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Frequently Asked Questions |
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The Stansberry & Associates customer service center is open Monday through Friday, 9 a.m.-5 p.m. Eastern Time. Please feel free to contact us at any time, should you have any questions or concerns regarding your DailyWealth Trader account.
What's the goal of DailyWealth Trader?
Our goal is to feature the world's best short-term (one to four weeks) and medium-term (four to 52 weeks) trading ideas. The majority of these insights will come from our own S&A analysts. But we'll also offer trades from outside gurus and our extensive network of "insiders." We're going to provide the educational content you need to take advantage of our trades. And we're going to do it all for an extremely low price.
What kind of trades can I expect to see in DailyWealth Trader?
We like to say we're "mercenaries." In DailyWealth Trader, we'll go wherever we get paid.
That means when a new uptrend is beginning in small resource stocks, you'll see us talk a lot about small resource stocks. If biotech is screaming higher, we'll look for potential triple-digit winners in biotech. The same goes for other "boom and bust" assets, like homebuilders, basic materials, steel, emerging markets, semiconductors, and more.
If a favorite stock of ours is stuck in a trading range, we'll show you how to collect 15%-25% annual income streams by selling covered calls. If the market is volatile and investors are scared, we'll take advantage by selling puts on the world's best companies. We'll show you how to use both techniques to "leverage" recommendations from the world's best analysts and legendary hedge-fund managers.
You'll hear when asset ratios are out of whack and when stocks are incredibly oversold or overbought. You'll also hear when we reach extremes of sentiment or price… We'll show you how to use that information to profit.
In short, we'll feature all sorts of trades in DailyWealth Trader. And we'll make sure you have all the tools you need to take advantage of them.
Will you feature any short sales in DailyWealth Trader?
It's hard to make money shorting stocks, so you won't see many short sales in DailyWealth Trader. But when we do find a safe, compelling setup, we will share it with you. In the meantime, you can learn more about shorting stocks in this chapter of the S&A Trader's Manual.
How often is DailyWealth Trader published? How many trades will you feature?
We publish every day the market is open. You'll receive your issue by mail around 10:30 every morning.
How many new trades we feature will depend on the market. Most trading services won't tell you to "do nothing." They give in to pressure from readers who want a new idea every day. We feel that pressure, too… But we're not going to feature trades we don't believe in. If the best trade is to sit in cash and go play golf, we'll tell you so… And we'll look down the road for the next great trading setup.
I've never traded options before. Where can I learn more about what they are?
Start with this easy-to-read guide, which covers the basics of calls and puts. You should also watch this video from Jeff Clark, editor of the S&A Short Report.
For details on covered call trades and naked put trades, see our answers below.
I've never sold puts before. Where can I learn more about this technique?
First, read this brief essay from Jeff Clark. It's the simplest explanation we've ever read of how these kinds of trades work. Then, for a more detailed explanation, watch this video from Jeff. He'll walk you through some sample trades.
We also recommend reading this report from Doc Eifrig, editor of Retirement Trader. If you don't have "approval" from your broker to sell puts, you'll find simple instructions on how to get it in the section titled "How to Open an Options Account."
I've never sold covered calls before. Where can I learn more about this technique?
For a quick overview of the strategy, read this brief essay from Jeff Clark. Then watch Jeff's video presentation for a more detailed look at how these trades work.
You can also read this archived special report from Jeff's Advanced Income service. Scroll down to "How Covered Call Writing Works" for a simple explanation of the covered call strategy.
The option prices in your write-up don't match the prices in the market. What should I do?
If our suggested option trades have moved out of range, look for a similar option at a different strike price or expiration date... or wait for prices to come to you. The best days for selling puts are when prices are falling. And the best days for selling calls are when prices are rising.
What are your recommended strategies for risk management?
There's no "one size fits all" risk-management strategy when you're making several different kinds of trades. But we always recommend you spend much more time considering risk than potential profits. Remember... the Most Important Law of Lasting Wealth is "don't lose money."
As a general rule of thumb, we suggest a 15% trailing stop loss on stock and covered call trades (taking into account the income you receive). For naked put trades, we generally recommend closing out a trade if the underlying security drops 15% below your strike price.
For speculative trades, like long calls and puts and certain highly volatile stocks, we also recommend reducing your position size. For a discussion of how to figure out the right stop loss and position size, read this brief interview from our sister site, The Daily Crux.
