Game Plan 2

To survive the Big Game Plan, the important factor is not to hit our $2,000 loss in the first few opening market moves!

Once we pass this stage, how then do we ensure that $10,000 keeps growing at 15% ROI per month for at least 3 years for us to achieve our first million? 

The secret is the Kickoff Plan.

The Key in the Kickoff Plan is to start off with one ticker only and to ride it to conclusion first. We do not open the second position until the first position has been closed.

We keep doing this until we have built up sufficient capital to open 2 positions at any one time.

During the Kickoff Plan stage, we would limit ourselves to only one contract for that one ticker symbol. The following Tree Diagram illustrates the Kickoff Plan concept. We see what happens for every win/loss scenario. Here:
• We first trade AAPL options (Round 1),
• Then we trade IBM options (Round 2),
• Then we trade AAPL options again (Round 3),
• Then we trade IBM options again (Round 4).

The big idea behind the Kickoff Plan is to allow us to play as many times as we can at as low a cost as possible. Using the Kickoff Plan,
• we can get a feel for our trading system and
• by being in the game longer, we get a feel for it, and
• we have the valuable experience of trading real money in a risk managed situation.

Benefits of Kickoff Plan

Using the Kickoff Plan, a profitable trading system should be able to kick in and allow us to keep building our capital base up at each round. We can also reduce any rate of loss from untested trading systems (or untested traders!) by limiting the amount of trades that we place at the beginning.

From the tree diagram, we observe that this method allows our capital to grow (best case is $15,000) while reducing our “beginners” rate of loss (if any) even after 4 rounds (worst case is $9,240). It is only once our capital base has started growing that we should seek to place more than one trade at a time.

For each trade that we place, we also implement the 2% stop loss rule. So with a $2,000 “disaster plan” in place and at maximum of $200 stop loss per trade, we can afford to lose up to 10 games straight before we fold.

I notice that I am only using 10% of my Total Capital to trade in the Kickoff Plan. Isn't that inefficient use of my money?

In the Kickoff Plan, we are only using 10% of the Total Capital at any one time to trade. We are keeping the remaining 90% in cash. This is because we are trying to get our money to grow more money in a sure and systematic manner using options trading. The correct options and the correct trading systems can grow money in the appropriate manner.

Think of it this way. In soccer, there are 22 players on the field doing all the work and 50,000 people on the stand watching them. The players need the spectators to cheer them on. Likewise, the working capital (the 10%) need the 90% sitting in the bank to cheer them on.

Here, it would be mistake to think that… “ the remaining sum of $9,000 is not doing anything and I should be putting them to work, etc”. Great mistakes have been made by overextending trading money based on the concept of “getting all my money to work”. By doing so, the chance of hitting our $2,000 disaster plan is higher! Don’t do it!

Game Plan #3, #4 and #5: Getting from $12,500 to $1,000,000

By now, you should be getting the idea of using systematic game plans. Use the basic principles of consistent growth, limited risk, etc to develop your own money management approach to growing money.

You don't have to buy the Secret Blue Print for Options Trading to complete your Game Plan. The advantage is you are able to develop your own unbiased game plan, tailored more to suit you.

However, a person might consider getting a copy of the Secret Blue Print for Options Trading as a trading reference or for bench-marking. Sometimes, it is good to have a have a handy reference nearby. Some people also say that it is easier to use a proven method rather than to develop one from scratch.

However, you don't have to buy this book Secret Blue Print for Options Trading to learn options trading. Really!

Let us move on to another important topic, the Trading Mindset ...

Next: Trading Mindset ...