The Automatic Cash Machine
April 3, 2008 – 5:13 amWell, you asked for cashflow strategies … and here is a really great one!
We have edited some of the DVDs from the Homestudy Program to give you “The Automatic Cash Machine” video. This is one of the share market strategies that delivers instant cashflow. We think it is a pretty exciting strategy and we think you are going to really like it!
Please give us your feedback on it in the comments box below.
Get yourself a pen and a piece of paper and get ready to take notes as you watch how this exciting strategy works.
So, sit back and get comfortable … and press the “play” button …
Get the Flash Player to see this player.
By the way, the Australian Stock Exchange (ASX) website that we try to show you on the video (it may be a bit small to read) that has an intro to Options is: asx.com.au/programs/vignettes/lesson4.html
The ASX also has a great investor education centre at asx.com.au/investor/education/index.htm
And, they have a guide called “Getting Started In Shares” for download at: asx.com.au/investor/pdf/getting_started_in_shares.pdf
Their full Options (or Exchange Traded Options - to give them their full title!) education centre is at: asx.com.au/investor/options/index.htm
Ian
18 Responses to “The Automatic Cash Machine”
Please advice on a Full Services Broker for this trading strategies…I am in Auckland, New Zealand.
Steve
By steven afford on Apr 3, 2008
This was Very interesting, I would like to know more about this, How do you pick the shares to take up thier options.
Regards
Tony
By Tony on Apr 3, 2008
Hi, and thanks Again! I too would like to know of a Full Servise Broker in Australia, and about picking shares to take up options. One more thing: What would be a reasonable amount to start trading with?
By Dian George on Apr 5, 2008
I thought that it was a great strategy and would like to have a closer look at this.
Peri
By Peri on Apr 5, 2008
Hello Ian.
Is there a resource freely available that will give step by step instructions on how to get started (paper trading) using the strategy described in this video and also for trading CFD’s
Thanks for sharing this ifo.
Best regards
MarkR
By Mark Rattray on Apr 5, 2008
Hello
I would like to know how the options are picked can you please give me the information on this?
By Nathan on Apr 11, 2008
Hi,
Just a quick note …
The full service broker that we recommend is Kinetic Securities. Kinetic is headed up by Angus Knight. Angus presents some of the topics in the Homestudy program and knows all the strategies really well.
Kinetic work with clients in Australia and in New Zealand. Their Aus. phone number is 1300 306 114 and their NZ number is 0800 507 015. They have a website at http://www.KineticSecurities.com.au.
And … we have some great news!!!
Angus has agreed to answer your questions for you! We are really REALLY pleased about that. He is a very busy person and getting some of his time to do this is fabulous news. We’ve just got to schedule the time for it now. We will record him answering your questions and will put the recording up for you as soon as we can (sometime next week I hope!).
And, … yes … if you have another question (stock-broking related
) for Angus, then post it here now and we will do our best to get Angus to answer that one too!
All the best!
Ian
By Ian on Apr 11, 2008
So who will tell us how the options are picked?
By Nathan on Apr 12, 2008
This movie has really inspired me to look further into this stratorgy. Are these things covered in the course?
By Lisa on Apr 12, 2008
In Australia also looking for a broker
By Lisa on Apr 12, 2008
Hi Nathan,
Yes, Angus will talk about this further when we do the interview with him. I have my own opinions about how I chose which shares to trade but it is better that you hear an expert talking about it!
Ian
By Ian on Apr 12, 2008
Hi Lisa,
Yes, this has been taken from the course. We have edited it down (quite heavily!
) so the course covers it in more depth.
And, I recommend Kinetic as the best broker that I know of to support you with this trade strategy. They will guide you on which companies to trade, when to trade, how much to trade etc. That’s why I am so keen to do this interview with Angus as I think he will be able to share some really useful information that will help you to get started with the strategy. I just need to get a time scheduled into his busy diary … (hopefully in the next few days!).
Ian
By Ian on Apr 12, 2008
Hi again
Have you scheduled an interveiw with angus yet if so when will the video be out? Because as soon as i learn how to pick the shares to implement the strategy on i will start paper trading.
By Nathan on Apr 16, 2008
Also what is a good resource to papertrade with? I have looked around but havnt found much at all
By Nathan on Apr 16, 2008
Hi.
Thank you soo mutch for the DVD and your e-mails, I have learned alot.
This seems lika a pretty solid trading strategy.
But when you do the math im not as convinced anymore.
Please correct me if im wrong her.
If i am going to use the examples from the video:
80% chance of winning
20% chanse of loosing
if you do ten trades:
8 wins maximum = $2800
2 lose maximum= $2000
That means you win $800 on ten trades, witch doesent seems like as solid as in the beginning?
In that example i havent even calculated the trades where i have to buy myself out etc.
With todays volatile climate i thinkt its hard to achieve 80% winning, maybe 50%.
Then the calculation looks like this:
5 wins = $1750
5 lose = $5000
= - 3250
What do you guys think about that?
By John on May 16, 2008
Hi John,
Great to hear that you are learning from the information. Thanks for the feedback.
Now, let’s have a look at the numbers …
So, you have a scenario of $1,000 risk and $350 return. So, by putting all 10 trades on, you will receive 10 x $350 = $3,500 up front.
Then, if 20% of these “go bad” then, what Andrew says on the video is that one third of that 20% will make the same money but over a longer period of time, one third will make less money and one third will lose money.
He goes on to say that even the third that loses money will lose some part of your risk. Only in the worst case would it be the full amount of the risk.
So, let’s take an example where one third of 20% loses half of its risk. And, as we only have 10 trades, let’s say that one trade loses half of its risk, one trade breaks even and the other 8 are “winners”. That would give us $3,500 up front less $500 for the one that lost half its risk and less $350 for the one that “broke even”. So, that gives a return of $2,650 on a risk of $10,000. That’s a 26.5% return over a few weeks.
Does that make sense?
I think you make a good point about the current market conditions. I don’t know whether the 50% win/loss rate would be right. But, if it was, then assuming you lost half your risk on a third of the 50% of trades that “went bad” then the numbers would be roughly like this:
10 x $350 premiums up-front = $3,500. Less say 2 x $500 for losing trades and say less 2 x $350 for “breaking even” trades gives a return of $3,500 - $1,700 = $1,800.
Of course, as Andrew says, if the whole market were to take a sudden move against you then your ARE risking the full $10,000. So, if that were to happen, you would receive the $3,500 but end up down $6,500.
You are also right that there are extra costs that have not been factored in - particularly the transaction costs. And, the smaller the investment fund, the larger these costs are as a percentage of the fund.
Let me know if these sums make sense.
There are a few keys to success in trading in my opinion. One of these is to have tested what you are going to do thoroughly, across all market conditions, so you know (in advance) how well your trading will work out in real life. This means that you will have confidence in the trading system working which makes it heaps easier when you are actually trading - as (hopefully) you will not have any surprises.
So, that leads on to say that if you are not confident that your trading system will work, then don’t trade it!
Also, there are some traders who have different trading systems for different market conditions. It takes more effort to work it all out in advance and test it but it can be a good way of getting solid returns whatever the market is up to.
Does that help?
Ian
By Ian on May 16, 2008
Thanks, category locality, has added in elite.
By impellFet on Jul 3, 2008
Your blog is interesting!
Keep up the good work!
By AlexM on Aug 19, 2008