through this material several times a week in the evening and we are seeing some possibilities. It has been a fun and learning experience for us. I have also had some friends look this material over and they are also interested.

The Power Options site may also contain information about this approach. I signed up for the free 14 day trial period and since I was more interested in the covered call writing at the time I spent my time at this site working with that material. They do a good job on that. The other two sites also have information on covered call writing though the insight site’s focus is on this trend trading approach.

If this investment approach appeals to you, you will need a minimum of $2,000 to open a discount brokerage account in the US and a $5,000 minimum to open a discount brokerage in Canada. If you use a full service brokerage the minimums typically increase to $15,000 and many brokerages will require more. As I mentioned in a previous post it will be a challenge to find a broker familiar with trading options. If you sign up with ether of the two sites I mentioned, you can get assistance through them in locating a broker. I did not use this service so I do not know how effective either are.

Using Covered Calls to Boost Your Investment Returns

I am writing about using covered calls in today’s entry. I cannot cover this topic in proper detail in a blog entry so I am just going to try and illustrate the possibilities. If this interests you I suggest you also check out what Bill Cara has to say on this topic. If this intrigues you to the point that you wish to start using this technique I suggest you discuss this with your broker, or even better purchase Stephen Cooper’s course. The Power Options site also does a very good job of covering this topic. You can sign up for a free 14 day trail using this link.

A covered call approach is possibly among the most conservative of the various techniques that can be employed when trading options. There are still risks involved and I will detail these but a covered call position can be setup to be a very conservative investment.

With a covered call approach, you must first own the stock on which you are going to sell or write the call options. When you have selected the stock you are going to use and purchased this stock in lots of 100 shares you are in a position to begin using cover options. ( Selecting this base stock is an entire blog entry in itself. It is covered in Stephen’s course and many other places on the internet as well.)

When using covered calls you are selling or “writing” call options. A call option if you remember from a previous post is the right to purchase stock at the strike price. This approach is referred to as covered since you own the underlying stock. If the call option is exercised, you already own the stock and will not need to go into the market and purchase stock to meet your obligation if the stock is exercised. There are three slightly different approaches that can be used.

The first approach requires that you at least 100 shares of the stock and it is a stock you wish to hold for the long term. If you owned 300 shares of wonderful widgets and wanted to boost your return on this stock, you could look at selling 3 out of the money call option contracts. Say the stock was trading at 54.35. A call option with a strike price of 60 dollars 5 months in the future is listed as selling for $1.00. ( This is the bid price if you look at the price quote table for this option.) You can sell 3 of these contracts netting you $300.00 less your commission costs. If the stock price is under $60.00 in 5 months when the option expires, it will not be exercised and you get to keep the entire proceeds and the stock. ( and any dividends the stock may pay ) If the stock price is above $60.00 you will be forced to sell your stock. You will get $60.00 per share plus the proceeds of the sale of the call option contract. You would also collect any dividends paid during this time. ( With a North American option, it is possible though rare for the option to be exercised before the expiration date. Those rare occurrences happen when the stock announces an unusually large dividend that will be paid to shareholders before the expiration date.)

You have two risks with this type of investment. Since you are required to hold the stock, if the stock were to suddenly drop you would face a large loss. ( Though the loss would be $1.00 per share less than if you held the stock without selling a call option. ) Second if the stock were to have a large unexpected rise to in price to $65.00 you will realize an opportunity loss of $4.00 per stock. The first risk can be mitigated by proper selection of the underlying stock, and if things still go very wrong selling the underlying stock and purchasing 3 Call option contracts to cancel out the contracts you sold. ( You are unlikely to be able to continue to hold an obligation to sell a stock in your account. Brokers will not allow this and I will get into why in a later post.) The only way to mitigate the second risk to really know the underlying stock and not get caught with any surprises like this. This is not always possible. In the example, you realize a return of about 12% in just 5 months, ( a ROI of almost 30% annually) and this should be within you planned return. You should not be making the trade if you do not realize the ROI you have set as your goal in the planning stage.

