CHAPTER 4

Basic System

The System Is Scaled according to the Capital Available

This basic system is designed with the small investor in mind. All examples that we use assume an account with a capital allocation of $5,000.

The amount of capital that you have will determine the width of the vertical call spread. With $5,000 or more available you will use a 10-point spread. With a 10-point vertical call spread on the SPY we will be putting at risk about $500 to $600 per unit. The basic unit will be described later in detail. If you have less than $5,000 use the following for the amount of capital that you have available. As your capital grows increase the point spread accordingly.

Capital Available

Spread

$5,000

10 points

$4,500

9 points ...

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