FAQ’s

Our Founder has over 20 years of experience in the financial industry and as a professional trader (see About Us). Option Empire was founded as a means to educate and help investors achieve financial success through our investment strategies. Unlike too many other services (our competitors) whom are often novices with “limited” practical experience, we have the experience, knowledge and track record with proven and consistent results.

Recent market meltdowns have exposed many of our competitors. Very few have navigated the markets without significant or even crippling losses. We have! Unlike many of our competitors, we actually have the experience and are true to our commitments to preserve capital. Although we obviously can not and do not guarantee complete safety from losses, we remain steadfast in our commitment to adhere to our disciplined investment approach that produces consistent profits and manages risk to preserve capital. See our performance.

Why “options”?

Investors utilize options (calls and puts) for a multitude of objectives and purposes. Some strategies can involve a great deal of risk (speculative strategies), while others can actually reduce investment risk (hedging strategies) or enhance portfolio returns (income producing strategies). Even within a specific “option strategy”, the strategy can involve more or less risk depending on how the strategy is applied.

With options, particularly with “income producing” option strategies (writing/selling options), your maximum profit is generated at the time the option positions are entered into your brokerage account. In other words, your potential profit is realized “upfront”, rather than “buying” an asset and realizing a profit at some point in the future, only if that asset appreciates in value. Unlike “owning” stocks or investment shares with the expectation of appreciate in value, your profit is determined by the amount of “net premium” collected from writing the option position. Your “profits” are therefore primarily dependent upon the expiration of those options and keeping your “net premium” and not necessary dependent on the performance of the underlying investment or security. To learn more about options and option strategies, visit CBOE or optionsXpress®.

What is a “credit spread” option strategy?

The “option strategy” we use is referred to as a “credit spread”. A credit spread option strategy is an “income producing” strategy which has a very unique approach. These distinctions are critical to understanding why “credit spreads” can be so successful and why they are different from other types of investing. In essence, a “credit spread” option strategy allows you to collect a “net premium” (profit) without “investing in” the market and regardless of whether the market goes up or down!

A credit spread option strategy is generally considered a “low-risk” option strategy, primarily because an investor can definitely calculate the maximum potential gain (profit) and the maximum potential loss (risk to capital) for any “spread” position. This is very different then most types of investments. When investing in stocks, for example, investors theoretically have unlimited upside (profit) potential and unlimited downside risk (100% loss). “Credit spreads” can be used in situations in which an investor is “neutral”, “bullish” or “bearish” on the outlook for a particular security or market index, or believes the index will stay within a certain trading range over a specified period of time.

This strategy is called a “credit spread” option strategy because you are collecting a “net credit” (cash), otherwise know as a “net premium”, at the time your credit spread option trade is executed in your brokerage account. Your account actually receives cash “credit” because you are “selling” an option on a particular security (Index or ETF) at a certain strike price and expiration and simultaneously “buying” an option, on that same security and same expiration, at a strike price further away from the particular security “current price” (Index or ETF). The option being purchased is farther “out-of-money” than the option being sold and thus costs less, resulting in a “net credit” (profit). There are always two options, otherwise know as “legs”, when placing a “credit spread” trade. See Index “credit spreads” examples”.

To recap, “net credits” (profits) are collected upfront and deposited into investor accounts immediately. Again, this is quite different than relying on an asset appreciating to make a profit. Also, a credit spread investor “profits” from generating the “net credit”, not from an underlying assets appreciating or depreciating.

Second, once the “credit spread” is executed in your account, the objective is for the options to decrease in value, or “expire” by the expiration date. Options with a shorter duration have a greater “time decay” and, in theory, have less risk than longer term options. In other words, the term “long-term investing” can be a “dirty word” in the world of credit spread option trading. In fact, our strategy is based on very short term hold periods (typically 20 – 45 days) see Our Trading Strategy & Philosophy. In the world of options (namely “writing” options), shorter “hold periods” typically means less risk. So, unlike the “buy and hold for the long-term” wisdom which is often espoused regards stocks, one of the key ingredients to preserving capital (risk management) with credit spread options is SHORT TERM POSITIONS.

