Virtual ATM: Punch in the “P.I.N.#” UNY85 and Withdraw $750 Instantly

The teaser that launched the Instant Money Trader service

I’ve gotten a lot of questions about this latest ad for Lee Lowell’s new Instant Money Trader — he tells us that this is the “Safest Income Strategy on Earth,” and that it’s the “only strategy that pays you first — without you having to buy anything or pay out any cash whatsoever.”

Lowell is an options trader, so clearly this is an options trading exercise — and there’s nothing new under the sun, so it’s not likely to be some shocking new technique … though of course it will be unfamiliar to most of the amateur investors who see his ad, and therefore it will seem like magic. And who knows, perhaps the analysis and selection he does, or luck, will help his subscribers to execute the best trades of this type, only time will tell.

So what is this kind of trading that they call the “Virtual ATM?”

Here’s a bit from the ad:

“Punch in Today’s ‘P.I.N #’: UNY85 And Withdraw Your $750 Instantly

“Then, keep using this amazing “virtual ATM” strategy to average $219,600 a year income … without buying or owning anything….

“In fact, of the dozens of great options strategies I’ve mastered over the years, this is by far my favorite – simply because you get the money up front (no waiting for the market to move in your favor) and there’s virtually no risk at all.

“Why such little risk?

“Because when you use this strategy, you get paid instantly by those vast numbers of traders who do put themselves at the mercy of the market each and every day by buying options… people looking for that “big score” which more times than not never comes.

“And I promise you, once you see the fundamental logic behind this very simple, very safe strategy, you may never see the need to “buy” another investment in the traditional way ever again.
Why would you after all… when it’s possible to enter a simple code like the one I’m telling you about today and collect cash within a few minutes?

“$750 today…

“Then another $600 or so tomorrow… followed by $1,150 the week after… or maybe $900 the week after that.

“My point is, you can use this strategy – and this strategy alone – to generate a steady stream in cash income… without buying a single stock, bond, option or anything.”

So what kind of cockamamie scheme is this?

“Let me be clear. This is not a strategy the average investor is likely to have ever heard about. Ask the typical investor on the street if he’s ever heard of getting cash from the market just for punching in a simple code and he’s apt to tell you you’re nuts.

“Understand also that this isn’t something I’ve just stumbled upon or discovered recently.

“It’s not new, risky or untested. Professional investors use it every day. (Warren Buffett happens to be one of them).”

So now we’re getting a little closer to understanding what he’s talking about in terms of options trading — though the symbols he throws out still don’t make much sense (UNY85, CKU68, UNE79, bla bla bla).

Sound too good to be true? Of course it does — but, in part, it is true. You just have to realize that a few key notes in the ad reveal the truth behind it, and the limitations …

“People who use this strategy aren’t buying stocks, options, bonds, treasury notes or any “investment” at all.

“They’re not selling a product or getting involved in any Internet-based business. There’s no effort or special knowledge involved. You don’t have to “convince” anyone to send you the cash…

“You don’t need any special software package or start-up kit either… just an active, adequately funded brokerage account.”

OK, so — enough? Lowell throws around a lot of “PIN Codes” that look very similar to options ticker symbols, but not quite — so I can’t tell you with 100% certainty exactly what he’s doing with those quotes, or what precisely they mean.

But I can tell you that the “adequately funded brokerage account” is significant — that’s because the strategy he’s espousing is some variation of selling options … and probably selling covered call options, and if you sell a put or call option you need to have the stock or cash (or margin, if in a non-retirement account) to back it up.

Selling options means you sell someone the right to either buy or sell a set number of shares, at a specific price, before a predetermined date. The right to buy shares is a call option, the right to sell shares is a put option.

And the world can get much more complicated than that — you could do straddles, or collars, or spreads, each of which is a way of getting more than one options contract into the mix to bracket your risk and try to achieve some upside gains.

I suspect that Lowell is simply talking about the most-teased form of options trading, selling covered calls — and I’ve written about that dozens of times … there are some Stansberry letters that routinely tease this (including, in the last year or so, their income-focused 12% letter, and, for years, Jeff Clark’s Advanced Income letter — most memorably with the “Screw you” ads of a few months ago).

