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What is Jim Fink’s Velocity Trader like?

I see people talking about Jim’s Velocity Trader service in the Stock Talk forum. What’s the difference between Options for Income and VT?

OFI is a conservative trading service based on out-of-the-money (OTM) put credit spreads that can generate maximum potential profit in the 20% to 40% range by time-value decay alone (i.e., no directional movement is required) with an 85%-90% probability of success. Average trade duration is two months.

VT is a more aggressive service based on at-the-money (ATM) call and put debit spreads that require directional movement to be successful. Predicting price direction is much more difficult than simply playing time-value decay, so the probability of success of these aggressive trades is lower than OFI’s put credit spreads — Jim is shooting for a 60-70% win rate compared to OFI’s 85%-90% win rate. Average trade duration is ten days.

The good news is that the potential returns of VT are typically in the 100% range — much higher than OFI’s trades — and therefore the overall profitability of the VT service may be higher than OFI despite a lower win rate. For example, OFI trades typically risk $4 to make $1. VT typically risks $1 to make $1. As an illustration, but not based on any hard data, see the following assumptions:

  • Expected return on OFI: 85% winners * $1.00 -15% losers * $4.00 = $0.85 – $0.60 = $0.25 net profit per share.
  • Expected return on VT: 65% winners * $1.00 – 35% losers *$1.00 = $0.30 net profit per share.

These numbers are simplistic because most trades won’t suffer maximum potential loss, but you get the idea.

VT averages two new trades per week that are issued on Tuesday mornings and includes a video discussion of general market commentary and chart analysis of that week’s recommendations. In contrast, OFI does not provide a video discussion.

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