Make Money Trading Options
Short-Term Strategies for Beginners
Book Edition Details
Summary
Options trading doesn’t have to be a gamble. In Michael Sincere's game-changing guide, the complexities of the options market are transformed into a realm of potential, designed specifically for the cautious yet ambitious beginner. Shed the fear of volatility as you step into the savvy world of stock options, armed with Sincere’s wealth of experience and insight. From mastering short-term trading strategies to pinpointing the ideal moments to leap into or out of positions, this book is your map through the often treacherous terrain of calls and puts. Sincere’s approach is not just about profit; it’s about safeguarding your assets while recognizing golden opportunities, even in unpredictable markets. For those weary of endless graphs and convoluted theories, this book offers clarity and confidence, transforming the daunting into the doable. Whether you’re a novice seeking to dip your toes in or a trader aiming to refine your strategy, this is your essential companion to mastering options with poise and precision.
Introduction
The options market can feel like a maze of complexity, where many traders enter with high hopes but exit with depleted accounts. Yet behind every successful options trader lies a simple truth: they learned to manage risk first, then profit second. The path to consistent gains doesn't require complicated strategies or expensive software. Instead, it demands a methodical approach to finding winning stocks, understanding market behavior, and executing trades with discipline. Whether you're drawn to options for their leverage potential or seeking to diversify your trading toolkit, the journey begins with mastering the fundamentals while avoiding the costly mistakes that derail most beginners.
Build Your Foundation: Risk Management and Market Analysis
Risk management isn't just a safety net—it's the foundation that determines whether you'll survive long enough to profit from options trading. Most traders focus on finding the next big winner while ignoring the principles that protect their capital from devastating losses. Consider Sam, a retired teacher who dove into options trading with his entire retirement account. Within just one week, he transformed from a cautious investor into an emotional trader making increasingly desperate bets. Sam's story began when he bought Apple calls before an earnings announcement, betting $24,650 on what seemed like a sure thing. When the market moved against him, instead of cutting losses, he doubled down with SPY puts, then added Tesla calls, accumulating over 40 option contracts worth nearly $80,000. By Friday, Sam had lost almost $40,000—27% of his retirement savings. His mistake wasn't picking the wrong stocks; it was abandoning every risk management principle. He used retirement money for speculation, ignored position sizing rules, held too many contracts simultaneously, and let emotions drive his decisions. Each trade became larger and more desperate as he tried to recover previous losses. The antidote to Sam's fate lies in establishing clear boundaries before your first trade. Set a maximum loss limit for each position—an amount that stings but won't devastate your finances. Trade small initially, perhaps starting with single contracts until you've proven consistent profitability. Create written rules for when to exit positions, both winners and losers, then follow them religiously regardless of emotions. Most importantly, separate your trading capital from money needed for living expenses or retirement. Treat options trading as a skill-building endeavor rather than a get-rich-quick scheme. The traders who survive and thrive are those who respect the market's power to take money as quickly as it gives it.
The Test Trading Strategy: Find Winners Before You Trade
The Test Trading Strategy revolutionizes how you identify profitable options trades by using simulated accounts to discover winning stocks before risking real money. Rather than guessing which stocks might rally, this method lets actual market performance reveal the true winners. The strategy works like being able to bet on horses after seeing which ones take the early lead in a race. Every morning before the market opens, you scan your watchlist for stocks that have moved up at least one point or one percent in pre-market trading. Then you make paper money purchases of these candidates in your test trading account, essentially placing small bets on multiple potential winners. When the market opens at 9:30 AM, magic begins to happen. Most of your paper positions will either stagnate or decline, but one or two stocks will emerge as clear leaders, steadily climbing higher throughout the morning. These are your true winners—stocks with genuine momentum backed by real buying pressure, not just pre-market hype. Take Apple's performance on a typical strong day. While dozens of stocks opened higher, Apple distinguished itself by continuing to rally hour after hour. In the test account, a simple 100-share purchase showed steady profits climbing from $300 to $800 to $1,400 as the stock price advanced. This consistent upward movement signals a stock worth trading with real money. Once you've identified a winner through testing, you make your first probe: buying one at-the-money call option in your real account. If the stock continues its upward trajectory and your option shows immediate profit, you've confirmed a high-probability trade. The key is patience—waiting for the market to show you the winners rather than trying to predict them. This methodical approach eliminates guesswork and emotional decision-making. You're not betting on opinions or predictions; you're following demonstrable market strength. The few minutes spent setting up test trades each morning can save you from countless losing positions while directing you toward stocks with proven momentum.
Execute Like a Pro: From Paper Trades to Real Money
Transitioning from paper profits to real money requires precision timing and flawless execution. The gap between identifying a winner and profitably trading it separates successful options traders from those who struggle despite having good stock-picking abilities. Market behavior patterns provide your roadmap for execution timing. The "Bullish Steamroller" represents the ideal environment for call buying—a pattern that starts slowly but builds unstoppable momentum throughout the day. Unlike stocks that spike up quickly then reverse, a Bullish Steamroller gains strength gradually, overwhelming any attempts to halt its progress. Professional trader Jake learned this distinction the hard way when Tesla spiked 8% at the market open. Excited by the dramatic move, he immediately bought calls, only to watch the stock reverse and close down for the day. His mistake was chasing a "Spike Up" pattern—a dangerous formation that often signals an imminent reversal rather than continued strength. Contrast this with how Jake traded the next Bullish Steamroller he encountered. Amazon opened just 1.5% higher but continued grinding upward all morning. Instead of rushing in, Jake waited for confirmation by watching his test trades show consistent profits. When Amazon's paper position reached $400 profit on a 100-share test, he bought one real call option. As Amazon maintained its steady climb, Jake's option gained value throughout the day, ultimately delivering a 200% return. The execution process follows specific steps: First, use the five-minute rule to verify all trade details—strike price, expiration, quantity, and bid-ask spread. Second, place limit orders rather than market orders to avoid poor fills. Third, immediately establish your exit strategy with both time stops and profit targets. Finally, monitor the position continuously until closure, as options can lose value quickly when momentum shifts. Remember that options are wasting assets—time works against you every day you hold them. This reality demands active management rather than the passive approach suitable for stock investing. Set realistic profit targets, typically 50-100% for most trades, and resist the temptation to hold for "home runs" that often turn into strikeouts.
Summary
Successful options trading emerges not from complex strategies or market predictions, but from disciplined risk management, systematic stock selection, and precise execution timing. As the author emphasizes, "Making money is not enough—you must know how to protect what you've earned to avoid significant losses." The Test Trading Strategy provides a framework for identifying genuine market winners while the behavior analysis patterns guide optimal entry timing. Start immediately by opening both a real and simulated trading account, then spend one week practicing the Test Trading Strategy without risking actual money—this foundation will serve you throughout your entire options trading career.
Related Books
Download PDF & EPUB
To save this Black List summary for later, download the free PDF and EPUB. You can print it out, or read offline at your convenience.
By Michael Sincere
