Over the holidays I saw lots of family, immediate and extended.

Of course you have your relationships that are close, and then you have the family that you *sort of* know about (at least in my family). So we make a lot of small talk, and when we're done talking about the weather in Florida as opposed to New York (blah blah blah) ... the next topic is always work. I try to avoid it, believe it or not, but I tend to end up talking about options. Then I hear all of the responses that I try to avoid debating too hard, because I just don't want to be "that" guy.

So I was just thinking about it, and I realize just how many people are frightened by the thought of trading options. Everyone has heard some horror story about a friend of a friend who lost half of their net worth in one options trade. Listen to the way that we make big money on options in a very safe fashion ...

As many of you know, I now run a trading service called The Trend Rider. A little over six weeks ago I recommended that the subscribers to my trading service buy the June 20 call options on a certain software company, at $8.70. It was mainly a technical play. I liked the chart, and they're in a hot industry. The options traded right around $9.50-$11.00 for about a month.

Today the stock popped 4 points higher and the call options that I recommended went up to about $14.80, which gave The Trend Rider members a 70% gain. I think that there may be more good news to come based on the huge buying that came into the stock today. On the other hand, the stock has already come a long way in a short period of time and I'd hate to lose that profit that my subscribers are currently sitting on.

There is also a rule that many traders go by and that is that if a stock trades up over 20% in one week, you should not sell your entire position.

You either sell half or none at all.

Here's what we recommended doing: The March 35 call options were at $1.90. I recommended a strategy that will guarantee that my members lock in a 40% profit, and enjoy the possibility of even more upside. Like I said, we have 70% in profits right now. I locked in 40% of that profit.

Here's how:

-- My subscribers paid $2.00 for the March 35 puts today. (That means they have the right to sell the stock at $35.00 any time before March 17th.)

-- My subscribers already own the June calls for $8.70 (which gives them the right to buy at $20.00 any time before June 16th).

Let's review: We have the right to buy stock at $20.00, and to sell stock at $35.00. 

That is obviously a $15.00 difference.

Take the $15.00 and subtract what my subscribers paid for the calls and the puts -- which is a total of $10.70 ($8.70 $2.00) -- and you are left with $4.30 (a 40% profit), which is locked in until March 17th. Today the stock is trading at around $34.00. Any time between now and March 17th, if it trades over $35.00, (which is likely), or under $20 (which is doubtful), The Trend Rider members will start to build up profits larger than 40%.

Sure, we are giving up a chunk of the profit by doing so. That profit will easily be made up for if the stock trades a few points higher. But for the next 60 days, we know that we have a 40% (or greater) gain -- no two ways about it. There is only upside at this point.

Keep in mind that I did this after the stock had a very fast pop.

We also have a few energy positions that are up 70%-85% that we don't own puts on, but they are trading higher steadily, and I feel comfortable that they will continue to do so for some time.

In a case like that, I am less concerned about a big pullback.

I can't tell you what those plays are since The Trend Rider Members paid hard earned money for that privlege, but my point is that the hedge that I put on today wouldn't be appropriate for the energy plays that I'm talking about.

Yesterday I had different Trend Rider Position pop (our subscribers own the stock), so what we did was recommend selling covered calls that were in the money by one point, which paid our members an easy $1.60 per share. What that means is that we are simply selling someone the right to buy our stock from us, and for that, the subscribers were paid a fat premium.

They easily tacked on some extra profit instead of sitting on their hands watching the stock trade up or down. The best part about that situation is that if the stock trades back down a point, our subscribers will have tacked on an additional 8.7% in profits, and they will keep their stock for the next move. But if the stock trades higher they will also have a much bigger profit than if they simply sold the stock in the open market.

There's a lot more, but the point is that you have got to take some time and learn a few simple strategies with options, because you can easily use them to reduce your risk, protect you from losses, lock in a guaranteed profit, all while allowing you to enjoy more upside. And when you want to take the aggressive positions, you have the ability to take $10,000 and turn it into $65,000 in a few weeks.

Too many people are so intimidated by options that they don't even try to learn about them. My theory is that you aren't going to lose any money by taking time and learning about them. So for goodness sake, become familiar with options. I'm seeing way too much money being left on the table by people every day.

It's unnecessary and frankly, it's killing me.

Okay folks, next week my article will be more fun, but this week I had to be very serious with you and if I touch just one of you readers with this article, then I'm a happy trader.