Option Trading For Beginners? Best 3-Step Strategy [FAIL PROOF]

 Try it out today and take your stock market investing to the next level.

Here's What You'll Learn In This Master Lesson:

Are you, like many before you, setting sail on the vast and often perilous sea of option trading? Are you in search of a hidden treasure map—a strategy so potent that it guarantees success on every trade, even in the turbulent waters of this economy? 

I can assure you, that such a map exists, and I'm excited to unveil the blueprint of this foolproof 3-step strategy. But before we embark on this voyage of enlightenment, let me regale you with the tale of why I'm compelled to share this well-guarded knowledge.

You see, option trading isn't just a casual interest for me; it's a lifelong passion that has held me captive for over three decades. Some might say my devotion borders on obsession, but in truth, it crossed that threshold long ago.

In the world of finance, few subjects rival the intrigue, empowerment, and profit potential of options trading. Yet, it's also a realm shrouded in mystery, a deliberate enigma designed to bewilder even the most intrepid sailor.

In these tumultuous economic times, the promise of achieving stellar, risk-free results in option trading has never been more alluring. Never before has the siren call of profit been so compelling.

Our strategy doesn't demand an intimidating stack of option trading textbooks, the latest and greatest option trading app, or endless hours deciphering option trading beginner guides. You won't find yourself lost in the labyrinth of YouTube option trading tutorials or buried under the weight of complex options trading jargon. No, there's no need to shell out a king's ransom for exclusive courses, join elusive trading circles, or rely on the crutches of sophisticated trading systems or bots.

You won't need to invoke the power of cutting-edge artificial intelligence to select the perfect options or resort to dubious insider information. The heart of the matter lies in one thing: piercing through the fog of complexity. And, my friend, that's the true challenge.

In truth, if your journey into option trading has left you feeling more like a ship adrift than a seasoned captain, it's not your fault. The overwhelming deluge of trading information, coupled with a cacophony of trading experts and gurus peddling divergent strategies, has left 85% of traders, including those who are new to the options arena, cast adrift in a sea of confusion.

Picture this: You stand on the deck of your trading vessel, filled with unwavering confidence. Despite past setbacks and the fog of confusion, you take a deep breath, ready to steer your ship with clarity and purpose. We're about to chart a course using a simple 3-step strategy—a strategy so clear, that even a novice can expect success on every option trade.

But before we embark, let's cast aside the mist that has obscured your path until now.

We've all heard the age-old adage, haven't we?

"How you start is how you finish." 

In the world of trading, this saying holds more truth than ever. The key to unlocking success in trading is a journey that begins and concludes with your mindset, or your psychological disposition. You see, trading isn't just about skills; it's a mind game, where psychology accounts for a staggering 80%, leaving a mere 20% to the skillset. 

Think of it as a cup filled with liquid—the cup is your thinking, and it sets the stage for how you perceive the markets. The liquid in the cup represents your strategy or technique, whether you've crafted it yourself or adopted someone else's. Regardless of the liquid's flavor, it will always take the shape of your thinking.

The major characteristics of the nature of the stock market are its stability and its replicability. It's stable in that the nature of the stock market will never change. The market can be up, down, or sideways, its nature will be the same. It's replicable in that just as an apple seed will always produce after it's like and kind, the stock market will always produce market activity after the like and kind of its participants. This means that profit can be generated with consistent certainty, regardless of seemingly opposing market forces, if the investor possesses a consistent like and kindness that is congruent to profit.

Whereas the Certainty Mindset acknowledges market profitability as a natural flow that starts from the inside out, the Probability Mindset attempts to obtain profitability through the "back door" (outside in) by psychological projection. This involves displacing one's hopes, dreams, and speculative thoughts of what you want, need, or should happen onto the markets using the following mental activities:

In this economic landscape that turns investors into mere market liquidity so that others may become wealthy, they must decide whether they wish to remain on the outside looking in or cultivate the Certainty Mindset that allows them to see the market's objective reality from within.