Are there different types of “credit spread” option trades?

Yes. Again, all “credit spread” option strategies are “income producing” strategies. There are two types of credit spread option strategies – Bull Put Spreads and Bear Call Spreads.In both cases, however, a net “credit” is generated and credited to your investment account immediately upon executing the order. The Bull Put credit spread utilizes “put” options and assumes a neutral to slightly bullish outlook, for a particular index, over a specified period of time. On the other hand, a Bear Call credit spread assumes a neutral to slightly bearish outlook, for a particular index, over a specified period of time. The beauty of a conservatively placed “credit spread”, whether a Bull Put or a Bear Call, is that you don’t even have to necessary be correct in the market direction in order to profit! See “Our Strategy & Philosophy” and “Credit Spread examples”.

How do you profit with “credit spread” options?

Unlike many other types of investments where “profits” are dependent upon the asset “appreciating in value”, your “credit spread” profit is determined by the amount of “net premium” collected from writing the option position. This “net credit” (cash), otherwise know as a “net premium”, is generated “upfront” once the trades are executed within your investment account. Your maximum “profits” are therefore primarily dependent upon the expiration of those options and keeping your “net premium” and not necessary dependent on the performance of the underlying investment or security.

Maximum Profit = “Net Credit” Received

If other words, ”Maximum Profit” equals the money received from “selling” one option, minus the money paid for buying another further “out-of-the-money”option.

Generally, we provide trade recommendations which yield a “maximum profit” between 3% – 7% per option cycle (approximately a 20 -45 day time period). Note, however, that brokerage commissions and fees will also reduce your “net credit” and should be considered when evaluating your net profit.

Do “credit spread” options only profit during certain market conditions?

No. Again, credit spread “profits” are not dependant upon the markets going up, or down. Profits are simply derived form the “net credit” generated from an executed spread position and the expiration of those options (or closing out the positions for a profit prior to option expiration).

Can I lose money with your service?

Yes! We work diligently to offer our subscribers conservative trade recommendations relative to the inherent risk associated with the market. However, extreme volatility (both upside and downside) can force a losing trade. A “losing trade” does mean losing money.

What are the “risks” involved with “credit spread” option trades?

Although considered a low to moderate risk option strategy, this does not mean guaranteed, “risk-free” or easy. Losses can and do occur from time to time. However, the very fact that “credit spread” investors are net “sellers” of options (writing options) and nearly 85% of all options expire worthless means you have a much greater advantage over most option “buyers”. To determine your maximum potential loss, the following formula is used:

Maximum Loss Potential =

Difference between Strike Prices – Net Credit Received

In the event the underlying market index does move dramatically in the “wrong” direction for our “credit spread” position, we always recommend placing a “contingent trade” to close out the positions if the underlying index reaches the first option strike price. A contingent close order should always be entered after every successfully executed open order. These orders are designed to close credit spread positions, in the worst case scenario, and limit a potential maximum loss scenario.

Can you explain your index “credit spread” strategy?

Absolutely! For a detailed explanation of our approach and disciplined methodology, please read “Our Trading Strategy & Philosophy”.

Can you explain index “credit spreads” with some examples?

Yes. Again, although the particular market index to base the credit spread may vary from cycle to cycle, the type of credit spread will always be either a “bull put” or “bear call” credit spread. See “Credit Spread examples”.

Why isn’t everyone investing in “credit spreads”?

Good question! We asked that same question years ago when we were first introduced to index credit spread option strategies….and we had been “in the business” for years! This was, and still is today, a very common question. Options, and for that matter the credit spread option strategies, are certainly not new to the “world of investing”. The use of options dates back many, many years. The Japanese used very sophisticated option and option strategies four centuries ago to hedge and speculate on the rice industry. Today, the options markets are a huge and dynamic marketplace (CBOE). Options and option strategies are used extensively by most professional traders, institutions, portfolio managers, mutual funds, pension funds, hedge funds and insurance companies. Most retail investors, however, rarely expand their investment horizons beyond the traditional investment vehicles and investment strategies (i.e. stocks, bonds, mutual funds, ETFs).

