Opinion Versus Fact! – Options Education
The most basic aspect of trading is learning to differentiate between what is FACTUAL and what is OPINION. If you stay interested in the financial markets long enough you will discover that there are a lot of sharks out there who have become expert at making that task very difficult.
Several subscribers of this newsletter have contacted me over the last few weeks asking for my opinion of certain promoters who also advocate Options Trading Strategies. I make it a point to not comment on other services. However, without mentioning any names I feel that it is necessary to inform you of some of the most common and deceptive practices used by some promoters.
One of the great appeals to Options trading is that there are so many possibilities and trading strategies that can be used to manage risk. However, most services when promoting options like to demonstrate the tremendous REWARDS that are achievable. Although tremendous gain is possible, options are considered speculative instruments and potentially very risky in untrained hands. Since an Option gives the owner the right to buy or sell something for a specific period of time the OPTION is considered to be a deteriorating asset. Since all options have an expiration date, if all things are considered equal, the closer you get to that expiration date the less that the option will be worth.
I decided to investigate, and this article is the first installment in my investigative report. I believe I have cracked the ‘Magibon Code’ as you will see. I believe there are many facets to it, and the quest to find the answer will take us into many areas of human nature, and also the nature of the internet.
You only have to look at the many comments of baffled viewers to realize that the phenomenon is an extremely complex one. Does magi herself know all the answers? That’s an interesting question, that I intend to ask (and answer) in a later article. But for now I want to look at the reason why her videos are so compelling. First it’s necessary to deal with the question of sex. And for reasons that I’ll look at in more detail later, I believe that her popularity has very little to do with sex per se.
Now the promoters bait the hook……. Even though your profit was $50, your return on investment was 50%. This is indeed factual. Think of how EASY it was to earn that return, after all you did it in only one day! So since there are 365 days in a year, to calculate an annualized return we would multiply 50% times 365. The result is a staggering return of 18,250%. (Now if your stomach is turning by this type of deceit, GOOD!)
I offer you the MATH below:
Buy Price 1
Sell Price 1.5
Profit $0.5000
Gross Profit $50.00
% Return 50%
# of Days 1
# of periods in a year (365 days) 365
Initial $ Investment $100.00
Net Profit $50.00
Annualized Return 18,250%
Now what infuriates me about these promoters is how successful they are at providing the public with this type of “financial snake oil!” One promoter in particular has actually written a best-selling book on options that is filled with these types of misleading and deceitful computations. Hard to believe but an 18,250% return will barely pay for the price of the book!.
Although this is a technical point. many of you have probably realized that the above example is further complicated by the fact that the financial markets are not open 365 days a year. If you take weekends and holidays into account you literally only have 252 days to play with. So the more mathematically oriented con men would offer you the following calculation:
Buy 1
Sell 1.5
Profit $0.5000
Gross Profit $50.00
% Return 50%
# of Days 1
# of periods in a year (252 days) 252
Net Profit $50.00
Annualized Return 12,600%
Hey 12,600% annualized return…sure beats those low yielding MUTUAL FUNDS!
Now, I wish I was making this stuff up, but my mailbox is filled everyday with variations of these examples. No mention is ever made of the fact that your profit BEFORE commissions was $50 bucks which is not bad and might pay for DINNER out on the town.
This may seem extremely elementary and basic to many of you. However, I have seen many extremely successful individuals taken in by this type of deceit. I think you’ll agree that although the numbers are accurate they are completely unrealistic and the INTENTIONS of the promoters are what is in question. Nonetheless, you’d be surprised how many $3,500 seminars the above example will SELL.
Her appeal is very similar to that of La Mona Lisa, the famous painting by Da Vinci. Mona has kept everyone guessing for hundreds of years as to just what it is that she’s got to smile about in that mysterious way she has? Magibon is enigmatic in the same kind of way. It is that enigma that is playing a large part in attracting those many thousands of viewers. This is what I intend to address in later posts.
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