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Why Ultimate Investor?

Investing Not Trading:
All Option Strategies Used,
Longer Hold Time Using Special Situation Stocks

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Profiting From Volatility

In today's volatile market a buy and hold investor is more accurately described as a buy and hope investor. Volatility can be a bad thing for some option traders but it can also present some spectacular opportunities. Volatility can knock you out of carefully crafted positions and produce expensive losses. However, buying certain stocks after a volatility event sometimes produces an outstanding trade.

Volatility can come from an earnings miss, a guidance warning, broker downgrade, etc or it can come from a sector event where some other stock in the sector falls off the cliff and drags the sector down with it.

Buyouts in the sector, rumors of buyouts or even failed buyouts all produce volatility events that can be used to our advantage. There are rumors of buyouts all the time but not every rumor is a trade. Investors have to read between the lines and determine if there is a possibility to profit.

A recent volatility event was the firing of the activist investor attack on Office Depot and Staples. The sharks began swarming as the companies did their mating dance and eventually they agreed to merge with big gains in both stocks. NPS Pharmaceuticals was rumored to be an acquisition target and shares rose from $23 to $42 before Shire Plc offered $46 cash for a nice gain.

Another common volatility event centers around earnings reports. We don't hold positions over earnings because very bad things can happen if the company disappoints. However, when they do disappoint the resulting drop gives investors an attractive entry point on the right stocks. By swooping in after the damage is done we can use the volatility to our advantage.

One last example on how we can maximize gains in the Ultimate Investor. We launched a successful play on Gilead Sciences as the companies Hep-C liver drugs were gaining broad acceptance in the market. We closed a successful play the day before earnings. After the stock crashed because expectations were too high we bought the dip and will ride it up until the next earnings report. They announced a new dividend and a $15 billion stock buyback that will overshadow missed expectations.

All Investing Strategies

Because the plays to be profiled in Ultimate Investor can be from weeks to months in duration the option strategies used will cover all the available investing options. We can do simple long calls and puts, covered calls, simple spreads, cash secured puts, stocks or even futures if the right setup appears. There is no strict focus like we have in some of our other newsletters. This newsletter will focus on making money any way possible with a minimum of risk.

No two plays are alike so we should not be locked into a simple long option strategy. Subscribers don't have to have a big account to utilize these strategies. Some may require the ability to sell a put to maximize the returns but I will attempt to profile the trades in such a way to offer alternatives to a specific recommendation for those without option writing capability.

Frequency of Trades

Because there is no calendar for when a volatility event will occur there will not be a daily newsletter. Recommendations will be made when a low risk investment opportunity appears. There will be a regular update newsletter on the weekend to snapshot the open plays. I expect to profile from 3-5 trades a month. If more appear then we will have more trades. If the market goes dormant then we could go a couple weeks without a new position.

Investing is NOT about trading every day. It is about finding a low risk opportunity and having the capital available to apply to that opportunity. The key is patience and vigilance. We need to be vigilant in watching for opportunities and that takes patience. When days go by without a trade many traders will grow impatient and trade just to be trading. This is not a good strategy. Patience creates profits.

Profiles and Portfolios

Each trade will be tracked in an active portfolio and we will keep score. At any time you will be able to see all the current plays and the portfolio history for the entire year.

Play profiles will be lengthy when needed to explain the play in its entirety and not based purely on a chart. I believe fundamentals matter and they will eventually overcome headlines. We have seen many times lately where headlines trump technicals. Those headlines will give us the volatility events to profit from the fundamentals and the technicals.

You Can't Profit if You Don't Play

Our goal is to generate $10,000 or more in gains per year in the Ultimate Investor portfolio. Actually I would hope for more than that but we don't know how the investing climate will play out each year. Today we are at the mercy of the global economy and that is going to be a long term problem. This makes it even more important for investors to be careful about the entries they make because being over extended in a volatile market can shrink your trading capital.

Take a FREE trial today and we will prosper regardless of what the market gives us.


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