Chief Investment Strategist, The Freeport Society
A 127% gain in eight days…
If you’re a member of our Freeport Alpha trading advisory, you’ll know what I’m talking about.
As a way to play a Trump win, we recommended you buy shares in private prison operator CoreCivic.
With the situation at the border overwhelming government resources, private prisons play a critical role in detaining and processing undocumented migrants.
And that wasn’t the only “Trump trade” that paid off.
In August, when we first predicted a Trump win, we recommended a bullish trade on EQT, a U.S. oil-and-gas stock.
President Biden isn’t exactly friendly to the fossil fuel industry. But we reckoned that a second Trump administration would be.
One month later, with Trump the clear betting favorite to win the White House, we closed that trade for a 100% gain.
Bot trades came via master trader and Freeport Society friend Jonathan Rose.
And the reason they paid off so handsomely was down to the power of options.
“Side Bets” With Leverage
Options trading allow you to make a side bet on whether a stock will go up or down without actually owning the stock.
And they’re not just ordinary side bets… they’re side bets with leverage.
Options let you control shares in a company for a smaller upfront cost than you’d pay if you bought them directly.
So even a small change in the stock’s price can lead to a much larger percentage gain – or loss – on your investment.
And the shorter the time until those options expire, the higher the leverage.
That’s why I caught up this week with Jonathan for a Zoom call.
He’s developed a new trading strategy that takes advantage of a type of option that lists and expires on the same day.
Called zero-day-to-expiration – or 0DTE – options, they can give you leverage of 100-to-1… even as high as 500-to-1.
They’re so highly leveraged that Bloomberg compares them to “trading dynamite.” They can either blow up in your face… or they can deliver massive gains in less than 24 hours.
One-Day Winners
Luckily, we have the perfect guide for how to use these short-term options.
Jonathan isn’t just a master trader with nearly three decades of experience under his belt – including as a “pit” trader in Chicago. He’s also a fantastic educator.
And starting tomorrow, Saturday, November 23, he’s kicking off a four-day strategy summit all about these short-term options called “One Day Winners.”
If you’re even remotely curious about how 0DTEs work… and how you can trade them for profits… I can’t think of a better teacher.
So, make sure to register here.
I know right now it seems as though stocks can only go higher.
But there’s a little too much enthusiasm built into current valuations.
And as I’ve been writing to you about, investors are underestimating the risk that inflation flares up again in the new year.
But that’s why I love short-term trading strategies, like the one Jonathan has developed
By trading one day at a time, you can contain your risk while setting yourself up to potentially make hundreds of percent in profit.
And even if stocks fall, you can make gains.
So, make sure you’re signed up for Jonathan’s free four-day strategy summit.
Then watch the Zoom interview I did with him.
Or, if you prefer to read the transcript, you can find those below.
To life, liberty, and the pursuit of wealth.
Transcript
Charles Sizemore: Hi, Charles Sizemore, Chief Investment Strategy at The Freeport Society. And for your viewing pleasure today, I have the Master of Trading himself, Jonathan Rose. Jonathan, thanks for being on.
Jonathan Rose: I’m excited to be here. Thanks for having me, Charles.
Charles Sizemore: Yeah, good deal. So I figured today, what we’ll do is we’ll discuss what the environment is like, why short-term trading does make sense. We’ll cover some of your bonafides. You’ve actually made my readers a ton of money lately, and then we’ll talk about some of the new things you’ve been working on and why our viewers should be excited about that.
I’ll start with the big picture here. After the election, we had a big rally in stocks that has since fizzled, stocks have definitely lost some of that post-election momentum. And it’s not always obvious why. It could be jitters about inflation. It could just be the fact that the market is expensive right now. It could be that earnings are not expected to come in quite as well as previously baked in prices.
How are you handling this? How do you view this environment for trading?
Jonathan Rose: So, I think it’s a great environment. Really we had the real strong rally and volatility was really elevated going into the election. And since the election, volatility has come out of the market. The market’s pulled back a little bit, but it’s still pretty strong. We’re not that far from the highs.
And also, time of year. We’re walking into Thanksgiving, which historically, at least from my point of view, from the trading point of view, it’s a very, very slow time of the year. Usually, picks up right after Thanksgiving and then we can trade until the end of or until December 22nd or something like that. So, it’s the time of year it should slow down, but we’ll see. After Nvidia (NVDA), we’re living in Nvidia’s world, so we’ll see what Nvidia comes out with today.
