Lots of detailed advice from our Legacy Research experts in this Friday’s mailbag. So let’s get to it…
We begin with a reader who feels we shortchanged him in last Wednesday’s Daily Cut – “How Oil Gets to $250 a Barrel”…
Reader question: Good info on oil but no info on how to position oneself to profit. So we all know we are heading for a showdown… any suggestion on how to prosper? Let us know, thanks.
– Wayne C. (Legacy Research member)
For insight, we turned to Legacy colleague and Casey Daily Dispatch editor Justin Spittler. He’s been tracking this trend for the better part of the year…
Justin’s answer: The oil market has major supply concerns. And those concerns threaten to push the price of oil much higher.
So, consider betting on higher oil prices if you haven’t yet. You can easily do this by…
Buying the United States Oil Fund (USO). This fund tracks the price of West Texas Intermediate (WTI) crude oil.
Investing in oil companies. One way to do this is by buying the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). This fund invests in 64 oil and gas producers.
You could also buy the VanEck Vectors Oil Services ETF (OIH). This fund invests in 25 companies that sell machinery and equipment to oil producers or provide services like seismic testing and rig transportation. You can think of them as the “picks and shovels” companies of the oil industry.
Just understand that oil, like other commodities, can be highly volatile. So, don’t “bet the farm”… And consider trimming your positions once you’re sitting on big profits.
Next up… a reader asks one of the most important questions for investors. And Crisis Investing chief analyst Nick Giambruno has an answer…
Reader question: A question that perhaps every one of your subscribers wonders… What is the philosophy on when to sell and maximize your profit potential? When is the optimal time to sell based on the percentage of the investment’s growth?
I know there are several factors to account for, but generally, how do you best sell your position to still have the ability to maximize those rare 100-baggers that come with enough left to make it truly life-changing?
– Sam S. (Legacy Research member)
Nick’s answer: I often recommend taking a “Casey Free Ride” if a stock doubles from its buying price. This is not a rule set in stone, but generally, it’s the prudent thing to do.
The Casey Free Ride removes risk from an investment, but also retains significant upside. Here’s how it works…
To take a Casey Free Ride, sell enough of a stock to get all of your initial investment back. Then, let the rest ride.
For example, if a stock has doubled, sell half of your position. You’ll get back all the cash you invested, and you’ll continue to own half of your original position. Even if the stock goes down, your initial investment will be safe.
Here’s the formula:
A Casey Free Ride is useful for another reason: It puts cash in your brokerage account. I’m always finding new crisis investing and other compelling opportunities. Taking Casey Free Rides will help you have cash available to take advantage of the next one.
We’ll close today’s mailbag edition with an existential question for master trader Jeff Clark…
Reader question: Jeff, I have been following your service for several years (since The Short Report days) and have a lifetime subscription to Delta Report.
Thanks so much for the education and knowledge that you share with your readers! I am an executive in the financial services industry and have always followed the market and traded securities with limited success. Your training has given me the foundation to invest with confidence and humility to know that there are going to be some rough days.
I have done quite well with your suggestions and have made some trades on my own with limited success. Over the past year, I have been trading part time and am able to generate over six figures in income. I am hopeful that I can trade full time one day.
What do you think it takes in order for someone to be able to trade full time? Is there an ideal amount in the account? I would like to be able to generate $250,000+ per year, if possible, and I appreciate your insight.
I look forward to meeting you in person in Bermuda.
– Jim W. (Legacy Research member)
Jeff’s answer: Hi Jim. Thanks for your question.
There’s a HUGE difference between wanting to make money in the stock market and HAVING to make money in the stock market.
I’ve known lots of folks who did just fine trading stocks and options “part time” – meaning they had regular jobs that paid their regular bills. And, they used profits from trading as a way to enhance their lifestyles – like funding a vacation, paying for a new car, increasing their retirement savings, etc.
Some of these folks were so good at trading they made more money in their brokerage accounts than they made at their regular jobs. Several of them quit their regular jobs and elected to trade for a living.
In most cases, the results were not good.
The problem, Jim, is that wanting to turn a profit to fund an enhanced vacation is far different than having to turn a profit to make a mortgage payment.
Patience is probably the number one attribute of a successful trader. He/she has to be willing to wait for the right conditions before attempting to trade. And usually, when we are pressured to trade because we NEED to make money to pay for normal expenses, we lose our patience and we lose our discipline.
So, being able to trade full time is less about how much money you have, and more about what kind of temperament you have.
I’m not trying to be negative or attempting to talk you out of pursuing a dream. Personally, I LOVE trading for a living. Almost every day is different. Almost every day is exciting and challenging.
I love that when things line up just right, I can sometimes make an entire month’s worth of income in just a few minutes. But, I also have days where I clock out with less money than when I started. My discipline and patience get challenged during those times. What gets me through it, though, is knowing the market will eventually provide the sort of trade setups I typically look for and try to trade off of. I just have to be patient enough to wait for them.
So, I guess the best way to answer your question as to how much money you should have to start with is to say you need enough money to allow you to be patient and not feel forced to make a trade. I can’t answer that for you.
I will say this, though…
In my experience, a conservative trading strategy – where 80% of your funds are earmarked for selling uncovered put options or covered calls, 10% is used for speculating (like buying puts and calls), and the remaining 10% is used as a cushion for extraordinary opportunities – can generate excellent returns.
The market provides plenty of opportunities to make 15-20% per year selling uncovered puts (more when volatility is higher – but the swings in your account are higher, too). Depending on how well you speculate, you can add or subtract another 10% per year. (I tend to speculate only with profits I’ve made from selling uncovered puts, so even if I get on a losing streak, I’m not dipping into my original capital.)
This probably isn’t the exact answer you are looking for. But, I hope it’s enough information to help you decide whether or not you’ll be able to successfully trade for a living.
Happy to talk more about this in Bermuda next week.
We’re also looking forward to meeting you in Bermuda, Jim. It’s going to be a spectacular event… and we’ve even got a few surprises lined up for you and your fellow attendees.
So get ready to be impressed. And make sure you try the Bermudan mac & cheese… It’ll knock your socks off.
For all the Daily Cut readers who cannot attend, you can still follow right along via our livestream of the general sessions. That’s two full days of exclusive research, insights, and recommendations… all from the comfort of your own home.
And if you go here now for the details, there’s a special offer to get it all for a net cost of $0. What’s better than that?