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How to Win $1,000,000

By Jeff Clark
Thursday, March 8, 2007

The strategy that will help you win CNBC's new trading contest is not the same strategy that'll help you win in the real world...
 
The contest – CNBC's million-dollar portfolio challenge – started this past Monday and continues through May 25. Contestants are given $1 million in play money, and the trader who parlays it into the biggest pile of play money by the end of the game wins one million real dollars. (Okay, it's actually a $1 million annuity, so it's not quite as lucrative, but why quibble?)
 
But a real trader is not going to win this contest... a gambler will.
 
You see, the way to win short-term trading contests with play money is to make an oversized bet on a long-shot stock. If the bet fails, there's no harm done – after all, it was play money. But, if the bet is successful, you can double or triple your pile of play money in short order.
 
Real traders with real money would never do that. Real traders exercise risk management. They only trade when the odds of success are in their favor, or when the potential reward justifies taking a low-odds bet. They limit the size of their trades so that one loss doesn't wipe out a whole string of wins. And, perhaps most importantly, real traders understand the eleventh commandment of trading... "Risk not thy whole wad."
 
That kind of conservative approach doesn't work very well for winning trading contests on CNBC. But it's a terrific strategy for trading in the real world.
 
So, if you want to win CNBC's trading contest, then here's my advice...
 
Find a biotechnology stock that's scheduled to make a major announcement sometime in the next three weeks and bet the whole stack of play money on it. A good announcement will double or triple your stack and almost assuredly get you into the contest finals. A bad announcement will cut the size of your stack by 50%-75%. But who cares? It's not real money.
 
On the other hand, if you want to make money in the real world, then here's my suggestion...
 
Find that same biotechnology stock. Venture on over to the options market and craft a strategy that requires only a small amount of money and will turn a profit if the stock goes up, if it goes down, and even if it just stays the same.
 
As you may have guessed, I have found just such a stock, and I've crafted just such an options strategy. And I'll be sharing this trade with my S&A Short Report subscribers next Monday afternoon.
 
If you want to play games, then CNBC's portfolio challenge should be a lot of fun.
  
Best regards and good trading,
 
Jeff Clark




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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%