California Real Estate Auctions Industry Insider Secrets Part 2
California Real Estate Auctions Industry Insider Reveals 3 Secret Mistakes Most People Make When Flipping Houses (And How To Avoid Them!)
Part 2: Lessons Learned From Option Trades
John decided he would pass along some of his option trades that offered the least risk to me. The first one he told me about was buying coffee options. The option contracts were “cheap” because the coffee price was low.
John watches for weather occurrences that can affect prices (either positively or negatively). In this case, he knew the price of coffee was historically as low as it has ever been and the option contracts were being offered at a relatively low price with a fairly long maturity date.
He knew if a storm hit in the main coffee growing region that coffee prices would increase. Sure enough, the storms hit the coffee fields with vengeance. Both hail and flooding occurred and many fields couldn’t be harvested.
What Does A Coffee Option Contract Have To Do With Real Estate?
Being my 1st “trade”, I bought just one coffee option contract for $1,600. When John told me to sell the contract, someone else paid about $26,000 to speculate on prices going even higher. The holding period of my coffee contract was approximately 6 weeks. When I got my check from the commodity broker, guess what I asked John?
You got it… Do you know of any more good trades?
By the way, John bought 100 coffee option contracts… but let’s get back on track.
Nothing Is a “Slam Dunk”
John told me speculating in commodities doesn’t always work out this way, even when it appears to be a “slam dunk”. Furthermore, he said that many times he loses on his trades even though all his research and conservative stop losses/options strategies protect from a giant loss.
I told John that I understood but anxiously asked him if he could inform me about the next conservative option trade (with a big potential upside).
John gave me three more recommendations that I bet on. One of them (cattle) made a small gain, one (sugar) I lost my option money and the final one (natural gas), I sold my option contract 3 days before it expired (not John’s recommendation) and well I didn’t lose ¬all my option money but in the 3 days left prior to the expiration of the option, I could have made $55,000 if I stayed in until the end as John advised.
John didn’t want me to lose any money and decided not to give me any more trade recommendations.
