Rank #1: The Ultimate Options Trading Strategy - 26
Buenos dias genius nation, como estas. How you doing?
This episode we're going to call it The Ultimate Options Trading Strategy. Really what I wanted to do is I want to talk about option strategies and which one is the best.
I got the idea for this episode thanks to a couple guys on the Options Traders Alliance Group which is our free Facebook group. If you want information about that just search on Facebook for Option Traders Alliance or look in the show notes, we'll have a link to it there.
Thanks to Dan Gibson and Ken Gilstrup for that. From what I could tell, these guys they were just, one of them asked a question, the other one responding, just a couple guys. They're on the lower end of the option continuum, a couple of lower traders just looking for some kind of direction. If you don't know what the option continuum is or where you are on the continuum, you can check out Episode 21 and hear all about it.
It's a great question, which is the best option strategy, because when it comes to selling options there are well over a dozen strategies that you can use. You've heard all the names, all the crazy names, some of them; the iron condor, the credit spread, the calendar spread which is also the time spread, the butterfly, then there's the iron butterfly, and then there's the broken wing butterfly, there's the covered claw which can also be called the buy right. There are naked options so there's naked puts, naked calls, the straddle, the strangle, the ratio, the back spread, the box, the bag, the double diagonal, on and on and on, and that's just to name a few.
Then, each of these strategies can be manipulated so that there are unlimited variations. You have, let's say the iron condor. You have the, some people call it the high probability iron condor and then there's the low probability iron condor. Then, there's the unbalanced condor, and then there's, some people have been calling it the weirdor which is like a mix of the iron condor and the butterfly together. There's so many different strategies out there.
The question becomes which one is the best, which one do I trade because you can't do all of them, you'd be crazy. It would take you decades and decades to actually learn all of them and become good at any of them really. If you're a new trader and you just want to quickly get up to speed which is the easiest, the fastest, the most money making, that's what we need to know. Before I tell you the answer I want to talk about Simon.
You see, Simon was a lot like you. He was trying to figure out all this trading stuff and he had tried all the different techniques, different types of trading, and he was pretty fed up. When you spend lots of money on courses, when you spend hours and hours learning about Greeks, and probabilities, and volatility, and all that stuff and you still cannot make it work you get pretty upset, am I right? You guys know what I'm talking about because you've probably done the same things; taking courses, watching videos, listening to podcasts like this one, I know there's a whole bunch of them out there because none of them give you the secret and then you get really, really upset about it.
You just want the answer, why don't they just give you the answer. Boy, I wish it was that easy. For Simon, by the time our paths had crossed he had spent close to three years learning about options. In fact, he was much more knowledgeable about certain aspects of options than I was.
To this day, honestly, maybe I shouldn't say this but to this day if you ask me to describe to you what Gamma is I don't think I could. I know it's important, I know it's one of the Greeks, and there's ... I know what it is, in my head I can, I just can't put it down on paper. I'd have to look it up and look for the ways to explain it, I'd have to show you on a screen. I couldn't just simply tell you what it is but Simon, he can do that.
Simon knows all the differences, what is implied vs historical volatility and what the numbers should be, and how to set up the different probabilities. He knows all about that stuff because he spent all that time learning about it because that's what he though was the answer. The more he learned the more complicated he made his trading, the more complicated he made his trades, the more intricate.
He added in different indicators, some that nobody's ever heard of before. He added in all these rules. He added all this other stuff to make his trading better, to give him a better edge. That makes sense, when you think about it. You take a strategy and you improve it, you put your own spin on it, you craft it so that it works better. Then when you come up with something that you think is awesome you back test it over and over and over again. If you can't do that then you do paper trading and you have to do it hundreds of times.
If you can't do that, if you don't want to do that, then you have to use real money to test it and hopefully it works. Usually though it doesn't and then you end up back on the drawing board. I remember when I first got started I wanted one simple trade that I could do month after month after month like the holy grail. I found ... I really like butterflies so I tried to do a butterfly on McDonald's, and I came up with some rules and then I started back testing it. I think I back tested it for four years, month after month after month after money after month, say about 40, 50 trades, whatever that is, 4 x 12, 48 trades.
It was profitable and I was ecstatic. "Oh man, this is awesome, this is going to be so awesome." Then I did it with real money and I ended up losing, I don't know how many, I think it was $8,000 really quickly.
That's what Simon was doing as well and for him it wasn't working, and that's when he came to me. That was his main question. He's like, "Allen, I know so much but I still can't make it work. Am I doing something wrong or does this stuff just not work? Please Allen, tell me that all my hours and years of trying to learn this stuff has not been in vain because my brain is just going to explode, I can't take it anymore. My self-confidence is in the gutter but I know so much about options, I know more about the people who write these option books, I could probably teach a college course on options. Allen, please help me."
Well I got to tell you, if this stuff didn't work, this job option stuff didn't work, I would be flat broke. I can say, for those of you who are still skeptical, that yes, yes it does, in fact, does work. I can point out to dozens, and hundreds, and even thousands of people who have made it work and who it's working for. The problem ... If it's not the trading then maybe the problem's with Simon. It's either the trading work or the person doesn't work. Well, the person was Simon and the problem was not Simon either.
The problem was all the nonsense that we as traders and learning traders get bombarded with every single day. We get bombarded on the financial media, we get bombarded in our emails. We get bombarded on Facebook, and Twitter, and all over social media. The ads are all over the place and all the ads are people pretending that they are amazing traders making oodles and oodles of money, and the only way to get the same results is to pay them to teach us what they're doing, that's the only way to do it.
It's the magic bullet, it's the new thing. There's this new trading system or this new indicator or there's this new chart pattern or this new whatever that we have to pay to learn how to use so that we can also become wonderfully rich and super successful. It's like everybody else out there is so smart, and rich, and successful but we are not. No matter what we try it doesn't work, am I right?
Do you feel that frustration? Have you been through this or am I by myself? I don't think, I'm not by myself because we get emails every day from people. Ken and Dan were talking about this same exact thing in the group today so you know what I'm talking about. Here is what you need to do, here is how you overcome this. You stop listening to the noise, stop believing all the crap. Go back to the basics, back to the fundamentals.