Charles Sizemore: Nvidia seems to be the only stock that matters. It’s not the S&P 500 anymore, it’s the S&P one. It kind of seems like that, right? But now you bring up a good point. So you say that we’re in sort of a less volatile time of the year. It’s also a seasonably favorable time of the year. November to April is generally just a good time to be invested, but a time of falling volatility can almost be boring. So one of the benefits of doing what you do is there’s always action in the options market. When you’re trading short-term options, when you’re profiting from smaller, shorter term moves, there’s always something going on.
Jonathan Rose: It’s certainly true. So, what’s going on with the options market?
Options exploded in popularity in the late 70s, early 80s. And those early movers, they did real well. Well, what’s been happening since 2016, 2017, the market, the volume in the options market is moving to the shorter term options. And starting in 2016, ’17, ’18, now under three days to expiration is 44% of the overall options that are traded. So the action is moving towards the shorter term. I don’t know if that was a retail trend after Covid, but whatever it is, those are the most liquid options right now. Those real short-term options.
And so, for option traders, I look at an option as an option. It doesn’t matter if it’s a LEAP, a long-term option or a 30-day option or a seven-day option or a one-day option. When you learn to value options, an option is an option. The only thing different between those examples is just time.
Charles Sizemore: Sure.
Jonathan Rose: Yeah.
Charles Sizemore: Yeah, I would assume that you want to be where the action is and if traders are focused on their shorter term options these days, it makes sense to kind of focus your own trading there. You’re going to find a deep market, a liquid market, it’s easier to get in and out. So that’s a nice aspect as well.
But let’s talk about your bonafides here. As I mentioned at the beginning, you’ve made my people in Freeport Alpha a lot of money. Those that took your advice going into the election, that walked away with good profits. I actually jot down the exact numbers, let’s walk through them.
You recommended as an election trade, the December call options of CoreCivic (CXW241220C00015000), the publicly traded prison reap. And anyone that took your advice and bought when you said to buy walked away with 127% profit in all of eight days. That was pretty solid I got to say. It is not every day you walk away with a profit like that in such a short window of time. They didn’t do too shabby in your natural gas play either. Your election play on natural gas in EQT (EQT241220C00034000) earned 100% even for those that acted when you said to act. So congrats on those. You’ve made my readers a lot of money.
Jonathan Rose: So, what we do is we teach how to buy options. And when you’re buying options, you’re buying premiums. So for example, if a stock’s at 10, we may buy the 12 strike calls because we get a lot of leverage. But the odds of winning are really less than 50%. If the stock’s at 10 and we’re buying the stock from 12, that’s pretty difficult. So yeah, we’ve had three different tickers we’ve shared with your group. One of them didn’t work out at all. There was another one, HPP –
Charles Sizemore: Yup.
Jonathan Rose: That was another reap.
Charles Sizemore: Hudson Pacific Properties.
Jonathan Rose: And that one didn’t work. The other two ended up working. But when you’re buying options, you’re going to make a bunch of little plays and some of them are going to work out 100%, 200%. But we’re definitely risking principle in these trades because unlike the liquidity of Apple (AAPL) perhaps in options it’s really difficult to trade with a stop. So instead of trading with a stop, instead we want to figure what we’re comfortable risking before you get into the trade. In one of those trades that we shared with the members, EQT for example, if you’re comfortable risking $500 or $1,000, that’s the money management you’re making beforehand. You’re not risking $1,000 but only willing to lose $500. That’s not real. It doesn’t work that way.
Charles Sizemore: Yeah. So this is why I like what you do. You’re an educator. You don’t just tell people buy this option, you educate them on how to buy the option. Because for the uninitiated, it’s not so easy to get into this. And one of the hardest things for any trader, whether it’s options, stocks, whatever, commodity futures, crypto, Pokémon cards, whatever it is you’re trading, it’s risk management. That’s where really traders are made or broken is on risk management. And I like how you’re walking us through that there.
Some people in stock trading, for example, stop losses can be effective. For stocks or options as you say, position sizing is effective. And because of the way options have that time decay as they approach expiration, if they’re not in the money, they approach worthless very quickly. That position sizing is critically important. That’s how you avoid, if you go on a bad streak where several trades in a road don’t work out, and that will happen to every trader.
Jonathan Rose: Absolutely.
Charles Sizemore: You’re preserving capital because you’re not putting too much at risk on any single trade. But then when they do work out because of that leverage inherent in options you can really make out like a bandit.