In our opinion, there a few basic reasons for “Why isn’t everyone investing in Credit Spreads?”:

1) Most people have never heard to them!

We had been in the industry for years and had never been exposed to “credit spreads”! Most retail and “do-it-yourself” investors typically have a difficult enough time just trying to make sense of the world of stocks, bonds, mutual funds, ETFs, and basic asset allocation models. Generally, most people are never exposed to investment ideas or strategies other than the typical “conventional” investments – whether through their employers and benefit plans, reading financial publications or watching the “financial news” channels.

2) Has Your “Advisor” mentioned it to you?

Most financial advisors are generally “good people”. But, to be honest, most “advisors” are in the business of collecting assets and generating fees or commissions. Finding the most effect investment strategies and preserving capital are typically not their primary objectives. Moreover, most of the major financial institutions do nothing to promote, develop or offer alternative investment strategies to their clients. Sad, but true. What they perceive as the complexity of the strategies and the potential liability issues surrounding “options” prevents them from developing and offering investment alternatives to their clients. Keeping the “status quo” is much easier for entrenched bureaucrats and sales oriented organizations….and as long as they keep attracting and retaining client assets, why change?

3) Options are often perceived as “risky”!

Many folks associate “options” with complexity and speculation. This is “code” for “I don’t understand them and I would probably loss all my money”! In reality, however, professional investors understand and use options primarily to “hedge” portfolios or as “low-risk” strategies to enhance returns and produce “income”. It is important to not only understand “options”, but the actual levels of risk and potential reward for the various option strategies. Even within a specific “option strategy”, however, the strategy can involve more or less risk depending on how the strategy is applied.

4) Making profits in Up and Down markets is “counter intuitive” to most people!

Yes, it is that “sounds to good to be true” reaction many folks have initially. One of the BIGGEST obstacles we face today is that most people really do not understand how an investment strategy can profit in any market, ESPECIALLY A DOWN MARKET!! Unfortunately, most people have a tendency to dismiss things that they do not understand or simply just don’t make sense to them.

Do you currently use other option strategies?

No. Currently, we only utilize index “credit spreads”. There are many types of trading strategies available using options (credit spreads, debit spreads, Iron Condors, butterfly spreads, etc.) and each as certain advantages and disadvantages. Although we remain flexible in our trading approach and strategies, we are committed to our objectives of preserving capital (managing risk) while generating consistent returns over time (profits). And, while we reserve the right and flexibility to expand beyond “index credit spreads” at some point in the future, we currently do not see compelling opportunities at this time which would justify the additional risk.

Do I have to be an “expert” trader to join your service?

No! Absolutely not. Most of our subscribers are certainly not professional traders. In fact, most of our subscribers are simply average investors with jobs, careers and busy lives. We do not expect you to be an “expert” option trader, nor is it our objective to transform you into one. Our objective is to make these investment opportunities available to the investing pubic. Also, we strive to make using our service as effortless and turnkey as possible without you having to be, or become, experts or spend an inordinate amount of your time! You have the choice to be as involved as you wish. Some subscribers like the “hands on” involvement while others like as little involvement as possible. See Auto-trade.

How much “time” is required by subscribers?

Good Question! Many folks are deterred from taking control over their investments due to their lack of expertise and/or the time commitment often necessary to do so. The purpose of our Options Advisory Service is not to turn subscribers into professional traders or to consume an immense amount of their time. On the other hand, subscribers can spend as much time learning, researching and analyzing as they wish. For those subscribers who recognize the opportunities and want to participate in our service with very little effort on their part, Auto-trade may be the perfect solution for those individuals….learn more about “Auto-trade”.

Are there resources available to learn more about options and option trading?

Yes. We strongly believe that educating yourself is extremely beneficial in developing a comfort and comprehension of trading vehicles and strategies, and will ultimately aid in the success of your investment endeavors. For that reason, we provide resources to assist you in gaining more knowledge and understanding of the world of “options” and investing.

To learn more about options you can start with the free courses at the Chicago Board of Option Exchange (CBOE). One popular learning exercise is to “paper trade” or experiment in a virtual account (i.e. not with real money!) You can practice “paper trading” using these virtual accounts by going to CBOE’s Virtual Trading System. Also, there is an extensive educational learning center, as well as a virtual trading feature, available at optionsXpress®.