Structural analysis emerges from the Certainty Mindset, while technical and fundamental analysis is born from the Probability Mindset.

Structural analysis is Sacred Geometry applied to trading. Sacred geometry is an ancient belief that the intricate patterns inherent in nature are manifestations of a divine intelligence, often referred to as "God," "Spirit," or Infinite Primal Source. These patterns serve as templates guiding the universe's creation, containing the very essence of the Divine principles governing existence. Delving into and contemplating these patterns allows individuals to synchronize their thoughts (mindset) and aspirations with this divine intelligence, establishing a connection that not only allows one to see the "handiwork of God" or the "Kingdom of Heaven" within creation but attune their lives to the overarching cosmic blueprint (one's Dharma or Life Path).

Structural Analysis continues in line with Sacred Geometry as the observing and contemplating of patterns inherent in nature and how they organize themselves within the financial markets. These patterns, again, containing the very essence of the divine principles governing existence, manifest themselves into various forms, including "price trend" structures according to divine intelligence within the pattern (Objective Reality). 

Beyond the surface appearance of binary code flashing on digital screens, financial markets, by nature, have a geometric structure. This structure is characterized by four essential dimensions: Price (1st dimension), Time (2nd dimension), Outcome (3rd dimension), and Collective Market Sentiment (4th dimension), often referred to as the Soul (house of Divine Intelligence or Spirit) or Adam Smith's Invisible Hand. When arranged, these dimensions create a hypercube, a Tesseract, or a fourth-dimensional cube—also prominently featured as the brand logo of Master Of The Trading Craft.

PRICE, TIME, OUTCOME, and SOUL represent the sovereign dimensions of Market REALITY. Any attempt to ignore, usurp, or misrepresent the Tesseract arrangement creates market distortion. Unlike information and other tools investors and traders use to discern a market's true intent, these dimensions remain immune to corruption, moral interpretation, or misrepresentation. These 4 dimensions can only be OBSERVED and AGREED upon.

Technical and fundamental analysis are always applied to discern the 3rd dimension (Outcome) without awareness of and consideration for the 4th dimension, creating subjective bias. As a result, these tools rarely prompt traders to make a case against taking a market position, creating blind spots. Structural analysis, however, adopts a more holistic perspective.

In the financial markets, structural analysis parallels the construction and evaluation of a building's structure for safe usage. Just as a building possesses both supportive elements and reinforcements to withstand potential stress, structural analysis gauges a potential trade by its structural integrity countered by any structural weakness.

Structural analysis delves into the interplay of all four dimensions, providing a comprehensive and objective view of market reality. While technical analysis fixates on price (and volume) alone, neglecting Time, Outcome, and Collective Market Sentiment, and fundamental analysis (in stocks) centers on "facts and figures" unrelated to market structure, structural analysis scrutinizes the harmony among these four dimensions. The failure to perceive the markets in their natural form often leads to financial losses, strategy-hopping born of frustration, and an overall unsatisfactory trading experience.

All financial markets are 4th dimension structures and therefore, require you to see them as such to obtain favorable certainty in your trading. Seeing the stock market in its entirety requires something you never see mentioned in any trading book or investment book, or promoted by the "experts," which is care. Care is the master key to certainty.

In the discourse surrounding the 4th dimension, we've already covered that this is the realm of the Soul and the collective sentiment of market participants. Yet, there exists another aspect to this dimension, one symbolized by a "heart" in the hypercube illustration—a heart that aligns with the 4th chakra, the central point in Man's spiritual and inner economic system.

Consider this: just as the Soul's influence guides Price over Time to yield a specific Outcome, your profound willingness to care, to immerse yourself in the intricacies of the markets, acts as the driving force. It's akin to the Christian Mystic seeking direct and experiential knowledge of The Divine through a conscious union with The Divine.

