Small Account Strategies by Henry

Jul 22, 2024

Small Account Strategies by Henry

Introduction

  • Discussing strategies to turn small portfolios into larger ones.
  • Aim: Turn $70 into $430 or $700 into $4,300 (6X your money).
  • Emphasis on risk management and proper knowledge.
  • Myth debunked: A large portfolio isn't necessary to make a lot of money.
  • **Topics Covered: **
    • Strategies for trading.
    • Managing risks and setting stop losses.

Strategy Assumption

  • Stocks are expected to move sideways (not significantly up or down).
  • Market analysis: High but no catalysts expected for significant movements.

Strategy 1: American Airlines (AAL)

  1. Stock Analysis: AAL has been trading sideways.
  2. Setup:
    • Open AAL on Robinhood.
    • Sell a near-the-money call option (e.g., $19.5 strike for $30).
    • Buy a call option one leg above and one leg below.
  3. Example:
    • Sell 19.5 call, Buy 19 call, Buy 20 call.
    • Result: Max loss = $12, Max profit = $38.
    • Assumption: AAL remains around the central price.
  4. Why It Works: Good for stocks with less movement.
  5. Example Payoff: Bet $12 to gain $38 if the stock stays within a certain range.

Strategy 2: Palantir Technologies (PLTR)

  1. Stock Analysis: PLTR trends sideways after movements.
  2. Setup:
    • Sell at-the-money call option (e.g., $21.5 strike).
    • Buy a call option one leg below (e.g., $21 strike) and one leg above (e.g., $22 strike).
  3. Example:
    • Sell 21.5 call, Buy 19 call, Buy 20 call.
    • Custom order setup to balance bought and sold options.
    • Result: Max loss = $39, Max profit = $61.
    • Assumption: PLTR moves slightly but remains within range.
  4. Why It Works: Optimizes returns for stocks with predictable ranges.

Strategy 3: NIO Stock

  1. Stock Analysis: NIO trades within a certain range, ideal for options strategies.
  2. Setup:
    • Sell a put option near-the-money (e.g., 40 strike when trading at $42.4).
    • Buy a protective put option one leg below (e.g., 39 strike) and sell a call option (e.g., 41 strike).
  3. Example:
    • Sell 40 put, Buy 39 put, Sell 41 calls, Buy 42 calls.
    • Result: Max loss = $18, Max profit = $82.
  4. Why It Works: Double-sided strategy that benefits from stock stability.

Key Points for All Strategies

  • Importance of weekly options due to predictability in shorter periods.
  • Setting stop losses to manage potential losses.
  • Strategies optimized for stocks showing consistent sideways movement.
  • Can be adapted to various stocks based on individual analysis and assumptions.
  • Aim for frequent small gains rather than occasional large wins.

Closing Thoughts

  • Encouragement to apply strategies to stocks within personal watchlists.
  • Importance of continuous learning and risk management.
  • Recommendations:
    • Subscribe to Henry’s newsletter for weekly trading insights.
    • Consider joining Discord for further guidance and learning.