option hype

Discussion in 'Options' started by Free Thinker, Feb 2, 2003.

  1. whenever i get spam about ways to make money in the market i try to figure out what they are trying to sell for educational purposes. i recieved this one today. i thought i would post it here as a little test for the option gurus.who can guess what the trick is? here it is:

    How to Double Your Money Even if Your Stock Stays Flat

    I have created a list of 55 companies for which the following statement is true - “If two years from now, the price of the stock is equal to or above its current price, you will at least double your initial investment. Guaranteed.” And it gets even better. Read on.

    We all know that there are thousands of get-rich-quick investments scams circulating on the Internet. Most of them are just that – scams.

    I am not a neophyte investor. I graduated from the Harvard Business School. I have a Doctorate in Business Administration from the Univ. of Virginia. I have held a seat on the Chicago Board Options Exchange (CBOE). I have traded on the floor of the CBOE. For over 25 years, I have bought and sold options virtually every trading day.

    I have been so successful trading stock options that I have given away over $365,000 a year ($1,000 every day) to mostly Vermont charities for the last four years.

    I only list these credentials so that you won’t think I’m some deranged lunatic when I say that you can double your money, guaranteed, if you pick one of 55 companies on my list and in two years, the stock does one of three things:

    What Has to Happen to Double Your Money

    1) Stays the same in price

    2) Goes up by any amount

    3) Falls by no more than 5% (for some stocks, it can fall 10%).
    On the downside, the stock can fall by 30% or so, and you will still make a small profit. You can figure out your exact returns before you invest. Of course, in two years, if the stock is more than 30% lower than today’s price, you will lose money.

    A Really Simple Strategy
    In order for you to double your money, you will not have to follow any complicated stock options trading strategy. In fact, you will only have to make two trades to get started, and then sit back and wait for about two years. That’s why I call it the “Lazy Way” to Double Your Money Strategy.

    With this simple strategy, you will not need to know much about stock options in general, or LEAPS in particular. Just pick a stock you believe in two years will be at least equal to its price today, and make the two trades I specify.

    Choose >From a List of Popular Companies
    These 55 companies include many well-known companies such as Amazon, Apple Computer, Applied Materials, AOL, Cisco, Motorola, Oracle, and Yahoo. If you make two simple trades in any of these companies, you will at least double your money if the stock doesn’t fall by a large amount over the two-year period.

    Average Company Return Over 250%
    For many companies, the return is far greater than 100%. In fact, the average two-year return for the 55 companies is over 250%. And it even gets better. For a few companies, the return is actually infinite because your initial cash investment is essentially zero. Your broker will allow you to put on these positions without putting up any real cash. I know it sounds crazy, but it is true

    No-Risk Guarantee
    I offer a DOUBLE-YOUR-MONEY-BACK GUARANTEE that you can calculate your 100% profit in two years (even if the stock doesn't go up) before you make the investment in any of the listed companies. It’s that simple, and sure. So far, no one has asked for their money back.
  2. I guess they are selling far dated puts about 5% OTM and collecting on the theta decay and HOPING AND PRAYING that none of their stocks blow up...
  3. Short Put Butterfly for Credit.
    Buy Calls with the Credit received from the Butterfly.

    These trades do not satisfy all the criteria. However, they are two trades.
  4. I don't know what his strategy is. But anyone that's going to take the time to choose one of those stocks (looks like the SSF list) and to play options on it, ought to be able to double their money in two months, not two years. Just by buying at the right moment, and most importantly, choosing correctly between Calls or Puts.
  5. Anything that said "No-risk guaranteed" is a scam. We all know that trading always have risk, big or small, but still risk.

    Cheers!! :mad:
  6. Yeah, but that might not be enough to "double their money". I suppose that depends on how tight the broker is with credit balance requirements. How about selling ATM LEAPS Puts?

    1. Start to lose if the stock declines, but will still provide a profit to a certain point (maybe even to 30% as he assumes).
    2. Profit if the stock stays the same.
    3. Profit if the stock goes up.

    Also, I think the author's contention that money posted to back the Short Options (as not being "real cash") manifests itself when the broker allows someone to "put on these positions without putting up any real cash", or, words to that effect.
  7. Looks to me as selling LEAP puts. A leap can be thirty percent of the underlying which would allow for the thirty percent low break even level. The margin required for the short puts would be approximately equal to the LEAP premiums for the hundred percent returns.

    Hard to believe this worked well the past few years.
  8. dis


  9. i thought at first he was just selling leaps puts too but he states that he makes 2 trades.
    i decided to post the website in case someone wants to check it out further. i want to say up front that i have no connection with this guy and have never even used his service and it sounds like another hypothetical scam to me. if someone figures it out for sure please let the rest of us know the answer.

  10. You are correct on the two trades. Therefore he is doing a Leaps covered call. Buying the stock and selling a two year leaps. This has the same risk graph as a short naked put but requires two trades and is considered less risky. If it goes up, stays the same or falls less than the stock entry price minus the premium it will make money.
    #10     Feb 4, 2003