[Note: according to one of the commenters below, he’s actually doing the reverse, selling put options — that means you set the cash aside to buy a stock and promise to buy it at a lower price, and get paid for that promise. Other than that, it works similarly, though instead of owning the stock to begin with you have the cash, and are ready and willing to buy the stock if the price falls to your strike price.]

This strategy, considered by most folks to be the least risky form of options trading, entails first owning a decent block of stock, and then selling off your rights to some of the upside potential of that stock. I say “decent block” because options contracts represent 100 shares, so you need 100 shares to sell one call option against your holdings, and more if you want to maximize income and minimize the impact of commissions — Lowell’s tease relies on 10-contract blocks, which would mean you’d have to own 1,000 shares).

An example would be this: you buy 1,000 shares of Microsoft for $22,760 (or better yet, you already own the shares at a lower price). You then sell 10 call option contracts against your position — let’s say you want to keep it tight, so you sell the August calls (they expire on Aug. 21) at a strike price of $24. Those options are currently trading for about .63 per share, or $63 per contract, so you would take in $630 for selling ten contracts.

In exchange, the buyer has the right (but not the obligation) to buy your MSFT shares for $24,000 anytime before August 21. So your maximum potential on those MSFT shares if is the shares go up well above $24 and the option gets exercised, in which case you would have to sell the shares for $24 each, and you’d also keep your extra 63 cents per share from the option premium. Of course, that doesn’t take into account taxes, which you’ll owe for selling those shares if you made money, or the fact that many folks would rather see MSFT shares tread water while they’re short calls, so they can just easily sell those calls again once the August batch expires and keep the income rolling in. It is, at least, far stronger an income stream than you’d see from MSFT’s dividend, which will pay you 13 cents a quarter (and of course, you still get that dividend on top of the options contract income, as long as you hold the shares).

Lowell may well be trying something slightly trickier here, of course — he is clearly selling options, but he might be doing so in a more complex manner. He could be selling put options, but doing that provides a bit more risk because you’ve got to have the backing in cash — either real cash or a margin account that could be used to buy the shares to back up your end of the option (again, that “adequate” brokerage account).

Using Microsoft as the example, again, you could sell a put to someone at $21, also for August, for about .55 — that means you’re obligating yourself to buy Microsoft shares for $21, regardless of where the market prices them. That’s probably fine, but if they happen to make a deal to buy Yahoo, for example, and the Street panics and thinks they overpaid and drops MSFT back to its lows of near $15, you’ve still got to buy the shares for $21 — in which case, your .55 of option premium won’t be that much consolation against the $6 premium you’ll pay to own the shares (though in reality you’d probably back that contract with cash, buy it back, and not actually buy the shares, which is what I think most people do).

And there are many variations that limit risk — you could, for example, simultaneously sell a call option and buy a put option against stock that you own, which helps to avoid getting into a situation where you’ve sold a call option and gotten your premium, but you want to stop out of the stock because it’s plummeting for some reason. You could sell that MSFT $24 call and, as a bit of insurance, also buy a $19 put option for 19 cents, that obviously reduces the income but also brackets the risk you’re willing to take by holding the shares until August, and, if the stock does happen to drop to $15 suddenly, you do just fine.

Lowell uses odd ticker codes for his “PIN Code” numbers — they look almost like options tickers, but not quite, and it looks to me like he just swapped the last two letters for numbers.

Options tickers consist of a root three letter code (usually) for each chain, followed by two letters that designate the month and the strike price. They’re actually in the process of testing a switch over to a much more standardized and explicit system of options quoting that uses the actual data (ticker, type of option, strike, and date) instead of these odd tickers, but that hasn’t happened yet.

So for now, we could use the basic logic of options tickers to interpret what options Lowell might be talking about (assuming that the tickers don’t represent some more complex trade than just the sale of a call or put option).

