If you want annual returns of +75%, think small…
When traders think the potential returns from a position are too small, they often use a term that originated in the Middle Ages: small beer.
I find that appropriate since most traders think like they were born in the Middle Ages. Small beer refers to beer with light alcohol content.
I’m a small beer kind of guy when it comes to trading. Why? Historians estimate workers and sailors drank up to ten imperial pints—almost six liters—of small beer a day.
Sounds like a plan to me: Lots of small trades that add up.
Here’s one you can trade 52 times a year. Valero (VLO) is an independent refiner (and a very good one at that). As I write this, the stock is trading just pennies shy of $56.
Sell the May, Week Four 55 put—almost a dollar out of the money and $55 (to my mind) is a major support level—and you generate $80 or so per contract.
Small beer… a return of just 1.45%.
Think of yourself as a worker or sailor, make that trade 52 times a year, and generate $4,160 dollars.
Oh yeah. That’s a return of 75.64%.
Waiter, a refill please?