45,650% Overnight?! Decoding the SPLK-CSCO Trade Mystery...

[Image] 45,650% Overnight? Decoding the SPLK-CSCO Trade Mystery… Towards the end of last week, a friend of mine showed me a trade that had been circulating on social media as if it was some incredible achievement… In reality, it’s one of the stupidest trades I’ve ever seen (more on that later)... But more importantly, the fact that some traders are admiring this kind of asinine move can potentially teach you a valuable lesson. In the options market, if you start trying to hit home runs (or grand slams), you’re setting yourself up for failure. You need to strive for consistency. Hit singles over and over again. Don’t go for outlandish trades (like the one we’ll break down today)... Keep reading and I’ll show you what I’m talking about… The One Catalyst That Sparked It All… First, let’s talk about catalysts. A significant enough catalyst can cause BIG swings in the underlying stock. (Think earnings reports, press releases, Fed meetings, geopolitical factors, etc…) And if the underlying stock moves 10-20%, the directionally-correct, near-term options contracts can gain hundreds or thousands of %. Naturally, this is a tantalizing draw to a lot of newbie traders looking to make millions overnight. But it’s also a huge mistake to seek out these kinds of trades because they’re impossible to foresee with a solid strategy. You have to either get Powerball-level lucky or break the law. Speaking of that, the trade we’re gonna talk about next is so sketchy that I think it could potentially catch the attention of Federal regulators… 45,650% … Overnight?! As mentioned earlier, last Thursday, I got forwarded the following screenshot: This trader allegedly turned $22,000 into $10 million+ … overnight. At first glance, this may look incredible … like something to aspire to. But I’m gonna show you why it’s actually exactly the opposite… Ask yourself: How could this individual have known about the deal between Cisco Systems Inc. (NASDAQ: CSCO) and Splunk Inc. (NASDAQ: SPLK) before the information was made public? Are they the ‘Nostradamus of trading,’ or did they possibly front-run a deal they knew was about to go through? I’m not accusing anyone of anything, but simply pointing out how weird this looks (and how bad it is to shine a spotlight on this type of trade). WARNING: There’s A Hidden Factor in This Trade… Another factor at play here was the implied volatility (IV) on the options going into this trade… Usually, the market has some expectation of an upcoming catalyst (like a scheduled earnings print), causing the IV to rise. In these cases, it’s pretty much impossible to make 45,000% returns because the premiums of the contracts are more expensive. But heading into this crazy trade, the IV on SPLK was just 34% with a 97% chance of closing out of the money. No one had any idea that CSCO was going to acquire the company, market makers included. Again, it’s impossible to predict these moves with any sort of conviction unless you have illegal, non-public information. I don’t want any of my students thinking they’re gonna make 45,000% in one trade. This sort of mentality is a recipe for disaster. Take it from me… I didn’t survive 20+ years in the trenches of Wall Street — watching hoards of over-eager traders come and go — by taking stupid risks like this. (On a professional trading floor, if you nail a 15% trade overnight, you’re treated like a golden god. This is because institutional traders know that marginal gains compound to create enormous money piles. There’s no need to shoot for the stars, so to speak.) In fact, my boss would’ve fired me immediately had I made this trade during my days on Wall Street. If you follow my ‘Burn Notice’ trades, you’ll notice I almost never make trades that bag hundreds of %. This comes from experience. You don’t need to make such large returns within a single trade. Consider the big picture: The SPDR S&P 500 ETF Trust (NYSEARCA: SPY) returns an average of 9% per year. Think about that. If you make just 10% on one trade, you’re outpacing the benchmark index for the entire 365 days. So, don’t get ahead of yourself. Don’t admire these ridiculous ‘YOLO’ plays. Be consistent, disciplined, and steady. Nurture Your Long-Term Vision In his massively popular book Outliers, journalist Malcolm Gladwell suggested that nearly every “master” of a difficult skill had spent at least 10,000 hours honing their craft before achieving true mastery. To put this in perspective, that’s about four hours of practice per day for ten years (or two hours for 20 years). However, remember that every trader is different. This number should be taken as a rough guideline. It may take you far less than 10,000 hours to get your footing in the market, or it could take considerably more time… Me?! I’ve been trading since 1998. This means I’ve spent tens of thousands of hours trading, charting, and thinking about the market. In other words, my success didn’t happen overnight and neither will yours… To succeed over many years (or decades) in the stock market, you need to have a clear, long-term vision. Here are three simple ways to think about it: - Trading isn’t a zero-sum game. There are trillions of dollars circulating throughout the stock market. Just because some other trader makes a huge trade doesn’t mean that an opportunity is being taken away from you. - Forget about instant gratification. Don’t expect to turn $1000 into $100,000 overnight. Understand that the vast majority of traders lose money in the beginning. Trading is a marathon, not a sprint. - Think about the big picture. The best traders I know are the ones who consider the big picture. They take a calculated, long-term approach to their trading trajectory. They have a well-thought-out game plan and execute it consistently. Closing Thoughts Take these three lessons to heart and I bet you’ll be a better trader for it. Stay Street Smart, Jeff Zananiri P.S. See how a former software engineer launched one of the boldest experiments in financial research history and earned $1.9 million in trading profits by the age of 25 … [Click here to RESERVE YOUR SPOT NOW!](   66 West Flagler Street STE 900 Miami, Florida 33130 United States [Facebook]( [Twitter]( [Instagram]( [YouTube]( [Click Here to Unsubscribe]( **Our gurus teach skills others have used to make money. Any results displayed are extraordinary and are not typical and will vary from person to person. For more info read our [Earning Claims Disclosure]( About: Making money trading stocks takes time, dedication, and hard work. My goal is to teach you how I have succeeded in the market, but you may not achieve my results. 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