When you embrace this perspective and dedicate yourself to understanding the markets with genuine care, you establish a connection with the markets that embark on a transformative journey. In return for your care, the markets reveal their true nature, imparting knowledge, wisdom, and insight. This newfound understanding places you in harmony with these dynamic forces, more or less in the way of someone experiencing a new outlook on life as a result of having a near-death experience.

In reality, no financial market, not even the stock market, can transcend the boundaries of human nature. Just as all financial markets are structured as a hypercube or a "cube within a cube," this symbolic representation mirrors the intricate connection between a trader's inner world and the heartbeat of the financial markets. Therefore, in order to achieve congruence, one must skillfully apply this understanding to one's market endeavors at the soul/heart level. As the saying goes, "As a man thinketh in his heart, so is he."

To cultivate unwavering confidence in your trading endeavors, it's imperative to perceive all markets through the lens of the fourth dimension – harmony. Imagine a scenario where a seasoned trader, Lisa, consistently recognized recurring patterns in market behavior. This led her to trade with confidence, knowing that harmony implies that price movements follow a structured order, devoid of randomness. The essence of market integrity is equal to Soul driving Price over Time, to yield a specific Outcome. Harmony, in this context, is the guardian of a market's structural integrity; without it, a market ceases to exist. Never will you witness a scenario where a "bullish trend" coincides with "falling prices." Such a conjunction has never occurred and never will.

The soul's genuine intention to foster a bullish market will unfailingly guide price movements over time, aligning them with the intent in an orderly manner. This unwavering process underscores the concept that outcomes invariably correspond to recurring patterns. Recognizing and acting upon these patterns ensures a 100% certainty in achieving the desired results. Among these pivotal patterns is the foundation of our three-step option trading strategy – the Bullish Continuation Pattern.

The Bullish Continuation Pattern is an awesome recurring pattern in the option trading for beginners game.

The Bullish Continuation Pattern always starts with a preexisting upward movement of the underlying stock price (1), the temporary exhaustion of said upward movement sending stock prices temporarily downward (2), and the resuming of the upward price movement (3), often characterized by a greater force than its previous iteration at (1). The Bullish Continuation Pattern is perfect because it is basically "option-friendly." This is what I mean:

To take full advantage of its potential, we are going to use a simple long-call stock option play. This means we are buying a call option with the expectation that the underlying stock price will go up. This is a simple play for beginners in options.

Harnessing the full potential of this strategy demands a solid understanding of what lies ahead. It's like embarking on a journey where knowing the terrain and having the right tools can make all the difference.

Options have earned their place as a preferred avenue for investment in the stock market. They offer flexibility, but like any powerful tool, they come with responsibilities, and the foremost one is understanding the risks involved.

Picture this: Options trading is akin to a contract that allows the buyer special privileges, such as the exclusive right to buy or sell an underlying stock at an agreed-upon price on a chosen future date. For those just starting, the emphasis should be on quality, not quantity, and prioritizing lower-risk investments.

Here's a real-world scenario: Imagine you're eyeing shares of McDonald's, currently trading at $100 each. Instead of going the traditional route, you opt for options trading. Now, with McDonald's stock priced at $100, if you believe that it's poised for significant future growth, options trading becomes an attractive prospect. You decide to purchase call options, granting you the privilege to buy the stocks for $100 each. The beauty of options is that you can decide the number of shares you want to buy, let's say ten, all at the agreed-upon price within a defined timeframe, say a month.

Fast forward 25 days from the initial agreement. You notice that McDonald's stock has surged to $200 or even $300 per share. Yet, you still have the option (pun intended) to buy ten shares at the original price of $100 each. In this ideal scenario, you stand to make substantial profits.

Now, let's explore the flip side. In a less favorable scenario where the stock price remains stagnant or, worse, plummets to $40 per share, your initial investment would translate into a substantial loss. However, options trading provides an escape hatch. Instead of purchasing the stocks at the initially agreed-upon rate of $100 each, you can simply let the options trading contract expire and then buy the stocks at the current market price of $40per share.