UNY85 is the “PIN” code given at the top of the letter, and UNY is one of the roots for call options in UNG, the United States Natural Gas Fund, which many people use as a sort of ETF to track natural gas futures. The 8 is the expiration date, so August, which is H in ticker form (the eighth letter) and the five would generally be the fifth dollar amount available as a strike price, usually $25 in the case of standard $5 increment options (and denoted using letter E), but in this case UNG options trade in $1 increments, so the fifth available option for August is a strike price of $13 (and it’s designated by an M — this kind of hassle is why they’re trying to revamp the quoting logic). So if I’m right, this is actually UNYHM.

Selling UNYHM now would get you actually more than $750, assuming 1,000 shares held and ten contracts sold, it would actually get you $1,100, per the last sale, though the spread is wide as I type this ($75 bid, $145 ask) … of course, UNG prices and trader sentiment about nat gas have probably changed since this teaser ad was written — the underlying stock is now at $12.62, so you’re effectively selling almost all of your potential two-month upside. Still, it’s a nice profit from a relatively low priced stock — you might regret it if a hurricane strikes the Gulf and natural gas doubles unexpectedly, but if you sold at $13 in August that’s effectively buying something for $12.62 now and selling it in seven weeks for $14.10, minus commissions, a gain of better than 11%.

You can do the same basic calculus for any of the tickers he teases in the lists — CKU68 is teased as one he got instant cash on recently, and CKU is the root for options for Capital One, so that would be the June Capital One calls at probably either $21 or $22, I don’t have access to the historical quotes — COF is right at $21 now, and a July option at those strike levels would similarly get you between 50 cents and a dollar per share, the kind of trade he seems to target.

So, this is certainly a legitimate strategy, selling covered calls, as is selling cash-covered puts, though selling puts is probably less common — I can’t guarantee that this is exactly what Lowell is doing, but from the logic of the ticker symbols he throws around it seems likely to me. This kind of trading gets much more profitable, by definition, when the VIX is high — the VIX is an indicator of volatility that measures expected stock price movements by tracking the premiums that people are willing to pay for options, so, if you work through the logic, of course you make more money if you sell things when they are expensive — and options premiums, as measured by the VIX, were very expensive during the frightening VIX peak last year, and they’re still awfully high when compared to historical norms.

Of course, when the VIX is high that’s also the time when investors are most skittish, and with many stocks doubling off the lows (or more), there would have been plenty of options sellers that were shouting at their computers as the upside they sold away made the options buyers rich. Generally, I’ve often heard it said that the people who consistently make money in options are the sellers, not the buyers — but of course, those who make the sudden windfalls are the options buyers.

So, as I’ve said many times, selling covered calls is often best for those who like a “steady Eddie” approach and who are happy to use a fairly large portfolio to consistently generate steady income. Lowell bases all the numbers he throws out on the profit potential of “10 units” — which would mean 10 options contracts, with each option contract representing (usually) 100 shares. So this is the equivalent of 1,000 shares we’re throwing around here, which means it’s hard for small investors to use this strategy very effectively to make the amounts of money he teases — at least, not if you want to hold a diversified portfolio.

If we consider that most of the quotes he teases are real picks of his, then it seems likely that he consistently chooses expiration dates within a month or two, and strike prices that are very close to the current price, which is consistent with strategies that I’ve heard from many successful covered call sellers — they don’t worry about missing out on huge move, they just sit tight and collect their 10% (or something in the neighborhood) every couple months, take the losses in stride or buy puts to cover any huge downside risk, and think about that money compounding at a nice rate year after year. It takes discipline, and diversification, and a good mind for choosing the stocks to target.

If you’re curious about these kinds of basic, cash-backed or share-backed options transactions, which are mostly used for steady income generation, there’s a good writeup from CBOE that explains them in some more detail, particularly with reference to IRA accounts (since you can’t usually use margin in an retirement account, options sales can’t be “naked,” they have to be backed by cash or shares).

And I know there are lots of folks out there in Gumshoe Land who practice the arcane arts of covered call selling, so if you’d care to share your strategy with the world, or some stocks that you think look like good targets for this strategy, feel free to share with a comment below.


