Are 100% Returns In Less Than 72 Hours Possible?

| 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!

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.

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.

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Category: Currency Trading

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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