Unlocking the Potential of Low-Risk, High-Reward Trades

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When you hear that someone made an 11% profit in a single day, it might sound unbelievable or incredibly risky. 

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However, with the right knowledge and tools, these kinds of results can become a part of your trading strategy without exposing you to extreme risk. 

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Today, I'll take you through the steps I followed to snatch a quick profit using basic options strategies, focusing on a specific stock example, PAR. 

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This approach can be informative for both newbie traders and seasoned investors looking for ways to optimize their trading techniques.

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Finding the Ideal Candidate

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The journey to a successful trade often begins with selecting the right stock. In my case, I used a resource called Bar Chart Premier. This website is a goldmine for traders as it features tools and data important for making informed trading decisions. One of the useful features of Bar Chart Premier is the options section that highlights IV Rank and IV Percentage.

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Click here to have a clear understanding of IV Rank and IV Percentage

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How I Made an 11% Profit in Just One Day with a Simple Options Trade

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What are IV Rank and IV Percentage?

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IV stands for Implied Volatility, which is a metric used to capture the market's view of the likelihood of changes in a given stock's price. High IV indicates expectations of high volatility or significant price movement, while low IV suggests the opposite.

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- IV Rank measures where the current IV sits in comparison to its high-low range over a specified period.

- IV Percentage indicates how low or high the current implied volatility is compared to the past.

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I targeted stocks with a low IV percentage because this implies that their options are cheaper. This doesn’t just mean saving money; it also reduces risk, as the cost associated with entering the trade is lower.

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Choosing PARA

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PARA had an IV Percentage of 0%, signaling that its options were priced at the lower end compared to the yearly range, hence providing a cost-effective opportunity. Given that earnings were due soon and PARA historically shows significant price swings around these announcements, it was a perfect pick for a high-potential trade.

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Strategy: The Straddle Approach

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Not sure which direction the stock will move post-earnings? No problem. The straddle approach has you covered. This simple yet strong strategy involves:

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- Buying a call option (betting the stock price will rise)

- Buying a put option (betting the stock price will fall)

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By purchasing both, you position yourself to profit regardless of which way the stock swings, provided it moves significantly enough to cover the costs of both options.

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Observing and Acting

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I positioned myself with both options just before the earnings announcement. The market’s reaction to the news was dramatic, with PARA’s stock price quickly dropping over 10%. This unexpected shift meant both of my options were positioned to be profitable soon after the trade was placed.

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Early Profits and a Swift Exit

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To the surprise of many, including myself, the substantial move in PARA's stock price allowed me to exit with an 11% profit on the very next day after setting the trade. This is a classic example of how significant market events like earnings announcements can be leveraged for quick gains.

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The Power of Compounding Interest

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If gaining 11% in one day sounds impressive, imagine the potential of leveraging similar trades consistently over a year. Even without achieving the same result every day, securing these gains regularly can have a profound impact, thanks to compounding interest. Understanding and applying simple yet effective trading strategies can dramatically expand your investment abilities.

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If this approach to trading sparks your interest, you’re in luck. We offer a free Next Level Options Masterclass where you can dive deeper into strategies like these and discover ways to refine your trading skills further. 

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[Next Level Options Masterclass]

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Additionally, we invite you to join our vibrant community on Telegram, where traders of all levels share experiences, tips, and strategies. Get a group of likeminded people with expert insights.

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