Why are the stop losses recommended in DailyWealth Trader often "tighter" than the stop losses recommended in other Stansberry & Associates publications?
Like choosing vanilla ice cream or chocolate ice cream, it's simply a matter of taste.
Your DailyWealth Trader editors, Brian Hunt and Amber Lee Mason, believe the standard 25% stop loss you see in some Stansberry & Associates' publications is too wide. It allows losing positions to consume too much trading capital. We simply don't like that level of risk in our trades.
Of course, the drawback to a tighter stop loss policy (like a "tight" 10% stop loss versus a "wider" 25% stop loss) is that you have a greater likelihood of being stopped out by a correction. Because we publish daily, we can mitigate this drawback with much more precise entry timing. We also focus on trades that are likely to move in our direction quickly.
When we are wrong – and we will be wrong – we want to be wrong quickly, and we want the "wrongness" to produce small losses. We want to make a lot when we are right, and lose a little when we are wrong. That's why we use tight stop losses.
Will you let readers know when a trade stops out? Will you publish a portfolio?
No. Everyone's entry points will be slightly different. And we don't expect readers to put on every trade we write about.
Our mission is to point you to the best trading setups we see every day. And we'll always offer entry and exit guidelines. It's up to you to keep track of the trades you make and your own risk-management strategies.
If you need help, you should consider TradeStops, which was started by a True Wealth subscriber with a Ph.D. in math, Richard Smith. It's a simple, web-based way to track your stops. The program sends you an e-mail when one of your stops is hit. Couldn't get much easier.
You could also check out XLQ, a full-blown Excel interface that automatically brings stock quotes and company data into an excel spreadsheet for you. With XLQ, you can easily track your stops. Visit www.qmatix.com for details.
How are you calculating the "upside" and "downside"?
For long stock and option trades, the upside is our best guess at what sort of gains you can expect if things move in your favor. The downside is set by our suggested stop levels.
For covered call trades, the upside is calculated by taking the price of the stock at the time we write it up, subtracting the price of the option, and figuring the gain if the stock rises and your shares are called away...
So let's say you buy a stock at $10 a share and sell a call for $1 with a strike price of $10. And let's say the stock ends up above $10 by option expiration day. In that case, you'd figure your return by taking $10 and subtracting $1 to get $9. If you get called away at $10 a share, your gain is $1 per share. Divide $1 by $9 and you get 0.11, or 11%. (You can read more about covered call trades in this archived special report from Jeff Clark's Advanced Income service.)
For naked put trades, the upside is calculated by figuring your return on margin if the stock rises above your strike price.
So let's say you sell a put for $1 with a strike price of $10. And let's say the stock ends up above $10 by option expiration day. Your broker will ask you to put up 20% of your purchase obligation, or $2 per put. In that case, your gain is $1 per put versus the $2 of margin. Divide $1 by $2 and you get 0.5, or 50%. (You can read more about naked put trades in this report from Doc Eifrig, editor of Retirement Trader.)
How do you figure "time in trade"?
For stock trades, this is our best guess on how long it will take for our thesis to play out. For option trades, we're calculating time until the option expires. (Option expiration happens on the third Friday of the month.) For more on the basics of options, take a look at this easy-to-read guide.
What do you mean by "minimum investment"?
We can't say what an appropriate position size is for you. Every trader has different goals and different amounts of money in his or her trading account. For advice on how to figure out the right position size, read this brief interview from our sister site, The Daily Crux.
But for certain trades – including calls and puts – the minimum investment your broker will accept is one contract, or 100 options.
For covered call trades, the minimum investment will be 100 shares of stock, minus the premium you receive for selling the call. (You can read more about covered call trades in this archived special report from Jeff Clark's Advanced Income service.)
For naked put trades, the minimum investment will be 20% of the value of 100 shares of stock. With most brokers, this is the amount you need to have available to make the trade. (You can read more about naked put trades in this report from Doc Eifrig, editor of Retirement Trader.)
For trades that involve just buying a stock or fund, we generally recommend a minimum position size of $500. Any less than that and you're paying too high a percentage in broker fees.
How much money should I have in my trading account to take advantage of DailyWealth Trader ideas?
Because we feature speculative ideas along with covered call and naked put trades, we recommend you have at least $10,000-$20,000 available in your trading account.
What broker do you recommend?
We don't recommend brokers. Everyone has different needs and levels of expertise. But we do advise you take a look at this incredibly helpful guide on choosing brokers by Retirement Trader editor Doc Eifrig.
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