Hey, stock market traders. Welcome back to the channel. If this is your first time here, my name is Karl, Karl with a ‘K’. I’ve been trading stocks and options online since the early to mid-1990s. If you’re here to learn about trading or to figure out if a stock or options course on YouTube is worth the money, then make sure to subscribe to the channel. This video will cover my bottom-line opinion from my experience behind the paywall of David Jaffee’s best stock strategy alert service.
In order to see detailed insights on how I personally adapted my trading account to follow David Jaffee’s alert service, watch the videos called “David Jaffee’s BestStockStrategy | Behind the Paywall Week One” and “David Jaffee’s BestStockStrategy | Behind the Paywall Week Two”.
During the time I was following David Jaffee’s BestStockStrategy alert service, I decided to take a look at his $400 free training videos on options. He has three main training videos and a playlist of well over a hundred videos that you can learn from for free. I took the time to look over the three training videos.
Video #1 is his options trading step-by-step guide. Which offers his overall methodology including trade types, sizing, execution, and timing. Video #2 was my favorite video of his because it shows his real account P&L over a full one-year period. Video #3 was very good on the basics of selling options to premium. It had some interesting insights on how stocks, that are market leaders, and how to narrow your focus for success. David Jaffee’ perspective on trading market leaders and how that plays into his approach was good information.
One of the main points he made was that he sticks to very liquid underlyings, and I recommend this free training. After following David Jaffee’s alert service for two weeks, my account was up over 4%. Which extrapolates out to about a 48% annualized return. That is a super high return. So first I’m gonna go over what I don’t like about the service and then what I do like.
The high returns do come with risk. Since we’re selling naked options, there really is not a safety net against a significant loss if the market crashes down. And I’m not really worried about risk to the upside or selling naked calls, because volatility typically falls helping calls lose value and the market does not really crash higher. Selling naked calls does not pose as much of a risk of the potential for substantial losses. Selling naked puts has risk, but the way David does it he’s able to mitigate the risk in three of the four market types. And I explained the four market types four options premium sellers in my book called A Portfolio for all Markets. If you’re interested in my book, I have provided a link in the description below.
The real risk in the strategy is that rare circumstance when the market crashes. And since 2011, we’ve seen three market crashes in my opinion. The three market crashes were August 24th, 2015, February 5th, 2018, and in March 2020 on multiple days when the market was limit down.
There are a couple ways to mitigate market crash risk using this strategy. One is to limit exposure by limiting the size of the trades and the other is to use vertical spreads instead of naked shorts. If you were to use a strategy with naked shorts only, I would personally do it in a separate account with 10% to 20% of my total capital. I would not put all my capital into this strategy. Now, maybe if I had a small account and I was okay taking risk to try and double my account in order to build up capital, I’d risk all my capital and hope the market would not crash until my capital was built up to a certain level. Then once my capital was built up, I would divide it up and allocate 10% to 20% to this strategy. Also note that after a crash, the volatility will typically crush and this method will profit much faster than normal. So this volatility crush can provide an opportunity to recover losses, and one thing I like is that I can contact David jaffeedirectly and get a response to my questions. I’ve emailed David a few times with questions and he responds in a very reasonable time frame. Access to someone that sells a course or service is a very good sign.
Another point I would like to make is that I have seen David Jaffee talk about lowering his risk using vertical spreads. I emailed and asked him about that and he said he recognizes that tail risk is dangerous when only training naked options. And he’s currently selling naked options because the VIX is high and he does not want to buy options when they’re expensive; like they are in this current environment. He said that once the VIX falls below 20, he will switch to using vertical credit spreads. The other thing he mentioned is that while he is directional he tends to trade overbought and oversold conditions. At this moment, he’s primarily short because he believes many stocks are overextended.
He also mentioned that he understands short naked puts are dangerous, especially when the market has had a huge run-up. And that the risk, at this moment, is to the downside so he’s willing to sell calls on underlyings that he perceives to be overextended.