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33 Comments on "Virtual ATM: Punch in the “P.I.N.#” UNY85 and Withdraw $750 Instantly"

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Paul Edmonds
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Paul Edmonds
July 7, 2009 2:16 pm
The Instant Money involves selling OTM puts on stocks you would buy at a lower price if you have to exercise the options. I have used the service for 3 months and have made money on each position; usually take profits at 70% or above. Lee is sneaky in using the coded sumbols in his flyer to keep non-subscribers from taking the trades. So far I have not had the stocks put to me as the stock price has not reached the strike price before I closed the position. So far so good. I currently sold 10 UNG Oct 11… Read more »
dlst
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dlst
July 7, 2009 2:23 pm

Thanks for that good lesson in puts/calls. Not up to that degree of investment sophistication yet, but slowly working on it.

Reuben
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Reuben
July 7, 2009 3:20 pm

I have commented on this before and have been taken to task by others, but I will stick to my guns. Selling covered calls–which is considered “conservative”–and selling naked puts–which is perceived as riskier–are identical in their risk profiles. The main difference is that with a covered call the margin requirement is “covered” by the long stock, whereas with a naked put this requirement is elsewhere in the account. The fact that brokers may permit one and not the other doesn’t change the identical nature of the risk.

Mike
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Mike
July 7, 2009 4:41 pm

I have not tried selling puts, but I have recently sold covered calls on PM that has made a nice run already this year and I sold the call more out of the money so I would not be too upset if my sold call gets called. It provided a little less income than selling a call closer to the current price, but still added a nice little bump to an already nice yielding dividend stock.

AlanH
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AlanH
July 7, 2009 4:49 pm

I’d just like to say £$*&$£!£%^&*))____)))@: Ha Ha Ha!!

Facinating… truly. But all Martian to me thus far. I’ll catch up with you guys later…. say 5 years from now?. Gosh I envy anyone who can follow this stuff.

AlanH

Cool Soupy
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Cool Soupy
July 8, 2009 10:54 am

Don’t miss the fact that these trades should only be done by amateurs with stocks that they would own and have done their due dilligence on!!!!! Since we don’t have unlimited funds to spread the risk.

rick
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rick
July 9, 2009 6:46 pm
Hi.Gumshoe I always appreciate your insight. Today I received a tease message from The Daily Reckoning Australia. Can you help solve this puzzle? Thanks. Drilling begins November 2009… ‘Saudi of the Deep South’ Studies reveal there could be $3.5 billion worth of recoverable oil off the coast of New Zealand And, starting this November, one tiny Aussie company will use a revolutionary submersible drill to find it… Read on and stake your claim in the biggest oil story of 2010 Dear Reader, “Saudi-sized structures, they are that big.” That’s GNS Science’s David Darby’s take on the oil reserves contained deep… Read more »
mlf
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mlf
July 10, 2009 9:59 pm

Has to be AWE

chandrakant
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chandrakant
July 25, 2009 7:51 am

let me know where to punch the code…information is required about this.

Stanley Mills
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Stanley Mills
July 25, 2009 4:33 pm

I would like to know the code and where to punch it in also. But something tells me that the “code” is a stock symbol and the “place” is your brokerage acct.

Ira Biderman
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Ira Biderman
July 26, 2009 6:58 am

you mentioned above about money in a retirement account to sell puts, you cannot do that since you need margin to do that and in a retirement account there is no margin, so really can only sell covered calls, and can not sell anything naked (thought, being dressed is always best, had to add that in, sorry)

A.W. McDonald
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A.W. McDonald
August 11, 2009 8:00 pm

Mt. Vernon Research in Baltimore sent me an ad for a newsletter called “Instant Money Trader”, which says: “Instead of the usual $2,995 price, I’ll pay just $750 (75% off)…” to gain access to the newsletter’s recommendations. Both prices seem ridiculous. Anyone had enough experience with this one to say whether the steep cost is worth it.
Thx. A.W. McDonald

Tannia
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Tannia
October 4, 2009 3:28 pm
OK… I really have to be honest… I’m really not familiar with options, puts, calls, etc. I just came across Lee Lowell’s Instant Money Trader online and wanted to know if it was a scam or not…if you can make what his program says you can make. And if someone like me with no real investment experience can still take advantage of this program. I have searched all over the net to find reviews on this man and his program and can’t seem to find anything. I am very interested in knowing if anyone has REALLY USED his codes and… Read more »
Dave
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Dave
November 25, 2009 9:09 am

I’m with you Tannia – if this system is as good as it claims to be, then in this day and age the word would be out and everyone would be doing it ( I would say anyway…). I’m of the philosophy that nothing comes free in the world of financial gain ; and this system looks about as free a method as they come…….

