Frequently Asked Questions (FAQS)
FAQS: Trading is not an exact science. You can not do “X” and get “Y” every time. It is as much an art as it is anything else. There is no magic formula.
Trading is all about probability. It is the art of applying a certain set of carefully thought out rules and allocating the probabilities of that event to result in success.
Each trade is an independent event and the market does not remember if you lost or made money on the last trade.
We are market speculators and as such we buy and sell options with no directional bias.
QUESTIONS: What do I get?
With the Winning Secret you get two new trades every Tuesday evening with additional comments throughout the week if needed. These trades are detailed credit spread instructions as well as relative market commentary.
We offer a coaching program you can get in addition to the training package to make sure you grasp the concepts and technical aspects of this strategy.
How much do I need in my brokerage account to get started?
We recommend starting with $5,000 in your brokerage account; however, you can open a new account with TD Ameritrade with as little as $2,000. That being said, it is difficult to trade this strategy with less due to margin requirements at the brokerages.
How do you calculate profit percentage?
Peter calculates margin using the amount we have at risk, which is the difference between your bought and sold strike prices, minus your credit.
For example, let’s say you sold a 100 call and bought a 105 call to hedge for a net credit of 1.00. The difference between these strikes equals $5.00. The $1.00 credit you received for the trade is yours to keep even if the trade goes against you, bringing your amount at risk from $5.00 to $4.00.
105 strike price- 100 strike price = $5.00 spread
5.00 spread – 1.00 credit = $4.00 margin(risk)
To calculate your profit percentage if the trade expires worthless you simply divide the credit ($1.00) by the amount at risk ($4.00).
$1.00 / $4.00 = 25%
How much should I allocate per trade?
Our general recommendation is to allocate around 10-15% per trade and adjust on a trade-by-trade basis, as some expirations may be shorter or longer. We try to keep a minimum of 30-40% in cash to allow for buy-backs or adjustments. We are holding around 4-6 positions at a given time so that 15% is a general guideline.
The percentage is based on the margin hold, so if you trade a $5 spread and get a $1 credit, your margin is $4. If your account is $5,000, then you would trade 2 contracts, which is slightly more than 15%, but if you are only holding 4 positions that is fine. If you end up with 6 positions open, then maybe the latter would only be 10% of your account.
What does “Rolling” mean?
What Peter means, is to buy back what you sold and sell what you bought, which is how you close a spread position. He is then suggesting a new spread trade. The term “rolling” simply means we are changing our strike prices, and we do this by unwinding one spread and getting into a new one.
How do I receive trade updates?
All trades will be emailed and emails containing new trades and trade updates will be labeled “The Winning Secret is ready!” (for new trades) or “The Winning Secret Trade Alerts” (for updates on existing trades). From there it will have a link to our member site where you can read the current updates and all past updates. We also have the option for text alerts that you can sign up for in the member site for alerts on trade adjustments only.
If you need help navigating to find those they are inside the member site, after using your username and password to login, go to the subscription dropdown menu at the top and select “Commentary” and there you find find all trade updates.
You also have a free orientation session with your membership purchase. This orientation will walk you through reading our trades and navigation of our site. You can schedule that at your earliest convenience by CLICKING HERE.