The truth is that every single strategy that I mentioned earlier works. There are people out there making money with each one so you can make money if you only trade covered calls. Yes you can, you can be profitable consistently if you only trade covered calls. You can do the same thing if you only do strangles. You can do the same thing if you only do ratio spreads, and on, and on, and on. You don't need to be a master in everything, you don't need to understand 14 different ways to adjust your trade, you only need one strategy and that's the answer, that is the ultimate strategy. That's the best strategy, it's the one that you choose, the one that makes the most sense to you.
There are lots of different strategies out there because they have different uses, that's true. Once you become a very advanced trader, once you are on the upper end of the continuum if you're on level nine or level 10 and you are already consistently making money then yes, go into the other strategies. Until then, you stick to the one strategy that makes the most sense to you, that's the one you start with or for many of you that's the one you re-start with.
That is the one you keep doing until you figure it out because that's what I had Simon do. We identified together out of all the different strategies he preferred to trade credit spreads so that is what he focused on. That's what his time on to figure out. He spent time on figuring out the best way to enter a credit spread, he tested dozens of ways to adjust, and then he tested exit strategies, a whole host of different exit strategies.
Eventually, he discovered the best way to trade credit spreads that worked for him. Now, maybe his way won't work for you but that's okay with him because it works for him. That is all he does now, he only does credit spreads. He doesn't bother with iron condors or naked puts, he only does the spreads, the credit spreads his way. He has molded the strategy so that now he calls them layup spreads. A layup spread basically is a credit spread but with Simon's special magic, his method to enter, to manage, and to exit.
If you want more information about the layup spread and why they work so amazingly well you can do so at simonsaysoptions.com. Now, I hope this makes sense to you. The best strategy is the one that makes the most sense to you and the best way to learn how to trade is to just focus on it until it works for you. Now, it might get boring, it might get repetitious, it might get monotonous, yes maybe but that's still what you need to do.
I know we think that trading is all sexy and high flying and buy this, sell that, do this, do that. The reality is, if you trade well most of it is extremely boring and then there are certain pockets of craziness but most of your trading should be boring. If you are consistently making money then you know what I'm talking about. If you're flying by the seat of your pants, and if you're putting on dozens and dozens of trades, all different types, all different strategies on all different stocks that you never even heard of before because the chart looks good, then you are in for a very wild ride and so is your account balance.
With our account balance what do we want? Do we want up and down roller coasters? No, we want slow and steady increase. In order to have that you have to be trading in a way that is actually boring because you know what you're doing, that's why it's boring. You've mastered it, because you've excelled at it. The alternative is to do what you're doing right now jumping around from strategy to strategy.
I know what you thinking. Say, "Hey Allen, what about diversification, don't I need to diversify? If I have maybe some earnings trades over here or maybe I have some naked calls over here or maybe I have some box spreads over here." Yeah, you should diversify if you have an account that is well over six figures and you are already consistent and profitable. That's it right there. If you are over six figures, and I'm talking about mid-six figures; $400,000, $500,000, more than that, and you are already consistent and profitable then you can diversify as much as you want.
If you're on the top end of the continuum, level's nine, level 10, then you are making money so you are going to stick with what you know automatically. You're going to go to the bread and butter and you're going to do those every month or every week or whatever your timeframe is. Then with a little bit of extra cash you're going to try other stuff. That's the smart way to do it. If you don't have over six figures, if you're not consistent, if you're not profitable already, then forget about diversification.
Until you can make money with one strategy month after month, trade after trade. You have to be consistently profitable before you add another strategy to your arsenal, are you getting this? Is this sinking in? Yes? Hope so. Anybody that tells you otherwise is full of it and probably just wants to sell you something, that's the truth.
Stop all the noise, stop listening, stop jumping around, because the noise is there, the offers will always be there. If it's not options it'll be Bitcoin. If it's not Bitcoin it's going to be marijuana stocks. If it's not marijuana stocks it's going to be sports betting, that's the newest thing that's going to come on, right? The Supreme Court just announced on Monday that states can now make it legal to bet on sports. Well, guess what? There's going to be stocks on sports betting and they might even have options on sports and betting and all this stuff. Who knows what they're going to come out with in future? That's going to be the new hottest thing.
If you keep jumping from one to another, to the another, to the another, you're never going to get good at anything, you're never going to be profitable, you're never going to be consistent. Go back to the basics, back to the fundamentals. Choose one strategy and work on it until you know it inside out and you are profitable because that is the name of the game, that is the goal. That is the only thing that matters. I don't care what strategy you use, I don't care how you do it, I don't care when you do it. If you are profitable you are winning.
That's the only way to know if you are winning, I don't care how much you know. I don't care if you know more than me, I don't know if you know more history than me, I don't care if you know more math than me, more about statistics, more about options, more about everything. If you are not profitable it doesn't matter so go back to the fundamentals, go back to the basics, one strategy. You focus on it, you work on it, you back test it, you paper trade it, you real money trade it until you are profitable. That's it, that's the answer.
Now, if you can't figure it out, if you already tried, you tried your best and you can't do it, then reach out to me, maybe I can point you in the right direction. Maybe I can work with you like I did with Simon and we can identify what it was that works best for you or that makes the most sense for you, and then how to actually implement it. In the beginning you don't need complicated stuff, you don't need complicated indicators. You don't need complicated chart patterns, you need a strategy that you understand, that makes sense to you and you need to do it in a way where you can explain it to the third grader.
Then if you can do that then you tweak it. Then you work on it. Then you look at, like Simon did, you look at the entrance of the trade, you look at the management of the trade, you look at the exit of the trade, and then you improve your percentages. That's how it works. Right now, Simon, like I said, he's only doing one strategy and, yes, he is well over six figures in his trading account.
That's okay, it doesn't matter. He doesn't need to be doing anything else. I know people who only do one iron condor every single month. They do it on the same underlying, they do it on an index, and they trade literally over $100,000 worth of one iron condor every month. That's the entire trade, that's the whole strategy, one iron condor, six figures in that condor, every month.
I hope this makes sense, I hope this is sinking in. I hope you got to this this. Then finally, no matter which strategy you choose, whether it's the condor, the credit spread, the ratio, the butterfly, I don't care what it is, whatever it is, no matter which one you choose make sure that the odds are in your favor. Peace.