How do I get started?

Getting started is easy! Learn more about getting started at Getting Started!

What type of “account” do I need?

Trading index “credit spreads” options requires you to have a brokerage account. In addition, you must obtain the necessary option “trading level” prior to placing or executing our recommendations. For a list of our recommended brokerage firms, please see “Getting Started!”.

Which brokerage firm should I use?

We suggest using brokerage firms that can facilitate timely, and cost effective, executions of index credit spread option trades. Ultimately, you may choose any brokerage firm you wish. We have provided a list of brokerage firms on our “Getting Started!” section which we suggest members consider as viable brokerage firms. If you wish to auto-trade your brokerage account, however, you must have you brokerage account held at optionsXpress®. At this time, we only support auto-trade with optionsXpress and their “Xecute®” auto-trade program.

How much money do I need in my brokerage account?

We suggest you verify with your brokerage firm as to any account minimums as well as their commissions and fee schedules.

How much should I invest in index “credit spreads” options?

There is no correct answer for this question. The amount of money you invest in index credit spread options, or any investment for that matter, is a personal decision and must be made based on your goals, objectives and risk tolerance. There are, however, a couple of issues and cost considerations to evaluate in making this decision. First, most brokerage firms typically have a minimum initial investment necessary to open a brokerage account (make sure you have a least the initial requirements). Secondly, we suggest you include all trading costs (commissions) and our membership fees when evaluating your “net profits”. As a general rule, we suggest an account size of $10,000 or more. That is not to say, however, that a member can not have less than $10,000.

Do I have to invest my entire brokerage account in “credit spreads”?

No, absolutely not! The amount of money you wish to invest is completely your decision. You can designate a portion or percentage of your brokerage account(s), or the entire available capital. Each investor must make a prudent determination as to the amount of funds to designate to option trading. With optionsXpress “Xecute®”, you can designate us to auto-trade your account(s) based on a percentage of your available cash, a percentage of your buying power, or even a fixed dollar amount. Once the auto-trade feature is elected, you may change this designation, and any of the parameters, at any time you wish through your brokerage firm.

What are cash/margin requirements for trading index credit spread options?

Again, we suggest contacting your brokerage firm to confirm their cash/margin requirements for index “credit spread” option trading. Not all firms are identical in calculating cash requirements. With regards to optionsXpress, the following formula is used to calculate the cash requirements per option contract:

(Option Strike Difference – Net Credit) x 100 = Cash Requirement (per option contract)

For example, if we assume a 10 point strike difference and a $.50 net credit, the cash requirement per option contract is calculated as follows:

($10.00 – $.50) X 100 = $950.00 (per option contract)

Do you have access to my brokerage account(s)?

Absolutely NOT! It is important to understand that we do NOT have access to your account or account information. We simply act in the capacity of an Investment Newsletter Publisher and NOT as your Investment Advisor. Your brokerage accounts are held in your name(s), directly through your broker. By law, we do not have access to your account and are never privy to your account information (such as account balances, positions, option allocation percentage, contributions, withdrawals, performance, etc.). We do not have any authority to withdraw money or funds from, or deposit money or funds into, your account and at no time have possession of your money. You have absolute and complete control over your account AT ALL TIMES. The only activity directly related our service is auto-trade. Through auto-trade, you can initiate the “automated trade placement” feature through your brokerage firm. Once again, however, you have complete control to initiate or terminate this feature at any time. In addition, you have the ability to change or modify any or all of the allocation parameters and features at any time. To facilitate the auto-trade feature, brokerage firms (such as optionsXpress®) provide us with the names, email addresses and subscription information of account owners who are currently active subscribers to “Xecute”.

Can I deposit or withdraw money from my account at any time?

Yes. Again, you have complete control over your account and the funds within your account at all times. Note, however, that margin requirements must be met and maintained within your account if you have security positions with margin requirements. Also, holding positions or securities within your account may limit the liquidity and accessibility of your funds. It is important to read and understand all the terms and conditions of your brokerage account with your brokerage firm.