This is the essence of options trading—a versatile tool that grants you the flexibility to buy a stock at a predetermined rate. In a perfect world, it allows you to profit by purchasing at the initial price and selling at a higher future price. Conversely, when things don't go as planned, you have the option to let the contract expire and buy the stocks at the prevailing market price.

To navigate the realm of options trading effectively, it's crucial to understand both its upsides and downsides. A balanced perspective is essential, providing you with a comprehensive view of this intricate financial landscape. In the following section, we'll delve into the advantages and disadvantages of options trading, ensuring you gain a well-rounded understanding of this complex world.

These are the many advantages that make option trading for beginners one of the best paths to success in the markets. Now it is time to focus on the other side of the aisle, the disadvantages of options trading.

Understanding option call basics will help you get the most value from applying this 3-step option strategy. While this knowledge reveals the advantages that can leverage your stock market performance, there are some potential downsides. But no worries. Countless articles have been written on options trading and its influence on the stock market, but they will not give you the real gems you are getting here.

Now that you have your basics covered on options, let's get back to the strategy...

A bullish trap pattern is a false signal, referring to a declining trend in a stock that reverses after a convincing rally and breaks a prior support level. The move "traps" traders that act on the buy signal and generate losses on assuming a long position.

This troubles more investors and traders than they like to admit. But I am here to tell you that it doesn't matter what they go through; you don't have to go through that. This strategy is well thought out and has been tried and trued with rigorous and refined testing. This is the strategy I use to help my clients guarantee success in their option trading. Every precaution is in place to assure you that when you run this strategy in its entirety, you will have 100% certainty of success. Let's press forward.

So, how do we avoid this pitfall that beleaguers most traders? In the second step of this strategy, I will reveal my secret formula to determine if the Bullish Continuation Pattern that confronts you is the "real deal" or a "false flag."

Once we find a bullish continuation pattern, we must "qualify" it before we invest any money. The last thing you want to find out after you invest our precious capital is that the option trade was "dead on arrival." Qualifying this pattern allows us to know ahead of time.

There are a couple of ways some traders try to qualify a trade. One way is to "hope and pray" it will turn out successfully. Some will use trendlines, technical indicators, or Fibonacci retracements to filter out the fake ones. Other traders will not qualify the trade beforehand but will attempt to mitigate potential risk by placing a stop loss to protect some of their investment. Either way, this is inefficient trading.

I want to introduce a new, next-level way to qualify a trade, especially option trades derived from the Bullish Continuation Pattern. What we want to do here is measure the momentum in favor of the trend AND measure the momentum going against the trend. In other words, qualifying means reading the pattern's momentum and its resistance. 

We must measure momentum to see if the market has enough energy to move in the direction we expect the underlying stock price to go. However, it's more important to measure the momentum going in the opposite direction of the trend.

Most traders have an inherent bias toward the direction they want the markets to go and rarely make a case for NOT taking the trade. Measuring resistance helps us avoid the possibility of being blindsided by unforeseen market forces at play. But the real reason why we want to measure resistance is because of something called the Popup Effect.

The concept of measuring resistance draws inspiration from the intriguing "Popup Effect." This experiment involves submerging a beachball underwater, and the depth of submersion provides valuable insights:

So, you may wonder, what does a beach ball have to do with the Bullish Continuation Pattern? This pattern is intricately linked to the laws of physics, offering us analogous insights into the Popup Effect:

Now, what sets apart a Bullish Continuation Pattern from a Bullish Trap Pattern? The key distinction lies in the level of resistance exhibited during the downward price movement in relation to the momentum of the upward price trend.

The formula for making a determination is:

(Momentum/Resistance) – 100 = [absolute number]

(Absolute number must be less than 100. If quotient is negative, add to 100, then convert to absolute)

Side note: This formula uses the Momentum technical indicator to measure Momentum and Resistance, which is ironic because I downplayed technical analysis as the "offspring" of the "probability mindset." In my defense, I'm using the Momentum indicator differently than conventionally used. Instead of using it as part of an enter/exit strategy, I am using it strictly to measure the amount of momentum.