Resources mentioned in this episode:
May 23 2018
Rank #2: Getting Started As An Options Trader With Craig Davis - 48
In this episode we talk with a newer options trader who wants to make trading options his full time gig. So let's dive into his questions:
For more information on the program discussed in this episode, The Iron Condor Mastery, Click HERE
Craig Davis: So in terms of becoming options trader, being a specialist, what's the top three, top five things I should be looking to do, be, read, think about, think about, and words I'm supposed to have, things like that?
Allen: Okay. The top five or three things that you need to know to be a full-time trader. Obviously, you need to learn. There are many different ways to learn, right? There are many different coaches out there, there are different books out there. You can go, I know in the US we have the public libraries, and you can get any introduction to trading book, and they'll have lots of different strategies in there, they'll teach you everything. But I think it comes down to, so let's say...
Okay, so if I was going to be a trader, so I'm starting over, I'm working my job, I think in the beginning I would try to be more realistic and say, you know, "I need to set my goal, whatever my goal is." I need to, whatever my monthly expenses are, it's 5000 pound a month, or 10,000, whatever your expenses are. So, that's the central goal. And then I think you have to get into the psychology aspect of it first.
Craig Davis: Yeah, okay.
Allen: Where you have to figure out, okay, why? Why is this so important to me? What's going to happen if I don't achieve this goal?
Craig Davis: Okay, yeah.
Allen: Because I think you really need to dig down and make a list of all the negative things, and all of the horrible things that will happen. You know, I'm going to be working until I'm 70 years old, my kids are not going to be able to go to the right college and university, and all these different things, to make it like a mandatory thing in your life, that you have to achieve this goal no matter what happens.
The reason I say that is because a lot of people, they have, "Yeah, yeah, I want to make more money, I want to make more money." But then, while they're on the road, the road has bumps. And so sometimes they go over a bump and say, "Oh, that was too bumpy. I'm going to get off of this road. I don't want to do this anymore." Or they pause, or they stop. They pull over to the side, and they say, "Oh, I'll get back to that after my kid graduates from school, or I'll get back to that after this happens. Let me do this project at work first." They lose track, and then they never come back.
Craig Davis: Okay, okay.
Allen: So, that's a big problem. So, the mental aspect is there. And then the second thing, I think once we have that, then really, you know, you need to look over your entire lifestyle and say, "Okay, I obviously... You need money to trade." There's no other ways about that. So, we need to have, and build up our account as much as possible, so that we have some money to trade.
Craig Davis: Yeah.
Allen: That way you're reducing your expenses as much as possible, paying down your debt, so you're not paying extra fees, and interest, and all that stuff. And then, putting that money away and saving it. Once you have that done, let's say you have the mental aspect done, you have some money to trade, then I think you do some research and you say, "Okay, there are all these different strategies, which one do I think gives me the best chance for success?" And for every single person, it's different. There are people who tell me that, "I think what you're doing, where you're selling options, that's way too boring for me. I want to be a day trader, and I want to get rich in three days." Then, you try that path, right?
Craig Davis: Okay.
Allen: There are people that are very aggressive, there are people that are very conservative, and they say, "Oh, I don't want to take very much risk." Well, okay, then put your money in the index fund, or put your money in a bond fund, and just buy bonds, and make, whatever, two, three percent the bond is paying you, and you live off of that. There are some people that, I know one guy in Canada, he has a company where he teaches people how to do dividend investing.
Craig Davis: Oh, okay.
Allen: By the right shares, and they'll give you four or five percent a year in dividends.
Craig Davis: Okay, fair enough.
Allen: So if that's your thing, that's your thing, that's all you do, and that's all you do. You don't need to worry about it. I found that, for me, I found something that I don't want to only make four or five percent. I want to make, per year, at least 20 percent. And then, I want to do it in a way that made sense to me. For me, I'm a bit of a lazy person, honestly. I don't want to put a lot of time [crosstalk 00:04:31]-
Craig Davis: I think you're being over modest.
Allen: No, really. If you talk to my wife, she would definitely agree with me.
Craig Davis: Well, so you do some work somewhere, so there's some work there somewhere.
Allen: We do a little bit of work here and there in the office. But in terms of the trading, it's not that much. In the beginning, I wanted to find out what I wanted to do, so I did a lot of trades in the beginning. I did a lot of what's called the virtual trading, where you get a free account, and you just do all the different strategies, all the different trades, see which one works for you. I did a lot of back testing.
Craig Davis: Yeah.
Allen: There's software out there that lets you basically go back in time, and you put on a strategy, and then you just go through day by day by day how the strategy worked. If you need to adjust the trade, you can, if you need to change your strategy, you can. So, that was very, very beneficial, because that took a lot of time... If you do virtual trading, like paper trading, or you use real money and you do...
Let's say I want to do a butterfly spread. You come up with your own criteria and you say, "I want to try this new strategy that I've created. I'm going to do this, and this, and this, and this." To actually do it in real time would take you 30, 35 days, and you only get to do one of them.
Craig Davis: Right.
Allen: If you do the back testing, you go back to, let's say, 2000, January 1st, 2000, and you put on your trade. Within like three hours, you can do 10 hours, or 10 years worth of trades.
Craig Davis: Right [crosstalk 00:06:07].
Allen: So it's a big, big chance where you don't spend that much time on it. And you get the learning much faster.
Craig Davis: Right, I see. Yeah. Okay, yeah.
Allen: In the beginning I would find, I would say, "Okay, I'm going to find..." I wanted to find one strategy. Just one trade I could just do it, I don't have to do anything else, I don't have to worry about anything else. This is the only thing I wanted. I just wanted to find one thing that would work. I tried different things. I tried butterflies on McDonald's, butterflies on Walmart, I tried iron condors on certain stocks, iron condors on indexes, credit spreads, double diagonals, cover calls. I tried several different strategies. They all have their benefits, and they all have their negatives.
Craig Davis: Okay, yeah.
Allen: I do think that you can take any one strategy and just work with it, and learn it, and do really, really well with it. So if you find one strategy speaks to you, then focus on that one. Do your virtual trading, and if you can afford a back testing software, get the software, and just within a weekend, you'll have done dozens of trades. You'll have a leg up on everybody else that's doing this. I think that's a secret that people don't really use as much.
Craig Davis: Have you got like two or three back testing softwares that are for doing research?
Allen: So, the one I use most is called Option Net Explorer.
