Return on Investment (ROI)

To make one million dollars in 3 years or less starting with just $10,000, the secret is called Return on Investment.

To be more specific, the secret is to hit the “sweet spot” of 15% ROI per month, every month, for the next 3 years. 

 What risks are there in implementing this process?

There are risks in any ventures. There are no guarantees of success. As traders, we have control over one item only in this trading game: our losses. We control this right from the start.

Let’s invest $10,000. We decide to risk a maximum of $2,000. If we lose this $2,000, we will not invest in options trading anymore. We will then pull our remaining $8,000 out of the market and stop trading options.

Looking at the Bigger Picture, this $2,000 “disaster plan” is not such a bad disaster plan, given that there is a potential to achieve millions!

Are there any assumptions that one should be careful of?

Yes. Here, we are assuming that we can consistently attain 15% ROI per month. In reality, fluctuations happen. As such, it is realistic to expect some good months and some bad months.The trick is to consistently attain 15% ROI per month.

Why should we use Options for 15% ROI?

There are many financial investment tools, for example, stocks, options, futures, etc.

We choose to trade options because of the leverage that it provides.This means that with a small sum, we are able to invest in stocks for a much smaller amount as compared to buying the stocks outright.

For example, let's say AAPL (Apple Inc) stock is trading at $100. To buy 1 AAPL stock, we need to invest a minimum of $10,000 ($100 x 100 lots).If our starting capital is only $10,000, we would be totally tied up with one AAPL stock.However,  AAPL option can be bought for as low as $5. To buy that option, we only need to invest $500 ($5 x 100).

If our starting capital is $10,000, that is a more reasonable proposition.The bottom line, trading in stock options gives us, the small investor, a realistic fighting chance of making our first million within 3 years or less with our smaller investment capital.

Let us incorporate this important concept of ROI into a Game Plan next ...

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