Another thing I like about his alert service is that David Jaffee has a good grasp of this trading concept. I like that he only chooses to trade market leaders to help illuminate surprise moves. Big moves after you get into a trade are better to be avoided with this strategy, and he does his homework on how to best mitigate the possibility of big moves after establishing a position.
And next I’m going to go over how David Jaffee executes a well-thought-out plan when a trade goes against him. On June 30th, he opened short calls on Tesla while the stock rose over 50% since he entered the trade 10 days ago. Here’s how he handled that. This video is about how David jaffee handles a trade gone bad. Which would be Tesla. He actually entered this trade on the 30th of June, somewhere in here, and you can see that on Friday July 10th, only 10 days later, the Tesla stock is up over 50% in just 10 days.
So how did he handle this? So first of all, he had Plan A, where he got in here closer to the open and he sold the position out, as you can see, for a dollar nine. So he sold a call, a 1480 call, so he saw the call way up in here 1480, right about this level, but he sold it back here for a dollar. So he was planning on just taking that dollar, maybe taking 50% of it, but he was just planning on selling that call and Plan A was just to take profits from it. But then he had to turn to Plan B. So you can see he turned to Plan B on the seventh so and is that here. Right here. So Tesla had ran up all the way to here; started it here; he went to Plan B here after Tesla was up 35%. And Plan B, as you can see was, he actually bought back the 1480 call that he had sold and he exchanged it for 1520 call so he was right in here 1480 right up here he sold this call and then he exchanged it for a call up a little higher. So he increases his probability a little bit. But then also he knows that took a debit that cost money to do it. So he sold this 1200 put. So 1200 were down in here, lets see. So he sold a put at this range, the 1200, and the reason why he did that was this Plan B was to bring in a credit. Overall, this trade bought in another 32 cents so you can see. And as he got closer to expiration, so he put in this trade back on the seventh, and then the tenth came around, and he went to Plan C.
So what was Plan C? So you can see Plan C occurred right at the end of the day. He wanted to make sure all the extrinsic value was out of that 1520 call that he sold. So there was hardly any extrinsic value and he turned around he did a diagonal. So he bought this 1520 call, to close it out. And then he sold an 1830 call so he went way up into here at this level and sold a call. So he basically exchanged the call around here and made a more higher probability, sold it for up here. And because this call has another week to go, this new one that he sold, it doesn’t expire for another week as opposed to the one that expired today. He was able to exchange those two for another 72 cent credit. So you can see here how he had added up credit every time so Plan A brought in credit, plan B brought in credit, Plan C brought in credit, and he’s a lot safer. He’s got a pretty high probability situation all the way up here at 1830, and he has one week to go.
So it’s very interesting on how he trades when he gets into trouble. I mean, that’s the key thing you want to see. What does he do when he gets into trouble? And what he’s done so far is actually pretty good from what I’ve seen. I mean, if you see a stock move up 50% in 10 days after your short a call, you’re going to be in a lot of trouble but he’s able to mitigate that risk and he’s done pretty well with it.
The probabilities are on your side. David Jaffee places high probability trades which means that the trades take profit a high percentage of the time. Even when a position goes against him he, has a Plan A and Plan B and Plan C that pushes a position into another high probability situation. The odds that one of his positions will take a loss is very low, and you can build up capital very quickly using this method. And here’s what I like the most, David Jaffee shares his real P&L. He actually started a small account just for this purpose. In my opinion, providing P&L is the highest level of credibility and as I mentioned in my channel purpose, if I find someone that I think is credible I will say it, and this guy is credible. And in fact, I contacted him to ask for an affiliate link because I am recommending his free course and his alert service. So see the link in the description below. If you sign up I highly recommend using a paper trading account until you get a good feel for trading the system. The easiest way to lose money is through trade execution errors, and those errors need to be fixed before trading with real money.
Link to David Jaffee Alerts: https://bit.ly/3fmmruSBeststockstrategy
Link to my book: https://bit.ly/aPortfolioForAllMarkets
Link to my FREE Course: https://real-pl.com/landing-page-1/
Link to Go Fund Me: https://www.gofundme.com/f/help-suppo…