The Riskiest Option Trading Strategy Known to Man

Today, I wanted to discuss the riskiest Option Trading Strategy known to man. I am going to go through the strategy and then I am going to give you the names of two other strategies that you will want to stay away from because each one of them is using the risky trade within the strategy. So, let’s get started.

The Option Trading Strategy with the highest risk to an investor is known as selling naked calls or short a call. How this strategy works is as follows:

1. You find a stock you think will not have much upside nor volatility, aka SPECULATING. This should be your first indication that this strategy should not be used.

2. You sell a call naked (this means you do not own the stock, but, you are obligating yourself to selling this specific stock sometime in the future at a predetermined price.)

3. You receive a premium (meaning someone is paying you to have the right to buy the underlying stock, that you do not presently own, from you sometime in the future.)

4. Now, this is where this strategy can get UGLY!! READ BELOW

Selling naked calls (short a call) is gambling. You receive a premium from an investor that gives him the right to buy either from the market or from you, whomever is cheaper. Consider the example below.

You sell one (1) naked call on ABC stock at a strike price of $20. The buyer of your naked call pays you $3. (Alright, you just made $3 per contract, or $300.00)*

The current market price of the stock is $15.

Sounds good so far huh? You have $300 and the stock would have to move from $15 to above $23 ($20 strike price plus the $3 premium) before the person holding the call option would come to you and have you buy the stock at the market price and sell it to him for $20. Well, just to let you know, because there is no ceiling on how high the price of the stock can climb, your risk is UNLIMITED!!

Let say you wake up one morning three weeks into the future and find out the stock that was trading at $15 back when you sold the naked call just spiked up $50 per share. Well, guess what, the person that bought the call from you is doing? He is outside banging down your door to get you to sell him the stock at $20, so he can sell it in the market at $65. What an ugly predicament you are in now. You have to buy the stock at $65 and turn around and relinquish it at $20 leaving you with a loss of $42. (Your cost of $65 minus what you sold it for $20 equals $45. But remember, you were already paid $3, so your loss is $43 per share or $4300.00) OUCH!!

Now granted, this is an extreme example, but it is better to just stay away from selling naked calls so you don’t end up on the wrong side of a run away stock while you were sleeping. Get my drift.

Well, hopefully you understand the risk involved in selling naked calls now, here are two other option trading strategies to avoid like the plague:

short straddle: short a call and short a put

short combination: short a call and short a put (combination will have different strike prices, i.e. sell a 20 call and sell a 30 put)

* One (1) contract equals 100 shares of stock, therefore if you receive $3 per contract, you will receive as a premium $300.00.

Dominic LoRiggo – The Man Who Mastered the Secrets of Winning at the Craps Table

In the world of gambling craps has always been associated with a purely luck game that depended on a player getting hot or getting on a streak. You see it all the time in the movies and TV shows where a player starts playing craps and gets on a winning streak so big that he would end up playing at the table all day and his friends come back the next day to see that not only has he lost all his original money but has lost all of the money that he has borrowed to keep playing on top of that. It can be a fun game but it could drain your pocket book really quick. Has anyone ever cracked the system to consistently win at the crap table? So far only a few and we will take a look at the incredible feat of one infamous individual.

Dominic LoRiggio was a man who consistently made more money then the casinos that he has played at on its crap table and has earned some great praise by being called the man with the golden arm. Dominic through many years of practice has perfected the technique of getting the rolls that he needs and in his books explain the physics behind dice control and how to get the rolls you want almost every time. He says to get this style done you need to purchase a regulation craps table. He explains in his books and in his dice control seminars that there is a precise mathematical system involved and it takes discipline and focus as well as practice to be able to do this every time. He gets the cream of the crop as far as clients who sign up for his seminars like famous actors and big businessmen. These well known personalities know his reputation as a dice control specialist and if they are able to pass his courses they believe that they can also succeed at the tables. His courses aren’t cheap but in this world you get what you pay for.

He was originally part of a dice control team called Rosebud and were pretty successful at the beginning but Dominic eventually left them because their bets were too low for his taste as he was a very high roller who liked to bet big to win big. He figured that if he could consistently beat the house why not accumulate a large pot in a shorter period of time. I guess that would give him more time to enjoy his life outside the crap tables. The guy is a legend and people come from all over the globe to try to learn his golden secrets of rolling the dice. To call his feat an amazing one is the understatement of the century.