My percentage threshold is 97% or better. Anything less than that and what appears to be a Bullish Continuation Pattern is not what it seems. Therefore, I deem the pattern a bust and will pass on it as a potential candidate. If equal to or greater than 97%, the market tells me this is a Bullish Continuation Pattern. At this point, I will consider the potential trade further by using the percentage to determine a time value.

Each percentage from 97 and beyond (e.g., 98 and 99) corresponds to a specific duration. Personally, I align these percentages with trading days since my preference is to hold option trades for several weeks, and sometimes even months. The rationale behind this correlation is the result of meticulously testing these percentages over many historical price trends until they exhibited 100% consistency.

It's essential for you to replicate this process within your chosen time frame until you are content (in the heart) with the results.

Furthermore, having access to these time values holds significant importance as they directly relate to the duration in which prices are likely to maintain their trend or "stay in the air" before descending. For instance, if we identify a time value of 140 days, this signifies that after prices recover from a temporary dip, such as in a Bullish Continuation Pattern, they are expected to sustain an upward trajectory for a minimum of 140 trading days. Understanding this time value allows us to strategically select an option with an expiration date that is closest to having at least 140 trading days remaining. This approach optimizes our trading strategy for success.

IMPORTANT: Time value percentages DO NOT imply that we can know the length of a trend from its beginning to its end. We DO NOT predict the future. Time value percentages, however, DO imply that a part of a trend of an unknowable quantity and of an unknowable duration, is indeed knowable, by way of current momentum and resistance. Therefore, all time values are conservative, in that they only correspond to what can be known.

Knowing time values is essential because the erosion of option time value is always a deep concern. Using time values will strike the "right mix" of holding the option long enough to maximize our gains without being greedy but not long enough to where the worth of holding the option becomes increasingly marginal.

Up to this point, we have a great advantage over other traders because we now know the following before we've made any financial commitment:

So far, so good, but we have one more thing to figure out: when do we exit with a profit?

No worries. The 3rd and final step of this strategy will give us the answer.

In this last step, I'm revealing the secret sauce to get the most profit from your option trade. Ready? Let's begin.

First, when I speak of profiting on a call option trade, technically, I am talking about the expectation that the option premium or the total price you paid to buy the option will increase sometime in the future.

So, the key to understanding option profitability revolves around understanding premium.

Factors that impact option premiums are:

It is complex to compute the option premium by hand. For that, you would need to look at an option pricing model. Fortunately, financial websites like this will do all the work for you. However, in simple terms, the premium is seen as an asset's intrinsic value added to the time value.

We now have an idea of what option premium is and the ingredients that comprise it. Next, we want to focus on implied volatility, the key component to getting the most profits from our option play.

Implied volatility is an essential ingredient in option premiums. Stock options with less volatility have lower premiums than those with higher volatility. Make sense?

Moreover, Implied volatility is the markets' estimated expectation of the future value of an option. Here, we are talking about quantifying market sentiment, the Soul dimension of market objective reality, telling us through implied volatility how option values will likely turn out.

When we use implied volatility as part of our profit-taking plan, we gain an advantage over other traders who use arbitrary profit-taking means. Instead of saying things like:

Essentially, we are allowing the markets to reveal what they think is a  probable future of the option. We then use this to our advantage as to when to take profits.

This is the first component in our profit-taking plan. The next step is to understand something called historical volatility.

Implied volatility focuses on predicting the option's future behavior, while historical volatility assesses the recent price history of the underlying stock. Historical volatility measures the underlying stock's price fluctuations over a predefined period, often in terms of standard deviations or the extent to which the price dataset deviates from typical fluctuations.

In simpler terms, it quantifies how rapidly prices rise and fall over time. When you chart these fluctuations, they form a bell-shaped normal distribution curve.

