The Trading Secret to Triple-Digit Annualized Gains

The "Bond God" loves to make predictions...

Jeffrey Gundlach, founder of the $130 billion-plus investment firm DoubleLine Capital, is one of Wall Street's biggest winners. Over the past 20 years, he has specialized in fixed-income investments... which earned him the nickname the "Bond God" (not to be confused with the equally renowned "Bond King," Bill Gross.)

But what keeps his name in the press as much as anything are his regular predictions about the direction of stocks and interest rates.

Two weeks ago, he advised people to get out of a trade that he had recommended a month prior. The return totaled 22%. If you could do that every month, you'd earn 264% a year.

How could you earn that sort of return in bonds? Even the Bond God needed a little help.

For that, he turned to a unique trading strategy. Today, I'll show you how powerful it can be – and I'll explain how, with a little effort, you can learn to do something similar yourself.

Back in May, Gundlach spoke at the Sohn Investment Conference in New York... an annual forum where well-known Wall Street investors to talk about their top ideas.

While Gundlach generally makes good predictions on interest rates (a major factor in the value of bonds), this time he admitted that he couldn't figure out which way they were going to go.

Gundlach knew that interest rates were set to explode – but he didn't know which direction.

"The problem is that policy fluidity suggests pretty much anything can happen almost without notice," he said, referring to the fuzzy nature of the Federal Reserve's current outlook.

The trick here is that smart investors have a way to make such a bet. While most individual investors have to get the direction of investments – either up or down – correct... those with more tools can do more.

Gundlach recommended an option strategy called a "straddle." He placed a small bet that the iShares 20+ Year Treasury Bond Fund (TLT) would fall. And he placed another small bet that the same fund would rise. If the fund made a big enough move, the winning bet would pay for the losing bet and then some.

Interest rates did go wild. They headed straight down (and therefore, the price of the bonds went up).

Gundlach took to Twitter to announce he thought anyone listening to him should close the trade, calling the one-month 22% return a "rare instant gratification."

That kind of trade is fun... And options let him do it.

Most investors must take what the market gives them. They buy a stock and hope it goes up 10%. It's better than a savings account, I suppose, but it's still quite passive.

Smarter options strategies allow you to tailor trades to however you think the market (or individual stocks) may move. You can take the same fund or stock that everyone else sees and turn it into whatever kind of investment you want.

Do you want to bet on a fast gain? Or a slow-but-steady climb? Would you like a high-risk/high-reward scenario? Or would you prefer to earn low-risk returns? Do you want to profit if the market declines... or goes nowhere for six months?

And for an options trader, 22% in a month doesn't sound all that surprising. We've been using similar strategies to make returns of 60% in 21 days, 71% in 25 days, 77% in 14 days, and more. Those are real gains we've delivered to readers in the last six months.

This is all to say that finance is a rich subject area, and there is always something to learn.

Most folks who heard of Gundlach's idea didn't put the trade on, to be sure. They didn't quite understand the option strategy or didn't have the right account.

That's a shame. If you come across a good moneymaking idea in the market, you should have the tools to take advantage.

That's why I'm hosting a special educational session tonight at 8 p.m. Eastern time to prove that anyone can use these tools. We'll teach a small class of amateur investors how to perform these trades right before your eyes.

You're invited to join us online, follow along, and learn what options can do for you. Sign up for free right here.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

Editor's note: Don't miss Doc's free Master Class, TONIGHT at 8 p.m. Eastern time. He'll walk you through a similar specialized options trade... And you'll discover how it could boost your potential stock returns by 10 times or more – while risking less money up front. Plus, as a thank-you for tuning in, you'll even learn one of Doc's favorite buy recommendations. Reserve your spot right here.

Further Reading

"Many investors and other wealth seekers take the view that they have to seek out one big bet and pile in," Doc writes. "But for every investor who pulled those tricks off, you will find hundreds who went bankrupt." Get the details on his strategy to improve your trading here: A Better Way to Trade the Market's Ups and Downs.

"We often make real, costly mistakes worth hundreds of thousands of dollars when investing or planning our retirement strategies," Doc says. There's a simple trick to getting around one common emotional roadblock... Learn more here.

Market Notes
QUADRUPLING YOUR MONEY BY 'INVESTING IN VICE'

Today’s chart shows a company that exploits a highly profitable vice…

Longtime readers have seen us highlight companies with addictive products and services. From to video games to coffee, customers keep coming back for the rush – and like it or not, it’s a solid formula for growth and profitability. We’re seeing this again from today’s “addictive” business…

Churchill Downs (CHDN) owns the 144-year-old racetrack of the same name, home of the Kentucky Derby. But the company is about much more than fast horses… It’s a $4.5 billion gambling giant that also owns casinos and online-wagering platforms – its much-bigger revenue sources. Optimistic gamblers (plus, we imagine, a smattering of horse enthusiasts) shoveled $265 million into CHDN’s coffers in the most recent quarter, a 40% sales jump year over year.

Maybe those gamblers should have invested their money instead… CHDN has nearly quadrupled over the past five years, and shares just hit new all-time highs. Investing in vice can bring big gains for investors…