Instant Money Trader

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    1. Bob
      Jan 4 2010, 11:28:32 am

      This is a review of Instant Money Trader, one of the Mount Vernon Research newsletters (Mount Vernon Research has recently changed its name to White Cap Research).

      This newsletter recommends sales of far out of the money puts on stocks and ETFs. These are the same sorts of trades as are recommended in The Geiger Index, although I don’t know if its advertising hype is as ridiculous since I haven’t seen it. The idea is simple — find a stock that doesn’t suck too bad and is trading near the bottom of its historical range and then sell puts to buy it 20% or so cheaper.

      No surprise, nearly all the trades work (i.e., the puts expire worthless), as that comes with the territory for far out of the money puts. But be aware of the risks — if the stock goes down enough you will have to buy it at the strike price (or else buy back your puts at a loss). My performance rating takes the risk into account, that’s why a newsletter that almost always suggests successful trades gets 3 stars for performance. As usual with this sort of newsletter the writer blows hot and cold on the use of margin — he tells you to have enough cash to buy the stock if necessary (no margin) but then calculates the returns as if you were using 5 to 1 margin.

      In practice I can only sell 2 to 4 puts and stay within my risk tolerance, meaning that I make about $100 per trade. So I call this a “lunch money” newsletter — that’s about what the profits pay for.

      I get this as part of a package so I don’t know what they charge for an separate subscription. If you can get it cheap it’s probably worth getting, but don’t pay $1000 for it unless you have a lot of money to play with.

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