Trading Educators Blog
Instant Income Guaranteed
I have a few questions that I don't quite understand, about Instant Income Guaranteed. Please explain to me, thanks.
Q: "Only take the trades you can afford, keeping your put cover ratio at the advised strict minimum of 50% (80% preferably)"----Could you tell us how this data (50%-80%) is measured?
A: If you have a $100,000 account you would use only $20,000 of it for trading IIG if you stayed with the 80% model.
Q: How to avoid the shortage of margin situation in the market slump in prices in February?
A: During a crash of stock prices or a price explosion, margin requirements may move much higher, possibly even double or more. This is because Implied Volatility can soar higher and higher. In that event, you may find that you don't have sufficient margin to hold your position. This is why we suggest using only part of your principle (50%-80%) to enter positions.
Q: "Reduce your position size when $VIX is low for classic trades ($VIX lower than 13)."----why?
A: When volatility is low (13 or lower) premiums shrink to the point where you may not want to take risk for such low premiums. So, we lower our position size and also reduce risk. In other words, the risk to reward becomes less desirable.
Q: How to determine the units of each order (For example, I have 100,000 US dollars)?
Example: You want to sell an option with a $50 strike price. If you are put at $50, you will have to come up with $5,000. (100 shares x $50)
Divide $20,000 by $5,000 and you can safely sell 4 options.
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