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VIDEO: JIM FINK REVEALS THE KEYS TO UNLOCKING WEALTH

By Jim Fink • October 4, 2024 • Stocks to Watch

Printable PDF

Greetings! I’m Jim Fink, chief investment strategist of Options for Income,
Velocity Trader, Jim Fink’s Inner Circle, Seasonal Stock Alert, and Options
Bootcamp.

My colleague, John Persinos, is the editorial director of Investing Daily, the
parent company under which my trading services are published. John recently
asked me for an interview on my options trading methodologies. Of course, I
obliged. I’m always eager to share my trading secrets with investors.

In our interview, we emphasized Velocity Trader, but our remarks are applicable
to my overarching investment approach.

The article below is a condensed excerpt of our discussion. John’s questions are
in bold.

To unlock the keys to building wealth, just hit the video play button!



Click for sound



26:01










 

Jim, I’ve often heard you advise investors: Don’t trade stocks, trade velocity.
What does that mean?

Velocity refers to the speed of generating profits. Stocks can double or triple
over time, but it usually takes years. There is a way to generate 100% and 200%
returns much more quickly…in days rather than years…and that involves the use of
options as a substitute for stock.

In chemistry terms, call and put options are the “atoms” that make up a stock
“molecule.” When you buy a stock, you are buying exposure to the full range of a
stock’s price movement, up and down, for an unlimited period of time. Stock is a
very blunt, and expensive, investment instrument that’s sort of like being
forced to buy a 300-channel cable TV package when all you want to do is watch
Nickelodeon and the Food Network.

Options allow you to limit your capital at risk to only those portions of a
stock’s price movement that you want…and for only the period of time you think
necessary. This provides the trader with the ability to benefit from a stock’s
price movement but at a much lower cost than buying stock.

But there is yet another step you can take with options to reduce your risk even
further. It is a secret that option professionals have been using for decades
but which has only recently entered the mainstream. This extremely powerful tool
is known as spreading.

Remember, since an option is a derivative contract, it can be sold without
owning it first. By selling an option at the same time that you buy an option,
you can actually help finance the cost of the purchased option and lower your
cost basis further. Remember, a lower cost basis while maintaining the same
profit potential increases rate of return.

Because the outperformance of spreads is limited to cases where the stock rises
only modestly, option traders often characterize spreads as possessing “regional
leverage.” Within the region of modest price appreciation, the spread can’t be
beat, but individual calls will outperform in cases where the stock makes a huge
price move. But isn’t it better to bet on modest price moves than huge price
moves? You betcha.

Another advantage of selling a call to reduce cost is that you can often totally
eliminate the “time value” surcharge on the long-term call option that you are
long. You get all of the upside of stock ownership (up to the strike price of
the sold call) at a fraction of the cost of stock and without suffering any time
decay…the best of both worlds!

In other words, options provide tremendous leverage that speeds up profit
generation. Faster profits equal velocity.

I like case studies; they’re very persuasive. Could you provide one?

Sure. Imagine that you looked at Broadcom (NSDQ: AVGO) stock on November 19,
2020. Now, you might have noticed the semiconductor giant had excellent
third-quarter financials that year, beating analyst estimates in both revenue
and earnings. So, you figure you might as well go ahead and buy the stock.

By the end of the year, you would have earned a solid 15% gain. That’s nearly
twice the average annual return for most investors… in a little over a month and
a half.

Now, on the surface that sounds pretty impressive. But when you think about it…

If you’d invested just $5,000, you would have only made about a $750 profit.

BUT…

If you’d traded Broadcom’s velocity…BOOM!



You could have doubled your money in ONLY 8 days.

And that means…

Instead of sitting on $5,750…

You’d be sitting on $10,000…in just over a week!

That option leverage has the power to generate huge profits in a short amount of
time, which is what I mean by velocity.

Thanks for your time.

--------------------------------------------------------------------------------

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ABOUT THE AUTHOR

Jim Fink
Bio | Archive

Jim Fink is chief investment strategist for Options for Income, Velocity Trader,
and Jim Fink's Inner Circle. He has traded options for more than 30 years and
generated personal profits of more than $5 million. Jim also serves as an
investment analyst at Investing Daily’s flagship investing publication, Personal
Finance.

Hopelessly overeducated, Jim holds a bachelor's degree from Yale University, a
master's degree from Harvard's Kennedy School of Government, a law degree from
Columbia University, and an MBA from the University of Virginia's Darden School
of Business. For good measure, he has been a member of the Illinois and D.C.
bars.

Prior to joining Investing Daily, and when not incurring student loans hiding
out in academe, Jim practiced telecommunications regulatory law for nine years
until he realized that he made more money trading stock options than writing
briefs. After attending business school, Jim switched gears to the investment
realm full-time, working for a university endowment, a private wealth management
firm, an insurance and financial planning company, and as a Senior Analyst for
an online investment newsletter service that encourages the wearing of funny
hats.

A possible but unlikely descendant of legendary brawler and boatman Mike Fink,
Jim defies his heritage, believing that investing success requires patience and
analysis, not swashbuckling bravado. Besides his passion for analyzing and
writing about stocks, Jim likes to hike in the desert Southwest, vacation in Las
Vegas, play tennis, and feed his toddler son Cheerios.

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