Ali Javahery
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Ali Javahery
December 1, 2009 1:36 pm
These are strategies that professional traders use and you can contact any one of many but why all this nonesense spin to lure the lay person investor. What I don’t like about his pitch is that he is luring you in with his so called codes crap. Its dishonest. He is a “white-collar” car salesman trying to get you hooked and in the door. You may well make money and if thats your goal go for it but for me transparency is key. He should come clean and say he is getting paid for his 17 yrs of option trading… Read more »
Ali Javahery
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Ali Javahery
December 1, 2009 1:49 pm
These are strategies that professional traders use and you can contact any one of many but why all this nonesense spin to lure the lay person investor. What I don’t like about his pitch is that he is luring you in with his so called codes crap. Its dishonest. He is a “white-collar” car salesman trying to get you hooked and in the door. You may well make money and if thats your only goal go for it but for me transparency is key. He should come clean and say he is getting paid for his 17 yrs of option… Read more »
delver23
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delver23
December 1, 2009 9:43 pm

I came here since I got one of those emails. The problem is, what is the risk profile? If it’s so easy to make money like he says with low risk, then many players would get in and ruin it (since someone else has to lose, right?) Please explain that, someone or OP, not just go over the technical description of what people do.

delver23

Midas
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Midas
March 25, 2010 3:17 pm
If you are selling "naked calls", you must have a significant dollar amount in your brokerage account. *All* brokers will require this, after all, if by chance the stock should fall to the strike price of the put you sold, you will have to come up with the money to buy the stock. That's all there is to it. And as others have pointed out, you'd have to be willing to own the stock at the strike price. Let's say for example that you have an account of $25,000, and the margin requirements of your "trade" to sell the naked… Read more »
CalvinDay
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CalvinDay
December 10, 2010 4:58 pm

I joined and tracked his trades for a year using the option express virtual account. I wasn't always able to get in due to price changes. However, I was able to do about 90-95% of the trades. Everyone of them were profitable.
There were a couple of times where I thought I would have to buy the stock but that never happened. One time we rolled the options into the next month where they recovered and brought a little more meney into the account. plus the amount of the sale.
Options express only requires 10% of the total stock price plus

pat
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pat
April 3, 2013 1:40 pm
I have been using monthlycashthuroptions for 17 months trading long iron condors (a bull put spread and a bear call spread surrounding the underlying where the two spreads do not overlap) They are autotrading for me at $115/month or do it yourself at $85/month… His returns have been stellar…HIs ROI (return on investment) chart is PUBLIC and can be seen on his website. One note: the returns in the ROI chart are for those who trade themselves and are slightly better than you get with autotrading for yadda yadda reasons…. My advice: Unless you have a few years experience trading… Read more »
Gravity Switch
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July 7, 2009 3:28 pm
Thanks Paul — interesting to hear the details. Selling puts is generally less common than selling calls, to my knowledge, but if you have a pile of cash at hand (as opposed to a pile of stock) it can certainly provide comparable income. This is tougher in a retirement account, since folks are much more likely to have large stock positions than large cash positions in IRAs and such. Porter Stansberry tried a newsletter based on a similar strategy when he launched his Put Strategy newsletter a while back, but I don’t think that one ever took off.
Ali Javahery
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Ali Javahery
December 3, 2009 5:02 pm

Hi Paul: read an old comment of yours on sockgumshoe.com…thanks for the info. Just was curious as to did the UNG ever get exercised if so do you still have 1000 shares you were referring to since the stck is down alot since July when you got the option spread.
thanks

Ali

Dan Weiskopf
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Dan Weiskopf
January 21, 2010 11:45 am

Paul, do you trade in an online account or through a regular brick and mortar broker? Does Lee offer up a list of brokers that I can look over that will trade side by side with his recommendations? Thanks for your time.