Can I invest in index “credit spreads” within my IRA account?

Yes! Most of the brokerage firms that we recommend allow index “credit spread” trading within IRA accounts. This is not to say that all brokerage firms allow this type of trading within IRA accounts. If you do not hold your IRA(s) at one of our recommended brokers and you do no intend to auto-trade, please contact your brokerage firm regarding capabilities and limitations.

Can I invest in multiple accounts under with my subscription?

Yes. As a member of our service, you may trade our recommendations in multiple investment accounts. However, you must be the account owner or primary account owner of all accounts. Your membership allows you exclusive rights to our Members Area and our trade recommendation. At no time are you allowed to disseminate, sell or share our trade recommendations with non-members. See Terms & Conditions

How are index “credit spreads” options profits taxed?

Very favorably! The IRS defines a non-equity option as “any listed option that is not an equity option.” According to the IRS, non-stock options include debt options, commodity futures options, currency options, and broad-based stock index options. A broad-based stock index is based upon the value of a group of diversified stocks or securities (ten or more). Standard and Poor’s 500 index (SPX) is one example of a broad-based stock index. Generally, capital gains from stock or stock option investments held less than one year are considered short-term and those held longer than one year are considered long-term.

However, according to the IRS, under the marked to market system, 60% of a capital gain or loss may be treated as a long-term capital gain or loss and 40% may be treated as a short-term capital gain or loss, even if the position was held for less than a year. The ramification of this rule is that capital gains or losses considered to be long-term have lower marginal tax rates than short-term capital gains or losses, and index options on broad-based indexes qualifying under the 60/40 rule have a more favorable tax treatment over options on equities considered short-term investments. We strongly recommend consulting your tax advisor for more details on ITC Section 1256 contracts.

What is Auto-trade?

See Auto-Trade.

Can you explain what my subscription membership includes?

Sure! Our active members are eligible for all services and privileges offered to our members. First and foremost, our active members receive all of our trade recommendations. For members participating in our auto-trade program, our trade recommendations are entered automatically on their behalf. Auto-trade provides members with a completely effortless and “hands off” order placement service through optionsXpress® and their “Xecute” program. In addition, all active members receive full access to our Members Area. Our Members Area contains our Commentary & Updates (updated daily), archived Commentary & Updates, as well as educational links.

How do you provide “trade recommendations” to your members?

Simple! Upon issuing a trade recommendation, we immediately post the trade recommendation to the Members Area of our website. All active members have full access to and can login into our Members Area. Once we post a trade recommendation, we notify our active members via electronic media (email) that a new trade recommendation has posted to our website. Again, all active members participating in our auto-trade program do not necessary have to take any action in order to place our trades (auto-trade program will automatically place the trade orders). Members not participating in our auto-trade program would have to enter their own trades within their brokerage account(s). As members, however, you are not required to take any action in regards to our trade recommendations. You have full and complete control over your account. You may trade all of our trade recommendation, some of our trade recommendations, or simply use our service as “informational” and place your own trades.

How often will I receive trade recommendations?

Since we only recommend one “credit spread” position per option cycle, you will not be inundated with vast amounts of emails and new trade recommendations. Also, since our trading windows are only 30 – 45 days per positions and the “time value” premium erodes very quickly, we generally strive to generate our trade recommendation within the first week of the new option cycle. If trading conditions do not meet our criteria or we simply do not see a viable trading opportunity during the first week, we can and do offer trade recommendations during the second or perhaps even third week of the option cycle. On occasions, if markets are extremely volatile and the risk is simply too great, we reserve the right to not issue any trade recommendations. In times of great uncertainty and risk, we will not force a trade or issue trade recommendations which we feel have exorbitant risk. In those rare instances, in an effort to ensure capital preservation, we do not issue a trade recommendation for that option cycle. Our members often rely on our daily “Updates & Commentary” to monitor our outlook and market analysis.

When will I receive the trade recommendations?

