Are 100% Returns In Less Than 72 Hours
Possible?
The Dynamic Wealth Report
October 26, 2009
Earlier this month, we made a great trade in our Currency
Options Insider service. I thought I’d share that big win with
you. I also wanted to explain how we were able to make outsized returns
using a unique investing technique.
First, the trade.
Back in early October, we’d seen a string of big upward moves in the
Australian Dollar. Subscribers to the service had already profited from
these moves a few times. But, I knew there was more to come.
Here’s why.
Australia’s economy is tied very closely to commodities. A significant
portion of the population is involved in mining and the production of
commodities. And the demand for commodities is surging. As a matter of
fact, some mining companies were struggling to find employees. They’re
trying to ramp up production as quickly as possible.
Why?
The answer is simple… growth in Asia. China’s economy has been growing
at better than 10% for years. This year, despite the recession,
China’s
growth rate will be near 8%... that’s huge considering the US is
expecting little to no growth!
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So follow my logic. China’s growing and that means more demand for
commodities. Bigger demand means higher prices. Since Australia’s number
one trading partner is China, they would benefit not only from rising
demand, but also the increasing prices.
That means more business activity, more employment, and a quicker
recovery for the economy.
The stronger the Australian economy, the higher the Australian Dollar
will move. That’s why I was telling my subscribers to buy the Australian
Dollar.
Look what happened…
The currency rallied from just over $87.50 to nearly $93. That’s
a gain
of 6% in less than two weeks. Just one day after recommending the trade,
the Reserve Bank of Australia (similar to the US Federal Reserve)
decided to increase interest rates by 0.25%.
That caused a huge jump in the value of the currency. Now while a gain
of 6% isn’t bad, some of my subscribers were
showing profits of almost
100% in less than 72 hours!
What’s our secret?
We used options.
When I recommended subscribers take a position in the Australian Dollar,
I also recommended a very specific call option for them to trade. Now
for those of you who don’t know, options are a way to leverage your
investment.
With options, you also know exactly what your risk is. Once you buy an
option, you can never lose more than your original investment. That’s a
huge advantage over trading futures contracts!
For every few hundred dollars we invested in the Australian Dollar
options, we were essentially
controlling $10,000 worth of currency. Talk
about leverage!
The option I recommended cost just $162. I’d love to tell you
exactly what I recommended, but that wouldn’t be fair to my paying
subscribers. Trust me though, you could have bought as many of these
options as you wanted.
The next day this option traded up to $235.
Then two days later it was trading as high as $320.
In less than 72 hours, the price had moved more than 97%. That’s a huge
gain in my book! But it didn’t stop there. Just a few days ago, the
option traded at a new high of $454.
That’s a gain of more than 180%!
As you can see, combining some savvy trading in the currency markets and
using the leverage of options allowed us to capture a big win.
If you’ve never traded options before, you might consider giving them a
closer look.
While not every trade turns out this well, options are an interesting
way to use a little leverage. The best part is you have a very defined
risk level. You’ll never lose more than you invest… unlike trading
currency or commodity futures. That’s why I prefer to trade options over
trading on the futures exchanges.
• Auto Industry (Up 12%)
After the “Cash for Clunkers” program ended, many investors gave up the
industry for dead. That decision was made a little too soon. In just the
last month, we’ve seen the Auto Industry rally almost 12%. Harley
Davidson (HOG) and Ford (F) were in the top performers. This industry
might have life yet!
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