Gravity Switch
Admin
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July 7, 2009 3:30 pm

I won’t wade into which is riskier, I get a headache when people start throwing out greek symbols, but would note that just as you can limit your risk when selling a covered call by also buying a put, you can do the same with puts by selling one near the money and buying one further out of the money to put a lid on the capital you’re risking (and on your income).

MC
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MC
July 7, 2009 4:55 pm

dlst I completely agree. Selling calls against stock is the equivalent of a synthetic put. Also a key consideration in any option selling strategy is to have a view on implied volatility.

Tor(Victor)
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Tor(Victor)
July 7, 2009 6:51 pm

This is a Bull Put vertical spread and I have done these many times and made money. The number of contracts times 100 shares per contract times the difference in strike prices equals the amount of money the broker will reduce the cash balance available in your account. For example, this would be $5000 for 10 contracts with a $5 difference in strike prices. You make the most money if the stock closes above the sell strike price at expiration.

reuben
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reuben
July 8, 2009 11:40 am

I have been trading options for several years. I read a great deal about them, and have attended a few seminars. It also helps to have a good broker. Mine is the best. Like so many other things, the more I learn the less I know 🙂

spreadtrader
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spreadtrader
July 8, 2009 3:47 pm
“You make the most money if the stock closes above the sell strike price at expiration.” …not exactly accurate but I think I understand what you’re trying to say. Let me illustrate: Two scenarios, A and B…in which do you make the most money? A) Buy a 10.00 put and sell a 7.50 put, and when the puts expire the stock is at 8.00 or “above the sell strike price”; or B) Buy a 10.00 put and sell a 7.50 put, and when the puts expire the stock is at 7.49 or below the sell strike price. In which scenario… Read more »
Steve
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Steve
July 10, 2009 10:53 pm
Spreadtrader: Knowing just enough about options to be dangerous, I think that Victor’s Bull Put Spread looks like this: If the stock sells for a price higher than the nearest put, e.g., $11 and the seller thinks it will rise or at least stay above the put’s strike price e.g. $10, at expiration, then a profit is made by selling the $10 put. To have downside protection (limit losses) in case the stock falls below $10, a put with lower strike price is bought, e.g., $7.50. This put is less expensive than the $10 put, and acts as insurance in… Read more »
spreadtrader
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spreadtrader
July 10, 2009 11:11 pm

Yup, that’s what I get for being left handed.

Ali Javahery
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Ali Javahery
December 1, 2009 3:49 pm
Tania….there 2 main rules in investing Warren Buffet says….and if I were you I d take note of them….1st rule: don’t lose your money….2nd rule: when you feel greedy be very afraid….here you may have not been burnt in the market but the 2nd rule is something very real….I am not saying you are getting greedy but $750 may be Ok for you as far as a new investor but once you keep losing $750’s here and there then you see the wisdom of Buffet 2nd rule….here Mr. Lowell may make you decent return….my only thing is for you to… Read more »
Ali Javahery
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Ali Javahery
December 3, 2009 3:03 pm
Hi Delver23…since dec 1st I ve been immersed in options trying to figure out what he (lowell) is doing….I can tell you there is risk because you still need to be correct trend with the whole market direction “of the stock or fund” in question….if you get that wrong no matter no matter what you ll lose on the trade but your loss will not be like losing on a stock since you are buying insurance against the selling of options by “buying the same option” at a different strike price ….so there is a chance he ll lose but… Read more »
dan
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dan
April 16, 2012 3:02 pm

Yes they lure you in and then let their recommended brokers tell you if you don’t have at least 15,000 to invest they won’t mess with you! Nothing left to do but cancell subscription. They gladly take their percentage out and offer no appolgies or even want to know why you cancelled. My guess…they already know.

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