When we issue a new trade recommendation, we post the recommendation to Members Area of our website and send an email notification to all active subscribers. Trading opportunities and the “windows” for executing trades and capturing the desired “net credit spread” are often very limited and extremely time sensitive. We suggest that members, particularly those members not participating in auto-trade, monitor for new trade recommendations by checking their emails and the Members Area of our website. see “Why recommend only one “credit spread” position per option cycle?”

What is your Member Area “Updates & Commentary “?

All Option Empire members have full access to our “Updates & Commentary” section of the Members Area. This area is used extensively by many of our Members as a means to receive daily updates on markets conditions, evaluate current option positions, market outlooks, and any other pertinent news and developments.

Is there always at least one trade recommendation during each option cycle?

Generally, but not always! On rare occasions, we do not issue a trade recommendation. These rare instances may occur during periods of extreme market volatility and risk. We always reserve the right to not issue any trade recommendations. Again, our goal is to provide consistent returns (profits) and effective risk management (capital preservation). In times of great uncertainty and risk, we will not force a trade or issue trade recommendations which we feel have exorbitant risk. In our opinion, foregoing a potential 3% – 5% gain during extreme market conditions is much better than incurring a potential 30%- 40% loss.

Why recommend only one “credit spread” position per option cycle? Aren’t multiple trade recommendations “better” for subscribers?

We typically provide one trade recommendation each option cycle. If a trade recommendation does not execute (auto-trader), we will typically adjust and re-post our recommendations to our members in an effect to generate a successful trade execution.

Note: Many advisory services contend they make multiple or even many trade recommendations throughout the month. This is a case where “more is not better”. Multiple trades typically translate into confusion, trading errors and frustration. In addition, the reality is that most subscribers do not participate or trade all of the recommendations anyway, either by choice or impracticality. Often a subscriber is committed to a position when another trade recommendation is issued. At that point, the subscribe must either close out the “previous” trade (and either incur a loss or sacrifice some potential profits) and execute another trade, or simply pass on the recommendation. What’s worse, many advisory services do not provide “exit” trades for existing trade(s) and leave the subscribers hanging as to what to do with their existing positions.

From the advisory service standpoint, multiple trade recommendations throughout the month often open the door for manipulative and even deception performance reporting. Since not all trade recommendations are actually “executed” or traded by subscribers, some services conveniently only report select recommendations or even just the “winning” trades. In reality, many of the trade recommendations may appear to be great trade recommendations, however, often these trade recommendations are unrealistic and often did not and would not even execute if the order had been entered by subscribers. Even though the trade recommendation was completely unrealistic and no subscriber successfully executed a trade based on that recommendation, that doesn’t stop many services from posting “another successful trade”! In fact, some advisory firms even disclose these deceptive reporting techniques in the “fine print”. As you can see, multiple “recommendations” creates a lot of opportunity to manipulate performance results and can be very frustrating for subscribers.

What can I do if I miss a trade recommendation?

Once we issue a trade recommendation, all active members are immediately notified via an email. All trade recommendations are posted within the Members Area of our website. For members who do not participate in auto-trade, there may be instances when you are either unaware of a trade recommendation, or, can not feasibly enter the trade recommendation in a timely manner. In these instances, you could potentially still act upon the trade recommendation; however, there are no guarantees that the trade will successfully execute. You would need to evaluate the market conditions at that time and the feasibly of a successful trade execute if the trade order is entered. Remember, trading opportunities often only exist within a narrow window of time and your “hold” period is typically only 20-45 days anyway. However, our trade recommendations are always posted as “limit orders”. In other words, you could still potentially successfully execute the trade recommendation, perhaps even days after the posting, if the minimum “net credit premium” could still be obtained.

Do you recommend any “stop loss” or contingent “close trades”?

Yes! Following any “opening trade” successfully execute through our auto-trade accounts, we always “post” a “contingency” trade to close any open positions. For auto-trade subscribers, this contingent order will be placed automatically. The “contingency” orders that we post would be “triggered” when and if the underlying index used in our credit spread position trades within 10-points of the lower option leg (the sold option) strike price. CAUTION: We never recommend that any subscriber establish a “contingent” close order with a “trigger” beyond the “sold option” strike price (Bear Call Spreads) or below the “sold option” strike price (Bull Put Spread). We also suggest, regardless of whether or not a subscriber is participating in auto-trade, that you evaluate your risk tolerance and adjust the index “trigger” accordingly, if necessary, to further reduce any potential losses you might incur.