A second approach to using call options is even more conservative. Here you would buy a very conservative stock and look to sell a “deep in the money” call that is perhaps a year away. Bank stocks work well for this. Say ABC bank stock is selling for $50 per stock. You would try and sell a call option with a $40.00 strike price a year out for perhaps $14.00. Here is how the trade works. You purchase 200 shares of ABC bank stock, costing you $10,000. You then sell 2 call option contracts 1 year out with a strike price of $40 and realize a immediate cash return of $2,800. The net effect is you have $7,200 invested. One year from now, it is expected that your ABC bank shares will be “called” away and you will receive $8,000. A better than 10% return on your money. The price of ABC bank stock would need to decline from $50.00 to less than $40.00 in a one year period for this trade to not work out. The price would have to decline to $38.00 before you started loosing money. Unless you pick a really poor bank stock this is unlikely most of the time. I have ignored commissions and dividends in this example. Commissions would reduce your return and dividends would boost your return.

The third approach is to use the second approach but do it for a shorter term. However to get a decent return in the shorter term you will need to find a more volatile stock, ie stock whose price moves around a lot, and this means that you are in a higher risk position. If the price is not very stable it can as easily go down as go up.

An Introduction to Options Trading

This is the first in a series of posts that I intend to write focusing options. I have used option trades for a number of years now to boost the returns on my investments. I intend to explain what these two financial tools are and show the many ways they can be used. This is exciting stuff. This is also not for the beginning investor!.

Options trading is not for everyone and in fact the majority avoid it. My experience has been that most brokers do not understand this either and that finding a broker who is willing and able to work with you on this can be a challenge. I now use a discount brokerage myself for these trades and that has worked best for me. However, I worked for years closely with a broker before doing this on my own.

I have been reading a number of books on investing and obtaining financial freedom and many if not all of them insist that in order to succeed you need to set specific goals. I do not have time in interest in writing about goal setting now, but this is an important step. I can say this quickly though, goals must be very specific. There is no point, in saying your goal is top make money. That is a given and of no help. A useful goal is to say you want to achieve a 15% return or a 20% return on every trade. One of the purposes of the goal is to eliminate emotion from the investment decision. A goal like a 20% return on every trade helps with this. If the return is less than 20% you do not make the trade, if it is 20% or more you make the trade. This is the type of decision a computer could make and get right every time. This is the sort of system you need to have in place to ensure success.

Now on to options and a quick introduction. This first post is just a quick look at the terminology involved. In subsequent posts I will review some of the strategies that can be used to successfully trade in the option market. If you are impatient there is a link at the bottom of this post for an excellant course in options trading.

An option is a type of financial instrument known as a derivative. It is basically an agreement between parties to exchange ownership of a stock at an agreed upon price within a certain time period. The exchange of the stock is optional and the owner of the option decides if this optional exchange takes place. The agreed price of the exchange is called the strike price. The date on which the agreement expires is the expiry date. The cost to purchase this agreement is referred to as the option premium. If the exchange does take place, then you have exercised the option.

Option premiums are always quoted per stock but are sold in lots of 100 shares minimum. Call options are always an agreement about being able to purchase the stock at the agreed upon price. Put options are an agreement about being able to sell the stock at the agreed upon price. Options come in both European style and American style. European style options are sold on European exchanges while American style options are sold on North American exchanges. The difference is quite simple. European options can only be exercised on the expiry day while American style options can be exercised at any time during the life of the option.

Options are frequently described by the relationship of the strike price to the stock price. An option for which the strike price is equal to the stock price is said to be an "at the money" option. With call options if the strike price is above the stock price the option is said to be an "out of the money" call option. A put option is the opposite of a call option, if the stock price is below the strike price then the put option is “in the money”. Remember a put option is an agreement to sell the stock. Finally, if the strike price is less than the stock price, the call option is said to be "in the money" and the opposite is still true for the put option which is now “out of the money”.

Increase your investment Returns Using Options