Craig Davis: Okay, Option Net Explorer, yeah.
Allen: I think that one costs... I don't know how much it costs now. Let me see. They have a 30 day trial, so you can try it for 30 days. After that, I think it's... Actually, the 30 day trial is 10 pounds.
Craig Davis: Okay.
Allen: And then for a year, it's 500 pounds.
Craig Davis: Wow.
Allen: You're in the UK, right?
Craig Davis: Yeah.
Allen: So yeah, so it's 500 pounds. So it's a little pricey, you know, maybe you don't need it for a month, or you don't need it for the whole year, but [crosstalk 00:08:16]... Yeah, so it's 10 pounds for the month, so you try it out. And if you like and you want to keep doing it, you can do, they have a three month plan and then they have a 12 month plan.
Craig Davis: Yeah, I'll look at that three month. Okay, three-month and 12 months, okay.
Allen: I mean, you look at everything and you say, "Okay, these are the different things that I want to test. Before you open the account, or before you do the trial, come up with your rules. Like, "Okay, I'm going to do this strategy, and this is my rule, this is what I'm going to put the trade on, this is how I know I'm going to be in trouble." You know, so you have a basic whole trading plan. And then you go and you test that, and you try it. You say, "Okay, this didn't work. Okay, how can I fix it? What can I do differently?" Then you go back and you try it again, and try it again, and try it again until you come up with something that works for you. We have different trading plans that are [crosstalk 00:09:07].
Craig Davis: I'm looking to specialize in the Iron Condor one.
Craig Davis: Because I've seen some things, and trades in the range, and all these adjustments and all that seems like it's a good plan. And then I seen on your program, you have the lazy day trading, or something like that. That incorporates some Iron Condor. So, maybe I am heading towards the iron Condor thing to focus on and try and specialize in.
Allen: Yeah. So we do, we have that course. It teaches everything of a tizzy about the Condor, how it works, how do you do it. It gives the different trading plans that you can use based on if you want to be aggressive or more conservative, whatnot. So, if that's something that you want to focus on, then just go 100 percent and do that, and see how it goes. Do the trial, and test all the different trading plans, see if you can find some other trading plans online.
Craig Davis: Okay.
Allen: I know the ones that we've put into the course, we've tested them, we've done them with real money, so we know that they work. So the question is really, "Okay, so here's the plan. Allen says it works. Now let me go back in time and let me try it, and let me see how I do."
Craig Davis: I like that bit, yeah.
Allen: And let's see. You know, let's see if Allen is full of it, or let's see if he's really telling the truth.
Craig Davis: Now, that's fair enough. I like it. Yeah.
Allen: Because it also, like I said, it's different for everybody. So, the trading plan, we've gotten testimonials from people and said, "Hey, I tried this and it worked great," and then we've had other people that said, "I tried it and it failed, and I didn't work." So, what's the difference? The plan is the same, the market is the same.
Craig Davis: People.
Allen: It's the people that are, they're doing something different or whatnot. We had one student, he was in one of our other courses. It was, you know, you put on the trade and you wait until the trade, if it goes against you, you have to let it go to a certain Delta.
Craig Davis: Yeah.
Allen: So we do that with condors as well. You put the trade on at a certain Delta, and when it gets to a certain Delta, that's when you know that, okay, it's time to change or adjust the trade.
Craig Davis: Yeah.
Allen: Well, this fellow didn't want to wait until that Delta. He was looking at the money and he said, "Oh, I was down 200 dollars, so I got out of the trade, and it didn't work."
Craig Davis: Yeah.
Allen: I said, "But, that's not how it works. That's not the plan."
Craig Davis: Yeah.
Allen: You can go down four 500 dollars, and then eventually it will come back up, and then you'll win. So, you have to be able to ride the waves. For him, that particular plan, or maybe trading in general was not, it didn't fit for him, because of his style. If you cannot see yourself and say, "Okay, I'm going to put the trade on..." When we're selling options, especially with iron condors too, in the beginning of the trade you might be down 100 dollars, 200 dollars or something, before it turns around and then it starts making money again.
Craig Davis: Yeah.
Allen: But if you don't have the patience, or you don't have the ability to just sit and wait, then this is not the trade for you.
Craig Davis: That's true, that's true. Yeah, from what I can see and from what you're saying, it seems like you have to have that confidence to stick to the plan, and just follow the rules according to the plan. So yeah, I think that's-
Allen: You have to have confidence in the plan. So, that's why you do the back testing. You just do it as many times as you can, you track all your results, and you look at it and you say, "Okay, you know what? Over the last 10 years I made money eight of the years or six of the years, I lost money for of the years. In my head, am I behind? Is that acceptable to me?
Craig Davis: Yeah, yeah.
Allen: You know? I had a friend of mine, he found this strategy for the iron Condor, somebody showed it to him, that says, "This is how you put the trade on, and then you never touch it."
Craig Davis: Oh, naughty. Yeah.
Allen: That's it, you don't do anything else. You put the trade on, and then you just let it do its thing, and the numbers should work out, and you should make money. So, it's either you're going to win on that trade, or you're going to lose the maximum.
Craig Davis: Yeah, that's not a good trade then. That's not a good plan.
Allen: Right. I mean, before we make a judgment, we have to test it. So my friend, he's very smart, so he said, "Okay," and he got it. He got the same software, this option software. Now this guy, he's wealthy, he's already wealthy. He went and he found somebody, and told them, "Hey, I need you to learn how to use this software, and I'm going to pay you to run this test."
Craig Davis: Nice one. A real life scientist, yeah.
Allen: Yeah. So, he hired this person, and the guy did all the testing for like the past 20 years or something. The results were that if you had traded this way every single year for 20 years, you would've just about broken even.
Craig Davis: Oh my gosh, that's not good.
Allen: Yeah. There were some years where it did very, very well, and then there were some years where he lost a bunch of money. But overall, over 20 years you would've broken even. So he's like, "Yeah, this doesn't work," and I'm like, "Well, I'm glad you know before you wasted the next 20 years to try to bring it out."
Craig Davis: [inaudible 00:14:35].
Allen: So for iron condors, I do believe you have to adjust it. That just gives you a better chance to win.
Craig Davis: Yeah.
Allen: But another thing you have to be aware of is, you don't always want to be in the market.