Do you ever recommend “closing out” positions prior to the options expiration?

Yes! Once again, our strategy is based upon executing one successful trade (credit spread) per option cycle. Because of the extremely short time horizon, we believe in placing conservative positions and holding until expiration (thus, 100% on the net credit is realized as profit). However, there are instances when it becomes prudent to “close” out a position is an effect to reduce risk and preserve capital. Closing out a credit spread position prior to expiration will undoubtedly reduce an investor’s potential profits. Even when “credit spreads” are “out-of-the-money”, the cost to close out the positions prior to expiration can reduce, or even exceed, your initial “net credit”. In other words, investors would actually incur a “net loss” by closing out a credit spread position, even if the credit spread is still “out-of-the-money”. As a general strategic policy, we post our “contingent” close recommendation with a “trigger” that executes (closes the open index credit spread) once the underlying index (used in our index credit spread) trades within 10-Points of the “sold option” strike price. Again, this is simply our general strategic policy. PLEASE NOTE: We never recommend that any subscriber establish a “contingent” close order with a “trigger” beyond the “sold option” strike price (Bear Call Spreads) or below the “sold option” strike price (Bull Put Spread). We also suggest, regardless of whether or not a subscriber is participating in auto-trade, that you evaluate your risk tolerance and adjust the index “trigger” accordingly, if necessary, to further reduce any potential losses you might incur. If this means closing out an index credit spread prior to expiration (and prior to reaching our posted “trigger” close level), we suggest you take any action necessary to meet your risk tolerance.

Can you explain your “Risk Management” Policies?

After a disappointing and unfortunate credit spread option loss in March 2010, we performed an extensive and thorough analysis of the risk management and capital preservation aspects of our credit spread option strategies. After THREE CONSECUTIVE YEARS of providing conservative index credit spread option trades to subscribers without a single credit spread loss, the March 2010 trade produced our first realized trading loss.

Through March 2010, all “contingency” orders that we posted to “auto-trader” accounts would be “triggered” when and if the underlying index used in our credit spread position reached the lower option leg (the sold option) strike price. Again, this was simply our general strategic policy.

Following the March 2010 loss, we analyzed various “closing methodologies” and “exit strategies” – incorporating time value (days until expiration), percentage out-of-the-money, points “out-of-the-money”, technical indicators, as well as other factors. After reviewing the historical data, as well as the “pros and cons” of each methodology, we elected to modify the “sell trigger” on any and all “contingent” close sell orders placed within “auto-trader” accounts. More specifically, we enter contingent close orders to “trigger” once the underlying “credit spread” index trades at or within 10-Points of our “short” option position (both CALL and PUT credit spreads). Again, this is simply our general strategic policy.

Although this “exit strategy” will not entirely eliminate any potential future net loss scenario in regards to any given credit spread position, it does reduce the potential loss in the event the trade is “closed” prior to reaching the “short” option strike price. Due to the nature of option market pricing and volatility, we can not quantify or quote specific loss figures and/or projections. However, as a general rule, the “debit” expense to close out an “open” option credit spread that is 10-points “out-of-the-money” is substantially less than the expense of closing out that same position “at-the-money”. Based on the initial “credit” collected upon the execution (opening execution of the credit spread) and the time remaining until option expiration, it could even be possible to realize a “breakeven” scenario. Although a “breakeven” scenario is possible, we would realistically anticipate a modest “net loss” as a result of closing a credit spread position prior to expiration (Closing Debit, minus Credit Collected). Again, although difficult to quantify any potential loss, it would undoubtedly be less than an anticipated “at-the-money” loss.

As always, subscribers (including auto-traders) have complete control over placing, modifying and setting trade parameters on any and all trades (including contingent “close” orders) at all times.

Can I “close out” a position prior to expiration?

Yes. Although we do not recommend closing positions prior to expiration (except in the case of contingent orders executing), there are absolutely no restrictions on closing positions. You are able and welcome to close, or open, any position at any time.