Jonathan Rose: You nailed it. You hit the nail on the head. We like to think of ourselves as snipers. We want to sit around the edges and wait for good opportunity. But something that I’ll repeat so often in the community for one, when people come in, because we trade differently than many people have learned. And also because we’re buying options. If you just get in there and buy everything, you’re putting out a lot of risks. So we want people to come and paper trade, take it slow, but without a doubt, we say all the time, education mitigates risk.
Charles Sizemore: Sure.
Jonathan Rose: We have people even in our community that will take trades and then once they enter the trade, they’ll ask questions about what they’re even allowed to do as far as position management, and that’s not what we want. Once you get into the trade, you need to know how to manage the trade. People are risking their hard-earned money to get into these trades. So learn first, take it slow, paper trade. And that’s also why we have a community where people can bounce ideas around.
I’m not in there giving financial advice in the community, but I am in there educating people and teaching that when you hold an option, there’s three different things you can do with that option. You can get out of it, you can roll it into a spread, you can even cover that option using the underlying stock, which many people don’t realize. So what’s most important, besides the opportunity to make a bunch of money, education mitigates risk. We want people to come in, be humble, be a little self-aware that they might not know everything about the trade, not feel like they’re missing out if a trade comes out, but learn, ask questions, and that’s where we see the most successful traders.
Charles Sizemore: Yeah. Education being the best risk management, I would agree with that completely. Because failing to have good risk management, well that is a form of education. Not having risk management and then learning the hard way. Clearly that’s not what anybody wants, although we’ve probably all been there at one point or another. So I love that. I love how you take this approach of recommending baby steps.
Do a paper trading account first, get comfortable with the terminology, get comfortable with the concepts involved, then put a little bit of money at risk. And then as you get comfortable, you can ramp up your position sizes. But the nature of buying options or selling options for that matter, just trading options, is you should keep each position manageable, keep it small. It’s very much a numbers game, rinse and repeat.
Jonathan Rose: Absolutely. And with that being said, there’s a learning curve as well, but I mean, anything worth doing there certainly is.
Charles Sizemore: You bet. I love this. So, you’re giving a presentation and you’re going to focus that presentation on a newer strategy of yours that focuses more specifically on shorter term options. Can you tell us a little about that?
Jonathan Rose: Yeah, yeah. This has been in the works for three or four months and it’s finally coming out. And we’re doing a live presentation this coming Tuesday. And I think we’re going to try to put that cool little, what are those called? I forgot the name of it.
Charles Sizemore: Oh, the QR code?
Jonathan Rose: We’re going to try to put a QR code, so hopefully you can shoot it with your phone and register for our short-term options event. The cool part about this event, there’s four days of training. So this Saturday coming up is the first day of training. Saturday, Sunday, Monday we’re going to do a live presentation, and then Tuesday we’re going to go live again. So it’s really exciting and something that’s been in the works for quite some time.
Charles Sizemore: Well, I think it’s great. I like the fact that you’re spreading it out over multiple days because anyone who’s ever tried to cram for a test in college or something, how well did that really work out when you tried to cram it at once? The secret to really learning something is to take it in pieces. Bite-sized pieces, kind of perfect each little piece along the way. And the more you do it, the more repetition, the more you actually retain. So I think that’s great. I plan to attend myself.
So to everyone watching, well, whether it’s a QR code or a link, we’re not the tech guys. We’re the investment guys. Don’t judge us for that. But anyway, I strongly encourage you guys to get to know Jonathan here, get to know what he’s doing. Like I said, he’s made my readers a lot of money and I take what he does very seriously. So with that, Jonathan thanks for being on the show.
Jonathan Rose: One last comment. Every morning I do a live show, and the video team is great. They put the QR code on the screen when I was presenting. But to make things even easier, I actually printed the QR code for everybody so they could shoot it with their camera. You could shoot this QR code with your camera.
Charles Sizemore: All right, I love it. We’re MacGyvering the QR code.
Jonathan Rose: See, you don’t have to be technical. We’re going to go old school.
Charles Sizemore: There you go. All right, on that note, Jonathan, thanks for coming on.
Jonathan Rose: Charles, thanks for having me. It was a lot of fun.
Charles Sizemore: Alrighty. And thanks to all of our viewers.
To life, liberty, and the pursuit of wealth. This is Charles Sizemore signing off.