Craig Davis: Okay. That's an interesting concept. Because you're always like, when you see on some of the things where they say, "Oh, yeah, you've always got to be [inaudible 00:14:59]." So it's interesting when you say be in the market and out the market. What do you mean by that? That's a good mindset, I suppose for someone that starting out?
Allen: In the stocks, when you're investing in stocks, they have gone back in time and they've looked at this, and they've said that most of the games that are made in the stock market are made in a few days every year.
Craig Davis: No way.
Allen: Maybe like 20 days every year. That's when the majority of the gains happen.
Craig Davis: No way, so what's happening for the rest of the time?
Allen: 70 percent of the time, stocks go sideways.
Craig Davis: Sideways, okay.
Allen: Yeah, that's why iron condors work. They go up, and they go down, and they go up, and they go down. That's why they tell you that you always have to be in the market if you're a stockholder, because you don't know when those days are going to happen.
Craig Davis: Yes, yes.
Allen: It could be in the beginning of the year, it could be in the middle, could be the end. You might miss out on a rally... Like for example, this year, 2019, if you were in from January to now, you would be up whatever it is, 16, 18 percent.
Craig Davis: Yeah.
Allen: If you missed these first few months, and you get in right now, well it looks like the market's going down, so you might lose money the rest of the year.
Craig Davis: Yeah, yeah.
Allen: That's why if you're a stock trader, most of the time you have to have your money in the market, because you can't time it. You don't know when it's going to go up and when it's going to go down.
Craig Davis: No, no.
Allen: Most of us. Most of us cannot.
Craig Davis: Most of us, yes. And unless you've got that magic crystal ball where you can say, "Oh, yeah..."
Allen: Yeah. But when you trade the iron Condor, or other option strategies, you want to look at what's the VIX. The VIX is the volatility of the overall market.
Craig Davis: Yeah.
Allen: Now, the more volatile it is, the more volatility there is, the more the option prices are worth. You get more money when you sell them. But, that also means that the stocks are moving up and down much faster.
Craig Davis: Right, okay.
Allen: So you have to be on your toes. You have to be watching every day when it's very volatile, and you have to be ready to adjust, you have to be ready to play with it, and you have to be... To trade when it's very volatile, you have to be the best of the best.
Craig Davis: Right, okay.
Allen: When volatility is very low, the stocks aren't really doing anything, you can put on the trade and just wait, and then it expires, and you're done, right? Anybody can do that. And so in the beginning when you're starting out, I tell people like, "Hey, if it's too volatile for you, if you are getting nervous because there was a two percent move, or a three percent move in a day, then that's a signal that this is above your skill level, and you need to just get out."
Craig Davis: Okay, yeah.
Allen: Because if we are trading iron condors, we can make 10, 12, 15 percent per month.
Craig Davis: Yeah.
Allen: Do we need to do it every single month? No.
Craig Davis: No, okay. Right.
Allen: If you have two or three good months, and you're up, let's say... Let's say it's the end of March and you're up 30 percent for the year, that's a pretty good year. You could take the rest of the year off, and say, "Hey, I made 30 percent." Most people don't do that, because they're so greedy. They're like, "Yeah, I want to get more. Let's go for 70 percent. Let's go for 100 percent."
Craig Davis: Okay.
Allen: Eventually one of those months you're going to lose. And the thing is, you really cannot tell, in the beginning, you cannot tell which months are going to be simple and which months are going to be very volatile. But the thing is, when you're done with a trade, you can re-examine and say, "What's going on in the market right now? Do I want to get in right now, or do I want to wait? Is there some news event on the horizon, or something that would cause the market a lot of uncertainty and a lot of concern? Then I'll just wait until that thing is over with, and I'll see how the market is reacting to it, and then I'll put my trade up." So, that's what I mean by you don't have to be in it all the time.
Craig Davis: Right.
Allen: You can pick and choose. [crosstalk 00:19:05]... Sorry, go ahead.
Craig Davis: Is there a way in your training, or is there some way to be able to help you make that decision? Because I might see the... The VIX might be something given this is in the market, but [inaudible 00:19:22] say with confidence to say that, oh, the market's a bit volatile at the moment, I might stay out of it?
Allen: So, it takes a little bit of experience to be able to really pinpoint it. But I'll give you the short version.
Craig Davis: Okay.
Allen: What I do whenever I'm putting on a trade, especially my iron condors, and I do them every month on SPX, and I do them on Rut, those are the two big ones that I like... You can do them, if you have less money you can do them on SPY, and IWM, or any of these ETFs.
Craig Davis: Okay.
Allen: I like to do them on the big ones, because it takes less contracts, and it has different advantages. But, I look at, when I'm putting on the trade, I have an analysis sheet and I say, "Okay, what is the VIX trading at right now? Do I see any kind of support and resistance on the chart? How did I do last month, how did I do the month before?" And then I'll also look at the standard deviations. So, standard deviation is basically a percentage movement. It's a statistical number, statistics, so it will tell you that the SPX moved in a bigger amount than it normally does.
Craig Davis: Okay.
Allen: So even if the volatility is still the same, today they had a really big move for some reason. So normally, you know, 70, 80 percent of the time, the SPX will be within one standard deviation.
Craig Davis: Okay.
Allen: If it moves more than one standard deviation, then that's a cause of like, "Hmm, let me pay attention to this."
Craig Davis: Okay.
Allen: If it's moving more, if it's moving two standard deviations, then that's a flag. And say, "Okay, there are big moves happening here, I need to pay attention to this, or maybe I need to get out of the market, or maybe I need to stay out."
Craig Davis: Right, yeah.
Allen: If there is a day when there is more than a one standard deviation move, I don't get in, I don't put a trade on that day.
Craig Davis: Right, okay.
Allen: I want to get in when it's a calm day. So that is the shortcut there, that you need to monitor the standard deviations on a daily basis, and see how they are doing for whatever instrument you are trading. If it's not SPX, if it's a stock, [crosstalk 00:21:35] you can find the standard deviation for everything. Look at it and see, "Okay, I was trading it last month, and it wasn't really moving very much. But now, it's moving one standard deviation every day for the last three days. Okay, something is going on."
Craig Davis: Okay.
Allen: So that's like a flag, it's a bell. "Ding, ding, ding." [inaudible 00:21:58].
Craig Davis: Yes, okay.