Do you have an “example” of a trade recommendation?

Yes. Once a trade recommendation is announced, all active members are notified via electronic communications that a trade recommendation has been “posted” to our website. All trade recommendations are contained within the Members Area section of our website for members to view. Our trade recommendations contain the relevant “trade specifications” which are necessary to enter the credit spread trade through the broker. Instructions for entering credit spread trades are contained in the Members Area.

How do you report your Performance?

Good Question! True and accurate performance reporting can be somewhat misleading to outright blatantly deceptive for many advisory services. To evaluate performance reporting, you must not only understand how the performance returns are calculated, but also what is included and/or not included in the reporting. Our performance figures do not include commissions or Empire subscriptions fees.

We strive to be a transparent as possible. Our performance figures are based on our “auto-trade” actual fill prices and executions. We do not use any compounding returns or capital weighted, risk adjusted, etc. We do not “exclude” losing trades like some services (they just don’t close out losing trades) – all of our option positions either expire or are closed out. No “smoke and mirrors” here! Auto-traders can easily verify performance figures and all members can easily track and evaluate performance results. Also see “Why only one trade or recommendation per cycle”? and Our Performance.

Are there incentives to provide “big profit” trade recommendations to subscribers?

No. Obviously we strive to recommend profitable trades which produce attractive and consistent returns over time. However, our business model is such that our success is only dependent upon retaining and adding satisfied subscribers. This is quite different than the “broker” or “investment advisor” business model. Brokers, by definition, are compensated based on “transactions”. Once paid, there is essentially no financial incentive for the broker to produce results or manage risk. As for “fee-based” investment advisors, advisor “income” is typically based on a “management fee” which is a specified “percentage” of the AUM (assets under management). As their AUM increase or grow, so does their “income”. Although this does give investment advisors much more of a “vested interest” in client accounts, it can also influence some advisors to be more aggressive and perhaps take excessive risks in efforts to “grow” AUM more rapidly. Our “income” is not dependent upon “assets under management” or transactions. Since our only objective is to retain and grow our subscriber base, we are always focused on maintaining a balance between producing consistent performance over time while managing risk.

Do you offer a Trail Period Membership?

Yes! Let’s face it. We know that most people are by nature very skeptical and cautious, as they should be. We make every effort to be as transparent, open and honest about our service and what you can expect. Because of this, we offer a 30-Day FREE TRAIL PERIOD to all new subscribers as a way to get comfortable with our service. If a subscriber is not completely satisfied, for any reason, they can cancel their subscription at any time through our Members Area. See “Terms & Conditions” and “Getting Started!”

How much is your service?

At Option Empire, our goal was to make our service affordable to most investors, not just the affluent or high net worth individuals. We offer various subscription plans, including a 30 Day FREE TRAIL PERIOD offer for new members. See “Terms & Conditions” and “Getting Started! The monthly subscription fee is $99.00 per month (discounts available for longer term subscriptions) and your online payments are processed through a secure and protected payment processing center. Members may cancel their subscription at any time. Also, we offer incentives and subscription discounts throught our Referral Program!

Do you receive any commission or benefit from the brokerage trading?

Good question! Absolutely not! We are in the business of providing information and trade recommendations to our members. We are not investment advisors and therefore do not receive any investment management fees. We are not brokers or agents and therefore do not receive any commissions or transaction fees.

We simply provide valuable information to our subscribers! Our success is dependent upon the success of our subscribers, not commissions or investment management fees!

Do you limit the number of subscriber members to your service?

We always reserve the right to limit the number of members that can subscribe to our service. At this time, we are accepting new subscribers. If, at any point in the future, the size of subscriber base begins to affect our ability to successfully execute our trade recommendation (due to the excessive amount of trading volume), we will suspend accepting new subscribers until further notice.

Does Option Empire have a “Referral Program”?

Yes! See our Referral Program.

How do I cancel my membership?
Easy! Active members simple login into their account and notify us they wish to cancel their subscription to our service. See Terms & Conditions.

Still have other questions?
If our question & answers have not answered all your questions, please contact us at info@optionempire.com.

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