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A Massive String of Double and Triple-Digit Winners

A Massive String of Double and Triple-Digit WinnersThe cash keeps pouring in for Profit Catalyst Alert readers. In the past few weeks, they’ve seen gains of 31%… 135%… and even 250%. More incredibly, those profits came on the heels of another string of winners sporting gains of 56%… 100% (twice!)… and 110%. We’re letting a limited number of additional people get access to these trades. Go here for the details.

 

 

Max Pain – The Recipe For An Easy 120% Gain in 8 Days

By Jim Fink on May 20, 2016

Earlier this week, I wrote about a bearish trade idea I had for Cisco Systems.

But before entering that trade I wanted to wait until after its third-quarter earnings announcement on Wednesday evening…

“…in order to take advantage of any short-lived price pop caused by the quarterly earnings release.”

Well, that price pop occurred yesterday, and as I told my Velocity Trader subscribers this morning, now is the perfect time to jump into a bearish fade trade on Cisco.

One of the reasons for that trade had to do with a “double-barrel” sell signal that’s clearly evident in Cisco’s stock chart right now. But the other reason I didn’t mention earlier this week has to do with an analysis technique I use called “Max Pain”.

“Max Pain” is an analysis of the open interest of bullish and bearish options contracts on a given stock, at a given time.  

If you’re not familiar with options, here’s a very quick primer.

An options trade lets you bet on whether a stock will go up or down from its current price. But that’s not all. It also lets you bets on how far a stock will go in either direction, as well as how soon it will happen.

For instance, let’s say I’m very bullish on a $10 stock right now. I could use a call option on that stock with a “strike price” of $15 and an expiration date 30 days from now.

In that case, I’d be “in-the-money” if the stock went above $15 within the next 30 days. But if the stock didn’t hit above $15 on the expiration date, the option would expire worthless.

If I was less optimistic, I could make a bullish bet at an $11 strike price, requiring a smaller price move to be “in-the-money” on the bet. Again, if the stock didn’t go above $11 on the expiration date, the option expires worthless for me.

What I’ve found through my “Max Pain” analysis is that as options expiration dates get closer, a stock like Cisco will tend to gravitate toward the options strike price with the most open bets (known as contracts).

The reason for this is that while most options are bought by the retail public, they are sold by option market makers. Those market makers have a huge inventory of “short” option positions that they want to expire worthless.

So, option market makers have a lot of power, they have a lot of capital behind their operations and in the week before expiration they often use that influence and capital to try to move stock prices so that most of the options they sold will expire worthless.

That way they just get to keep all of the money they made when they initially sold those now worthless options positions to the buyers!

So in my prior example of a $15 bullish options bet, options market makers have an incentive to keep that stock below $15 so my position expires worthless.

Here’s how that “Max Pain” analysis is working right now on my Cisco trade.

As I mentioned to Velocity Trader subscribers this morning, we saw an open interest of 3,641 call option contracts at the $27 strike price. These are bullish bets that Cisco will finish next week above $27.

Compare that to the much smaller 1,623 put option contracts at a $28 strike. These are bearish bets that the stock will finish next week below $28.

Using “Max Pain” analysis, this suggests that market makers care a lot more about being profitable on the 3,641 call options than the 1,623 put options.  They have a strong incentive to help push the stock lower than $27 per share at May 27th expiration. That would render those calls worthless, allowing them to make a lot of money.

This “Max Pain” analysis can be an extremely powerful tool for making shorter-term trading decisions. The bearish Cisco trade I released this morning has the potential to make more than 120% in just the next 8 days.

If you’d like to get the two sentences of instructions that will allow you to place this trade yourself, I encourage you to consider Velocity Trader now. You can learn more about this service, and my promise to deliver 24 triple digits winning trades to every subscriber in under a year, by clicking here.


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Here’s What’s Really Going to Crush the Market

Most folks understand the basic concept of inflation… things cost more money. But tragically, most don’t understand the real implications of what it means for their financial future. 

Or just how dangerous it’s becoming right now. Today.

And there are two reasons for that…

First, the U.S. government’s calculations barely take into account two of the things you and I are paying more and more for every day: energy and food.

Second, since inflation really hasn’t been an issue for the past 30 years here in the U.S., most analysts won’t dare to say it’s on the rise because they’ll suffer professionally. 

But I’ve made a name for myself by always saying what needs to be said. Which is why I’ve prepared a new special report that’ll give you simple instructions on how to protect yourself from the coming storm.

And better still…

It gives you the full story on the six types of investments that are destined to soar 275%… 375%… even up to 575% over the next few years as the winds of inflation flatten the U.S. economy.

You can get your free copy here.

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