Options Offer Incredible Potential That Stocks Can Never Give

Options Offer Incredible Potential That Stocks Can Never Give Us' -- And
This Successful Trader Proves It!

Dale Whaeatley was a contractor who traveled around the country
helping the telephone companies with their excess needs that
they could not handle in-house. As with any type of contract
work, it was inconsistent. It was difficult for him to budget
his money not knowing what his income or expenses would be. Dale
went looking for an alternative source of income. He attended
the usual Real Estate seminars, but realised he had no real
interest in becoming a landlord or managing property. Instead he
turned to stocks.

Dale had played in the stock market in his 20's, but didn't
understand it. He decided to educate himself on stock trading.
During this process Dale read how options offered limited risk
and unlimited potential for gains, a strategy that appealed to
him. To learn about when to trade, he read many technical
analysis books and spent over $500 a month just for quotes and
charts. he also plotted many charts by hand. Years later, he
discovered a company called AIQ Systems and bought two of their
programs, TradingExpert and OptionExpert. Still, all Dale was
doing was spending money with no return to show for it. It was
not until he sat down and examined his winning and losing
trades, comparing them to the charts and indicators, that he
finally began to discover the value in one particular indicator,
the MACD, known as the Moving Average Convergence Divergence. He
knew that when one line crossed the other it meant to buy or
sell, but that did not work well or consistently, both
requirements for trading options, since they are wasting assets.
By examining divergences in the MACD indicator, however, one
could tell when a stock was ready to change direction with a
great degree of reliability. He concentrated on perfecting his
entry and exit strategy using this indicator, but incorporated
various indicator time frames, a process Dale had never seen
done before. Soon Dale's returns were improving dramatically.

Why did Dale choose options rather trade the stock itself?
Options offer incredible potential that stocks can never give
us. Plus chart patterns develop clearly enough to see definite
direction changes that will produce returns in excess of 1,000%
in hours, days, or weeks depending on the strength of the
pattern relative to the price. Dale's philosophy is simple, he
doesn't want to "own"anything! He just want to make money to do
the things he wants, when he wants. Sometimes the chart patterns
looks so strong that Dale is sometimes limited by the number of
contracts he can buy at one time.

The pattern of the underlying security is of primary importance
in Dale's trading system. He does not use any pricing models
such as the Black-Scholes pricing formula or any other valuation
method. These formulas are not designed to help make a profit on
options, but rather to show what happens if the underlying stock
performs in a certain fashion. There is nothing that can Dale
can do about the options prices. Whatever the bid and ask prices
are that is what he has to pay. It's the surety in the trading
startegy that is paramount.

The pattern that Dale looks for is always the same, but it could
be on different time frames (hourly, daily, weekly, monthly,
etc) depending on the time left until the option's expiration
and distance from next strike price. Whathe looks for is a
divergence in the MACD indicator compared to the price of the
underlying security. he then looks to buy call options when a
stock tests its prior low but has a positive divergence in its
MACD indicator. The opposite is true for identifying tops. He
uses this pattern because after much experimenting he found it
to be the most consistent and accurate.

Here are some great examples of Dale's trades. LAM Research
(LRCX). Lam Research hit an initial low on February 12 and then
rallied. That low was retested on March 1-5. In effect, a
double-bottom pattern was forming. The key to the entry,
however, was the positive divergence in the MACD indicator A
similar example can be seen in Nicor Inc. (GAS), the initial low
came in mid-January, the stock rallied, and then retested on
March 5. Once again there was a strong positive divergence in
the MACD indicator. March 45 calls were purchased on 03/07/07.
Finally the topping formation of Freeport-McMoran Copper & Gold
(FCX) hit level highs in April/May at the same time that its
MACD indicator was falling. That was a time to buy put options.
On a daily chart, this pattern does not always signify major
reversals, but in the Freeport-McMoran case, the weekly chart
also had a huge negative divergence. Huge downside divergences
under multiple time frames is the perfect setup.The options went
from $0.20 to $12. Dale made sixty times his money in just one
week! More recently, in May he entered Advanced Micro Devices
(AMD) and General Motors (GM) call options, and both turned into
1000% gainers in only a few days! Dale beliieves that you can
avoid losing trades with his technique. A losing trade is not
the fault of the charts, but rather the trader. It is really
just a question of discipline and knowledge coupled with action
when the correct pattern appears. If you learn the correct
technique and act only when everything is in place, you will
always make a profit.

Determining which option Dale purchases depends on several
factors, such as the stock's price, how far that is from the
strike price, how many days are left until expiration, the cost
of the option, and the option's liquidity. dale almost always
buy out-of-the-money options that expire in the near term month
if the pattern appears on the daily chart. If it appears on a
weekly or monthly time frame, he buys out-of-the-money options
that could expire several months away.Dale's selling technique
is simple when the momentum turns back against the move using
the MACD divergence line, he exits the position.

Dale educates others on the technique in his Options Hunter
weekly webinar service, information can be found at
http://www.aiqsystems.com/optionshunter.htm He began teaching
others when some investors asked him to explain his trading
style and ever since then he has been talking about his
discovery to everyone he meets. Dale has taught people around
the world, some that he met on airplanes in the seat next to him
and in other casual situations. He enjoys showing people
extraordinary possibilities. Dale wishes he had someone to teach
him in the beginning how to avoid the pain of investing but, as
the saying goes, "The harder the conflict, the more glorious the
triumph. What we achieve too easily, we esteem too lightly."
Dale learned that the separation between rich and poor is
because rich people continue to do the things that produced
their wealth and poor people continue to do the things that
created their poverty. Dale believes it is a choice each of us
makes and he wants to help others to make the same choices and
to feel empowered in their own lives. There was a time when he
worried about everyone "catching on" if he told them what he
did, but after teaching so many people over the years exactly
what he does, he is still amazed that only a small number of
people actually apply the strategy. Dale has found it has more
to do with individuals and their preconceived ideas about
returns and investing, along with the fear within themselves
that actually prevents them from being successful. People all
need to look hard at their beliefs before expecting to become
successful options traders, or succeeding with anything in life.

Dale'sOptions Hunter service began rather slowly because people
came from different backgrounds and experience levels. Some were
beginners and others experienced. As time went by, however,
those who stayed have found many charts without Dale having to
hold their hands. One week, as the market was beginning to
change its momentum, many subscribers chimed in with about 15
stocks that all had the correct look and the next week some of
the options were jumping over 1,000%. There have been traders in
the group buy calls on QLGC, HD, CAL, AIG, MM, VLO and the
homebuilders and mortgage related companies (even with all of
the bad news out about subprime lending, etc).