Sniper Trades

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Greetings everyone,

Before getting started I thought it would be a good idea to give a little more info on the topic of the “Sniper Trades”.

First let me say that the sniper trade is very small part of a larger portfolio. It should never be the main emphasis of anyone’s investing strategy.  It is simply just a way to generate a small income steam that can add up in the long run.  We are doing something similar for the private group, although their trades are a bit more aggressive in nature.

Like Todd stated, the goal is to provide a weekly option trades (e.g., Iron Condor, bull or bear spreads) with a high probability of success and a weekly payout of $200- $400.

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Let’s face it, to be part of the Big Deal you are paying around $1,300 a year.  Now that is a good amount of money.  Break it out over a 12 month period and you get a cost of $108 a month.   The sniper trades, if they work as planned, should cover the cost of the service and then some.  I basically want to make the service free for you, but before we start though we need to get a few things clear for all.

The trades will come when we see them.  You will know these are Sniper trades as I will try to put the above symbol on the header of each trading action. If we don’t like what I see we won’t force a trade. Better safe than sorry is my philosophy.  The trades involve option spreads that are significantly out of the money and have a high probability of expiring worthless.  While larger entities (like hedge funds and large trading houses) trade close to the money line or further out in time, we will trade on short time frames and far from the money line. We are literally picking up the loose change that these big guys have no interest in.

Now do not feel you have to do these trades.  They are not a critical part of the portfolio.  Actually some people do not like these trades cause of the small dollar amounts involved.   Since we use spreads we limit the risk but some people don’t want to risk $1,500 to get $300 for example.  We are usually so far out the money that our chances of success are very good, but some people don’t want to take the chance and that is perfectly fine.  No problem.

The trades are selected based upon volatility, relative strength, charting, and a host of other factors. We will try to place our trades on Monday or Tuesday and be out by

Friday, but actually the trades could happen at any time. If you miss a trade or can’t get a fill don’t worry about it.  There will always be another one coming down the pike.  The trades will probably not even show up on the position sheets due to their short life span.

Often times there is going to be a high probability of the trades expiring worthless, but I would recommend that you close them out regardless.  Better to spend $10-$15 to close out a winning $300 trade than get trapped behind the eight ball in some after hour’s issues that you cannot escape from.

Finally let me be honest and say that there is always an element of risk involved. We will not be winners every time. We will have instances where we might just break even or even lose. It’s just part of the game.  Before placing the trades make sure you understand the basics of the option spread and what you are liable for.  Many trading accounts will require cash minimums or margin if necessary.

Lastly, these weekly trades can move quickly so they are not something that you can just ignore for the week. If we get a spread for $350 on Monday and you have the opportunity to close it out early on Thursday for penny per contract , do it. You do not have to wait for a trade alert to close out any Sniper trade if the opportunity arises. Don’t be greedy to capture that last dollar.

CLOSEOUTS

In our private group we did experience an issue when it came to closing the trades and communications.  To trade the weeklies we have to be nimble/quick and be able to make decisions on the fly without waiting for detailed instructions.  Establishing the trades early in the week is easy and our communication works well.  The final close out of the Sniper trade will be up to you.  You will have to decide when to pull the trigger and close out the trade, and here is why.

In these weeklies it sometimes comes down to the last couple of hours to make the money if you are trading around the strike you are short. It’s the nature of the beast in the weeklies.  You can get lots of pinning type action in my opinion.  The last thing you need is to wait until the last 2 hours to be issued instructions.  Everyone has different personal trading habits.  Also I know that some of you can’t access the email and act on it as quick as you would like.  If you do not have instant access to your account or email on that last day, then a message an hour before closing might not work out well.

Closing of the trades is going to be much more open and flexibility.  I will give you my thoughts and basic strategy for the close early in the day, but it will be your ability to execute on the fly that will ultimately make you successful.  This will also make you a better trader in the end.  You will close the trade at what you deem is the appropriate time.  Sometimes you will hit it just right, while other times you might leave a little on the table.  This might sound a bit involved, but it is the only way that it consistently works.

Any questions or concern please let me know.  Remember these trades are solely to help cover your cost of the service.  Don’t try to hit homeruns with them by upsizing the number of calls or puts that are suggested in the original trade.  This can get you in a tough spot if the trade works against you.

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Now let’s scan that horizon and find us a target.  I got an itchy trigger finger.

Mike Ray, Mike Morton, Todd Johnson

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