Allen: You need to research this more and decide, "Hey, what is the cost, and do I want to get in or not?"
Craig Davis: Yeah.
Allen: There's different ways. Sometimes I look at it and I'll say... When I'm putting the trade on I look at it, "Okay, over the past two weeks, how many times has it moved more than one standard deviation?"
Craig Davis: Okay.
Allen: If you get two or three, that's normal. You have to understand what is normal for whatever instrument you're trading.
Craig Davis: Yeah.
Allen: But for SPX, two or three times is normal. If you get seven or eight, that's very high, because it's only for two weeks. Over the last 10 days, it moved a lot more than one standard deviation seven times, that's very high. So that means that, without even looking at the news, you know that there is something happening in the market.
Craig Davis: Right, okay. Yeah. No, I like the sound of that. That's a good... There's one thing to a trading plan, but this analysis sheets sounds like another good thing as well. And definitely looking at standard deviations, and the movements and the market's an instrument. That sounds like a good, what's it called, skill, or discipline to have. So thank you.
Allen: It's something that can help you, you know? Just keeping an eye on it. It's not a hard and fast rule that you don't do it, or you have to... I don't initiate a trade when there's more than one standard deviation. Do you have to do it that way? No, that's just my personal preference. But, this is something that you can, it's like another tool that you can use.
Craig Davis: Okay, yeah. Lots of tools in the toolbox sounds good to me, lots of skills, yeah. I like the sound of that. So that's something I need to have in my vocabulary more than the standard deviations, the percentage movements?
Allen: Well I mean, if you don't do the standard deviation, you can look at the percentage movements, but then you'll have to remember. It's harder to remember. If you... I don't know what broker you're using.
Craig Davis: I'll be using Interactive Brokers.
Allen: Okay. So, I'm not familiar with their set up, but if you call them, or you find online that there must be a way that you can actually, on your chart you can see the standard deviations.
Craig Davis: Yeah, let me write that down. [inaudible 00:24:26] brokers where on charts I find the standard deviation. Yeah, okay.
Allen: You might have to write it down, or they might have it visually on your screen, however. But whatever works for you, it's a good measure to keep track of.
Craig Davis: Yeah. Thank you. No, we'll do that. Standard deviations, [inaudible 00:24:55] analysis sheet. Is the first one on there now? [inaudible 00:25:02] I need to get a trading plan, makes me stick to the trading plan, my analysis sheet. So you've now got another sheet now that says analysis on it [inaudible 00:25:10], and check standard deviation.
Allen: You also want to make sure that you're not trading during earnings, if it's a [inaudible 00:25:20].
Craig Davis: Okay.
Allen: And, if you're doing iron condors, you want to know in advance, at least have an idea of what you are going to be doing as an adjustment if the trade goes against you.
Craig Davis: Okay. That sounds like an interesting technique. How would I... Because you've got a couple of programs, is that mindset and that skill set within there, like that adjustment thing that you were just saying, like is that [crosstalk 00:25:51]?
Allen: In the course, and the iron Condor course, that's covered in detail.
Craig Davis: Oh, okay. So then-
Allen: Yeah, so we actually have videos where I went through some, I think it was three really, really horrible iron condors, like the market just went crazy. I go through it on that software, that back testing software I told you about.
Craig Davis: Right, okay.
Allen: I go through it on there, and I go day by day and I'm saying, "Okay, market just dropped 50 points. Okay, this is what I'm thinking. Do I do this, or do I do this, or what happens if I do this? Okay, which one am I going to do? I'm going to do this, because of XYZ reason. Okay, now let's see if it worked. Let's go day number three, day number four, go forward, go forward." So basically I'm telling you what I'm thinking as I'm going through the trade.
Craig Davis: Okay. I like it. That's a good, that's the best way I think.
Allen: So now are you going to be, you're in the UK, are you going to be trading the US stuff, or English stuff?
Craig Davis: US. I'll be looking to do US, yeah.
Allen: Okay, so the market-
Craig Davis: But I think my main focus is going to be the US stuff I think. Like the SPX, like I just said, SPX, or SPY and all that. I want to try and do something may be on the SLV possibly, if I can do something.
Craig Davis: As I say, I've I've got to look at your program, look at the resources that I've got, and then just [inaudible 00:27:16]. But yeah, the ETF SPY might be the one that I start with as well. But yeah, that's where I'll be starting, on the American stocks, and the American instruments.
Allen: Right now, gold is very steady, I think. I haven't checked it. I think it's been steady. I haven't checked SLV though. Let's see how that's doing. So yeah, these are ones that do not have earnings, so they are good to do that, they're good for iron condors.
Craig Davis: Okay. Sounds like a good one to do some back testing and research on that. Okay, yeah.
Allen: Definitely. Yes, definitely. Hold on a second. Hold on, I'm going to share my screen.
Craig Davis: Oh, okay. Do I have to press anything? Oh, no, it's fine.
Allen: I don't think so. You can see?
Craig Davis: Yeah, yeah, yeah, yeah, yeah.
Allen: All right, so here is SLV, and you know, it's pretty much up at 16, and died down at 13 something right now.
Craig Davis: Yeah.
Allen: So basically if we're doing an iron Condor... And you can use... In the course we normally go for about 45 days. But we can go 28 days. This one doesn't have a lot of volume, SLV though.
Craig Davis: Right.
Allen: So, might not be the best one.
Craig Davis: Okay.
Allen: Let's try it.
Craig Davis: Do you have a minimum volume in the instrument that you go for? What's your guide range?
Allen: I just want to see some action.
Craig Davis: Oh, okay.
Allen: If I'm doing five contracts, and like this one, this one has 200 contracts every day, 100 contracts. That's fine, because I'm a small part of that.
Craig Davis: Right, okay.
Allen: But the other one, SLV, this one was only showing, like right here, there's only 230. So, these are the only two options I have. So, I don't have a lot of choice in which to trade, so it was like, ", yeah, I don't want to do that one." You know, compared to SPY, you take a look at that one and you're going to say, "Oh, you have a lot of these to choose from."
Craig Davis: Yeah.
Allen: People are trading all of them. So, you have enough liquidity to get out if you need to as well.
Craig Davis: Yeah, yeah. Liquidity, that's definitely a good keyword.
