The Weekend Update that went out to paid subscribers on Saturday contained a new trade on Bitcoin, which we trade via calls and puts on BITO. Although we never know in advance which trades will be wildly successful, one thing I have noticed is that three of our top 20 trades year-to-date (combined PRO and Premium Services) have been BITO calls. That doesn't guarantee anything, but in a service like Blue Line, consistency is a factor. In fact, note on the table of our top twenty trades so far in 2024, how often certain symbols appear:
Blue Line Trading System - Combined Top 20 Trades of 2024*
*Performance from "Entry Date" to "Best Return" prior to expiration.
Option Trade Management
I've been providing this trading service since January, 2010, that's getting close to 15 years of option trading advice. One rule that has become abundantly clear: No one rule for exiting successful trades works for everyone. For unsuccessful trades, its easy: Anytime the trade is down by half, -50% or so, exit so as to preserve trading capital for the next trade. Winners are a bit more problematic, especially big winners, anything above 200% or so. Greed kicks in, as does fear, two emotions that do not always act in the traders best interests. The best way to control emotion is with math, cold, objective, dispassionate mathematics. One rule that seems to keep us out of trouble is that anytime an option has doubled it is subject to a 50% trailing stop. If applied on those trades chronicled in the table above, half of the percent value of those, "Best Return," cells would have been preserved by exiting the trade if and when those returns are subsequently cut in half.
Here's the rub: THERE ARE NO EXCEPTIONS TO THIS RULE. Even if you believe exigent circumstances are at play and you may know more than this simple trailing stop, you are wrong: No, this is not a special case that allows deviation from the rule: EXIT THE DAMN TRADE.
If that sounds harsh, it is. If that sounds like yours truly is guilty of violating this rule, and probably more than once or twice, he is. If you insist on proof, here it is, in all of its glory:
These puts are still in my account, in their entirety and have fallen from a gain on August 5th of 786% to their current return, -46%, because I knew better than Mr. Market. Yes, there is still time for these puts to regain their glory, but there is also time for them to slip to -100% if I don't implement that initial trade management rule: Exiting anytime the current return slips to -50%. In this case, it could be as soon as Monday's market open. This position, if exited correctly, when the return fell 50% from top tick, would have been a +393% (just shy of a 5X return).
Key Take Away
This trade was entered on July 17th and three weeks later was up almost 9X. There will be more gains like this and although it may not come from this particular trade, it will come from our particular methodology. Gains like that are not outliers, they have been coming every year this service has been in existence, like clockwork. Whatever the final numbers are on this trade, there will be more "Best Returns" like this in our future...and the way this election season is shaping up, likely before the end of this year.
Note: 10 of the top 20 trades YTD were up over 300% (4X) and 5 of the top 20 trades were up over 500% (6X)
What traders do with these trades is a partnership. First, there is my part, using my 40 years of option trading experience to identify these special high reward opportunities and pass them along to the members of the trading service. Second, there is what individual traders do with these trades, to take them or not, and if you do, how to handle both the wins and losses. I don't normally disclose my personal trading, and especially a trade where I violate a cardinal rule of trading, i.e., DON'T EVER LET A SIZABLE WIN TURN INTO A LOSS. In this instance, this QQQ trade, it is worth disclosing because there is such an important lesson to be learned and a mistake that can be avoided going forward, a mistake that I will not make again.
Addendum: Re: "a mistake that I will not make again." I know what you're thinking, "famous last words." We'll see, maybe as soon as tomorrow.