How do you retire rich and early without worrying about stock market crash? Learn to be a futures arbitrageur
Alan Hershey
Jun. 15, 2007

The trick lies in learning arbitrage on a daily, weekly and monthly basis. In the market, no matter how smart you are, unless you have insider information, it is difficult to make money. The brokers who collect their fees no matter whether you win or lose are the net gainers in the market place over the long term unless you act as arbitrageurs (arbs).

Becoming an arb is not easy. You have to learn to live with a new mind set. The fact is that you do not know what will happen tomorrow. You know what just happened. If you can use that data to create a win-win situation, you are acting like a successful arb.

Arbs have the fantastic ability to take advantage of known data to bring the probability on their side. When a commodity is rising fast, you just do not buy it. You buy it and sell a deep in the money call option because you get very high premium on your calls die to high volatility. A normal investor will think it is going up; it broke through the top of trading range so lets go and buy it. An arb says I like to sell a deep covered call because the volatility is so high. Please note the difference in the mind set.

When you are bullish on a commodity or stock or bonds or currency, just do not but it. Buy the future and sell a covered call. Make several of those trades if you wish. Bring time and probability on your side. On the long run statistically you will win. Just make sure you do not go wild – learn to mange your money. Do not use more than 30% of your capital.

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