This is a “no brainer” to get long on Oct. Lean Hogs at a break above the Triple Tops (if it happens) and buy a 56.00 Put for $808.00 for protection. We will risk only $500 on the trade. Figure 8.8

We placed the trade and as you can see, we are up to $846.00 on the trade but look what just happened; the market did a 180 on us and headed straight back down. Figure 8.9

This drives me crazy! Why me Lord? I’m a good person, I don’t treat people badly, I’m honest, I work hard and all the other reasons I can think of why this should not happen to me.

But the fact is that it did happen and now what am I going to do about it? Well, the first thing I’m going to do is to protect the $843.00 I worked so hard for and the next thing I’m going to do is try to make some more money if the market doesn’t straighten up and do what I told it to begin with. After all, I’m greedy and won’t settle for a mere profit of $843.00.

But there are so many things I could do. I’m confused, frustrated, and bewildered at this point. Ah, I know what I’m going to do. I’m going to get out of this mess with some options. But you knew that all along didn’t you.

Look at Figure 8.10 and you can see that I have sold one 67.00 Call for $664.00. If the market continues down this short Call will go down in value which is a profit for me. And at the same time, my Long Put will increase in value which is profit for me. Seems like a good idea! Of course, I would lose on the long Futures but hopefully, my short Call and Long Put would make up for a lot of it.

Now, I’m sure that I did not even have to tell you to do this because you already knew you could do this and you are hopefully two steps ahead of me by now. You should be nodding your head in agreement about now!

Let’s take a look at Figure 8.11 and see what happened. We almost had to exit this trade based on our trading plan which was to exit if the price came down below where we entered the market long on the futures contract at 58.40.

The price came right down and almost hit 58.40 but then bounced off forming double support. You can’t see it on this chart but at the time the double support was formed the account was still up over $500 due to the fact that we collected the premium on the 67.00 call we sold and our long Put was starting to gain in value again over the last few days from where it had been too.

Look in the red box on the left and you will notice that we made a net profit of $2,400 on this trade and at no time did we ever have a drawdown in our account. According to our plan, we were going to exit the trade and take profits at 67.00 which is exactly what we did. Aren’t options wonder.