Historical volatility suggests that past prices tend to experience fluctuations, including occasional abnormal ones, but ultimately gravitate back to the norm. Expanding on this, these extreme fluctuations often manifest as market trends that persist for a while before seeking equilibrium and returning to normalcy. This phenomenon resembles the "Popup Effect," where prices breaking out to the upside undergo extreme deviations from the norm but eventually revert when momentum wanes and prices decline.

From this distribution of prices, we get important information. First, the prices with extreme fluctuation rates (measured in deviations from the norm) fall to the right and left of the "bell."  The prices with less fluctuation are displaced in the middle of the "bell." 

In the distribution curve, the most frequently occurring price is the mode price.  It always exists in the middle of the bell and is the the key component in our profit-taking endeavors. We will touch on this later.

A Normal Distribution Curve

In theory, stock prices are expected to conform to a normal distribution because efficient markets are the assumption. However, in reality, prices don't always neatly align with this norm. They can exhibit consolidation into normal distributions, but there are also instances of inefficient movement, which we refer to as price trends.

For instance, imagine you're tracking a tech stock, and it typically follows a predictable pattern of modest fluctuations. Then, suddenly, a groundbreaking innovation in the industry propels the stock into a rapid upward trend, far from the expected norm.

If we solely adhere to the belief that markets are efficient, we overlook the potential impact of price trends on our trading decisions. Conversely, if we perceive the market as purely chaotic and riddled with extreme deviations, we lack the grounded context needed for informed trading choices.

Let's consider another example: a pharmaceutical company about to release a game-changing drug. The anticipation causes the stock to surge far beyond what historical data might suggest. Ignoring this trend in favor of pure efficiency could lead to missed opportunities.

Excluding any perspective ultimately hinders our progress.

Now, picture a cryptocurrency experiencing wild price swings due to market sentiment and speculative fervor. Viewing it solely through the lens of chaos might deter you from identifying profitable entry points.

The solution lies in striking a balance between both volatilities, offering the advantages of each approach. How can we achieve this? It's simple: by dividing historical volatility (linked to the underlying stock of the call option you intend to buy) by implied volatility (associated with the call option you're purchasing). This approach allows us to harness the benefits of both worlds.

Once you divide historical volatility by implied volatility, you get a quotient. This quotient tells us how far to skew the normal distribution for implied volatility to reflect the combined viewpoints – providing a more realistic range of values.

This calculation confirms that we expect the market prices to make a big move shortly, but not too big that it's out of the scope of past price movement.

For example, If the quotient is .7 or 70%, the computation tells us how far to skew (in deviations) the normal distribution of the implied volatility curve to the left or right – depending on which direction you expect a market to go. A normal distribution is always at 0 deviations or 50% (half of the prices fall on the right [down] and the other half fall to the left[up]). Since this lesson is about a bullish option strategy, we will adjust the normal distribution of prices negatively by 70% or 2 deviations (70% - 50% = 20% or 2 deviations).

This newly adjusted distribution will give us a new mode price. This number is our optimized profit target. It represents the best price we can get for our option while still maintaining trading efficiency and also happens to be the most frequently occurring price the market will trade, which guarantees that we can sell it at this price. Awesome, right?

Thank you for checking out my step-by-step fail proof option trading strategy. To recap:

These instructions form a solid trading plan that will tell you everything you need to know before you invest...

With just a bit of dedication and investment in time, this strategy can thoroughly come to life, promising you outstanding and foolproof trading outcomes. The primary hurdle for option traders, particularly those new to the game, lies in the potential overwhelm of assembling and executing this strategy effectively. The process of piecing together this strategy can be time-intensive and, if not done correctly, may lead to considerable frustration. There's a wealth of knowledge to acquire, including refining the time values.

With that objective in mind, imagine this: You're a busy professional with limited time to spare for studying complex trading strategies. The world of options trading appears enticing, but it also seems like a labyrinth of risks and challenges.

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