Allen: So if you are doing this one today, depending on how much money you want to put into each trade, you can go to the 292 maybe. Let's say we do 200 each, so two points. This is what our trade would look like.
Craig Davis: Yeah.
Allen: This trade gives us a 66 percent probability of winning, it's right in here in the middle, and then I can put these on the chart. So basically, this redline and this redline are the top and the bottom of our trade.
Craig Davis: Yeah.
Allen: So it seems like it'll do all right.
Craig Davis: Yeah.
Allen: This is a yearly chart. In this trade, what can you make? You can make 55 cents, and it's 200, so let me see if I... You can make 100, you can lose 300. So you know, whatever that is. You have a 66 percent chance of doing that. So what is that, like 33 percent gain? One divided by three?
Craig Davis: Yeah.
Allen: You could make... I mean, so you can be more conservative than this if you wanted to.
Craig Davis: Yeah, okay.
Allen: You can bring these all the way out to here, and go maybe 75 or 80 percent probability. That way, your tent will be larger.
Craig Davis: Right, okay.
Allen: So, less of a percentage return, but more chance of being safe.
Craig Davis: Okay.
Allen: Now the thing is, like right now, I don't know if you've been following the news or not, but the US and China, they're having their little trade war.
Craig Davis: Trade wars, yeah.
Allen: So that has been sending the market up and down almost every day for the last week or so.
Craig Davis: Right, I see.
Allen: If there's a tweet from Trump, then it goes up, otherwise it goes down. So in this environment I would say, no "Well you know, VIX is up a little bit, let's look at standard deviation, and these are the standard deviations. So in the past two weeks, we have one, two, three, four, five, six, seven, eight, nine, 10, one, two, three, four days where it moved more than one standard deviation." So that's a little bit on the high side.
Craig Davis: High side, okay. Yeah.
Allen: I would love it if it's like this, where it's all just gray, and no, they may be have one, but that's about it.
Craig Davis: Yeah.
Allen: This is telling me things are getting heated up.
Craig Davis: Right, okay.
Allen: Just looking at it visually. You see this, you see a lot of gray, a couple bars, a couple bars, couple bars, then all of a sudden you start seeing more reds and yellow. Yellow for here is a danger, because it's more than two standard deviation.
Craig Davis: Right.
Allen: And then, you're see more color, it's getting a little heated, so you have to be careful. That's all that tells you.
Craig Davis: Yeah, that's cool. Okay. So you say something about news, what kind of news are you following, or if there is one I should start looking at, one or two?
Allen: I try not to.
Craig Davis: Oh, okay.
Allen: I try not to watch the news. [crosstalk 00:32:48].
Craig Davis: Okay, good.
Allen: Yeah. I've done... When I do my back testing, you don't hear any news. You're just looking at the chart, you're looking at the trade and you're going day by day. You don't know what's going on in the world.
Craig Davis: No.
Allen: You will do better in your back testing than in real life, for sure.
Craig Davis: Yeah, that's true.
Allen: Just because the news has an effect on us.
Craig Davis: Yeah, true.
Allen: When you're in the trade for 30 days sometimes you get scared, sometimes you hear something. So, if you're only watching the trade, you're not watching the news, you'll actually do better.
Craig Davis: Right, okay. No worries.
Allen: But sometimes there's stuff like this, when it starts dropping all of a sudden, then you have to pay attention. "What's going on? Why is it always that it's going steady for so long, and then all of a sudden it starts dropping?" And then you have all, look at this, you see this? Red, red, no red, red, red, red, red, yellow. This is like, "Hello, wake up, we have something going on here."
Craig Davis: Yeah.
Allen: So that's when you watch the news and you see what's going on.
Craig Davis: What's going on, right. When the red flags are there, then watch the news, okay.
Allen: Yeah. So I mean, I watch some shows that tell you like technical analysis, what other people are thinking. They'll say, "Oh, this is the line of resistance, and this is the support level, and this is this," okay, I'll take a look at that. But on a day to day basis, the nude is total baloney. They have no clue why the market is moving. Really, on a day to day basis, they don't have any clue. They have to make up something.
Craig Davis: Yeah. Yeah, just to keep the viewers happy, I suppose, yeah.
Allen: Yeah, I mean, they have to have airtime, right? They're on 24 hours a day, they have to talk about something.
Craig Davis: Okay. Yeah, yeah, no worries. No, that's really insightful there, thank you. Yeah, so red flags, warning, check the news, standard deviations. [inaudible 00:34:51] if it's yellow, yeah, stuff is happening.
Allen: I mean, Interactive Brokers might not show it like this.
Craig Davis: No, that's fine. If they've got it somewhere, I'll just have to just get my eyes used to the way that they present the data, but yeah, I'm happy to do that.
Allen: So essentially you have about 2000 to trade with, is that what you wrote?
Craig Davis: Yes.
Allen: Okay. And your expenses, your goal is about 3500 a month, and you want to get there in about three years.
Craig Davis: Yes. Or sooner, or sooner.
Allen: Or sooner.
Craig Davis: I put that down there because, like as I say, I just put the figures down there, in terms of like what's achievable and what's possible.
Allen: So let's say, here, let's do some quick math. So, 3500 times 12, 42,000 pounds a year, and you have 2000 to work with.
Craig Davis: Yeah.
Allen: That's 42,000 divided by, let's say, 25 percent a year. If you're making a 25 percent yearly return, you would need an account of 168,000.
Craig Davis: Nice one.
Allen: And you're at two.
Craig Davis: Yeah, so that's no chance. [crosstalk 00:36:04].
Allen: How long will it take you to go from 2 to 168? There's a small chance, but you'll have... I don't want you to take excess risk is what I'm saying.
Craig Davis: No, no, no, no, I'm in it for the long term. I'm going to start small, grow small, learn.
Allen: And right now you have two, but that's what we talked about earlier, you're saving whatever you can. [crosstalk 00:36:24]...
Craig Davis: Yeah, you'll add into it, yeah.
Allen: Yeah. One of the things I tell some people is that, when you're doing your back testing at your paper trading, even if you're not real money trading, keep a result of all the records.
Craig Davis: Yes.
Allen: Keep a track record of how you're doing. Because you never know when you're going to run into somebody who has money, or an uncle, or someone who's... Because you know, when you go to a party or you meet someone, you say, "Oh, hey, what are you doing now? What are you up to?" And you, "Oh, I'm trading options." "Oh really?" "Yes." "How are you doing?" "Oh, I'm doing fantastic." "Really? Oh, okay, I have some money that I need to invest. Can you do it for me?"
