By: Steve Smith
If you’ve been around Options Sensei for a while you probably already know that I grew up in the options trading world.
By 12 years old, my summer job was as a clerk/runner on the commodity and stock exchange trading floors for my father’s brokerage.
He was an options trading madman. Constantly had massive naked positions, and would have to hustle to cover if a position went against him.
However, back then options trading was like the wild west. There was no Black Scholes model so options contracts sold for what people would pay for them.
I’ll give it to my old man, he was far better than most people at valuing options contracts. He could recognize contracts that were trading for more than they were worth, so he did well selling naked options into those situations.
Not a bad way to make a trade, but when the Black Scholes pricing model started being used to price options contracts those situations became fewer and farther between.
After college, at 23 years old, I became one of the youngest members of the NYSE. At 24 I joined the CBO and became a market maker for the next 7 years.
When I joined the CBO, I was still influenced by my father’s wild west approach to trading. I saw all these “old guys” around making conservative trades and I couldn’t figure out why they weren’t shooting for the fences.
I found out when I lost $50,000 on the first trade I made for myself. I sold naked options on an airline merger the day before they expired. I collected $1000 in premium on this “sure thing trade” – and the next day before close the merger was called off.
And in case you didn’t guess already – I could ill afford to lose $50,000 at the time.
Suddenly experience showed me why the traders around me took a conservative, “grind it out” approach.
I get lots of questions about why I don’t make more aggressive trades in Options360. Now you know the answer…
Because – to use a baseball analogy – it’s better to be a base hitter with an amazing batting average than be a home run hitter with a terrible batting average.
Base hit means longevity, and longevity is the path to building wealth.
So we grind it out in Options360, and there’s no doubt we are doing something right.
Since starting Options360 in 2015, we have substantially outperformed the market every year.
2015: up 122% (S&P was down .73%)
2016: up 39% (S&P was up just 9.54%)
2017: up 61% (S&P was up just 19.42%)
2018 up 67% (S&P lost a whopping 6.24%)
2019: up 77% (S&P up just 28.9%)
2020: up 46% (S&P was up just 16.26%)
And on top of that, he has been on fire this year…
If you have not yet it’s time to grab your test drive for just $19.
Subscribers do sometimes see 100%+ ROI on short-term trades. Those are nice when they come, but it’s not what we are shooting for normally.
We look for low-risk/high probability trades and we hedge them so we never end up with a catastrophic loss as I had on my first trade.
Remember Buffett’s first rule, Never Lose Money. That’s unrealistic in truth, however, we keep losses small and manageable – so that overall we are always advancing.
Come take a test drive and let me help you learn how to really build wealth by trading options.
To Your Success,