In a bearish market it's good to find some of the bullish trades.
My friend and teacher, Mojo, at insanemoney found one such trade. He put on a diagonal but I'm much more of a vertical fan. The "fire and forget" method of setting for max loss (see bottom of post for explanation on max loss) and letting the trade expire is more my type of trade.
If you look at the chart there is a strong uptrend and it just bounced of the 50 day. I put in a Put vertical for the Feb 70/65 and got a credit of $1.59.
ROI is 1.59/3.41 = 45% in 4 weeks!!
Max Loss: Any losing trade can not equal more than %2 of your portfolio before exited. Example: 100K portfolio has a %2 max loss of $2,000. If your trade is risking $4.00 per contract you multiply the risk * 100 (number of shares in a contract) $400, and divide that by your maximum allowed loss per trade (2k) for the number of contracts you can trade. 2000/400 = 5 contracts.
**Note** When using a stop loss, the stop loss price is the "risk" of the trade.