You will be surprised at how many people there are that have money, that they don't know what to do with. So these people, they might come and tell you, "Okay, I have 20,000 pounds, please do something." And you do it for them if you want to, and then you keep, "Okay, I'll take half the profit." "Okay."
Craig Davis: Yeah.
Allen: But keep in mind though that that also brings another level of stress.
Craig Davis: Yes. I could imagine, yeah.
Allen: Losing your money is one thing, losing somebody else's money is a whole different thing.
Craig Davis: That's true. Yeah, man, you have to be careful. Yeah, that's fine. Yeah, man. Just go and lose their money that easy. There's a UK term, they call it like a... I don't know how you'd say it in American slang, but in the UK it's like, "Don't pee it down the toilet," or something like that.
Craig Davis: Yeah, so I understand [inaudible 00:38:05].
Allen: Yeah, we call that, what do we say? We say we pissed it away.
Craig Davis: Yeah, that same thing, yeah. So yeah, we say the same thing.
Craig Davis: So yeah, definitely. That sounds like a way forward. That's excellent.
Allen: So what else, what other questions?
Craig Davis: So, with respect to... I'm just trying to think, I think I've gone through the sort of, like you definitely have the mindset [inaudible 00:38:36]. With respect to adjusting, so you've calculated how much to put on a trade for an iron Condor. I'm just going by the term, like the rollover adjusting, is there a way to calculate, or you can't tell how far it could go against you, is there a way to make it like a rough ballpark figure on how much to put aside if you needed to do an adjustment? Or is that all on your course on how to make the decision should you adjust, or should you do this, or take money off the table?
Allen: In reality, you can adjust forever. You can adjust month after month. You can keep it rolling forward, "Okay, so I didn't do good this month, I'm just going to roll it into next month," and then roll it into next month, and you can just keep going. I don't think that's a good idea, because it never ends.
Craig Davis: Yeah.
Allen: If I lose money on a month, then I just want to end it, and then start over fresh.
Craig Davis: Yes.
Allen: I don't want that baggage of coming, "Okay, I'm down 300 dollars from last month, I got to make it up." No, I want to start fresh, and whatever I can make, and then get it back eventually. If I was to put... I usually keep about half of what I put in originally.
Craig Davis: Oh, okay.
Allen: So, if I put in 1000 on a trade, I might keep another 500 on the side.
Craig Davis: Okay.
Allen: Or maybe another thousand, and worst-case scenario, to adjust.
Craig Davis: Okay. Why not, why not? Okay, I like that. Yeah. I like that. It makes sense. So 100 to 50 percent, why not? Why not? I like that. I like that. So trade, and that's what you [inaudible 00:40:22]. Okay, why not? Yeah, I like the sound that that's okay. Let's see, what other questions could I ask you? I sure have put some on my email, but-
Allen: It says here that you took some courses already?
Craig Davis: Yeah, so I took some courses. I know this might seem like a strange one. There's a guy called Robert Kiasaki. I went to one of his training things and I thought, "Right, I'm going to fly in..." So pretty much, he's the one that put me on the path to try and look into do these things. I've been trying to do real estate things, and business things, and the stocks and shares thing. So I've done a couple of things, but that was just like the theory. I never got into a paper trading account.
So last year I went, because in my full-time job I work in healthcare, I work in a pharmacy. So I got this contract, I was at the hospital pharmacy, where you've got more some more and things. I worked with this guy, I worked with him before, and he says, "Oh, come and work with me on this iron, and it's paying me [inaudible 00:41:21] a bit more money." So I thought, "Oh, based on the hours that I've got, this is okay."
But what I didn't factor in, and maybe it's a life lesson, is like the downside. If you can imagine, I experienced the most downsides where, this is my assumption, I never asked, so I suppose I wasn't wrong. So for example, the person contracted [inaudible 00:41:46] for his business, he was saying, "There's too many staff, we're not going to employ staff." So I go, "What do you mean by that?" I had to find out the hard way that if all the jobs don't get done, I have to stay behind.
Allen: [crosstalk 00:41:57] Yeah.
Craig Davis: So before I was supposed to do 45 hours a week [inaudible 00:42:02], I think I must've pushed about 75, 80 hours a week. I was there late nights on weekends, I was there on my days off.
Craig Davis: I was there trying to... So, my plan was to go there, get my paper trading account up and running, start doing some stuff, so that's where I had the idea to get onto the [inaudible 00:42:22]. But then it stopped. So let's say, so April, May, say June 2018, I stopped doing stuff. So in the process now, I have to send an email back to Interactive Brokers, because my account cleared [inaudible 00:42:37] on SLV. I was selling some put options, because I thought, "Oh, I've learned about put options, let me sell some put options, and if it goes up, I keep the premium, if it's slow I keep the premium, if it goes down, then I don't get the stock anyway, but I got it for discount."
So I started doing all that and then, boom, the reality of that kicked in. Then, I says, "Oh, I need some annual leave." He goes, "Oh, I can't find cover for your annual leave." I go, "What are you talking about?" So before I just assumed, I never discussed it. Well, it's not that I didn't discuss it, but I thought like, well... So for now, I'm just working with teams now where if I can get an agreement where possible, I'll go for that. Because before, I just overlooked it.
Allen: Mm-hmm (affirmative).
Craig Davis: I overlooked, like with my other team, like they were saying, "Oh, you got to do this [inaudible 00:43:30]." "You guys are killjoys." He was telling me, "Sorry, we can't give you cover for your leave," so I says, "What are you talking about?" So, I didn't have the words and the vocabulary, because I never thought I'd have to present an argument to ask for... Or, [inaudible 00:43:47] present an argument to request for annual leave.
Craig Davis: Never. I thought, "Okay..." So with respect to the courses, I started off with Robert Kiasaki, did some real estate ones, and there's a guy called Andy [Tamura 00:44:04], he had some ones. Then recently, I went on to Udemy, and that's where my... Because on Andy Tamura, he did one of these things and then I stopped. [inaudible 00:44:16] the profile, and when I seen the profile, "Oh, someone on Udemy," and I seen this thing it says like, "How to make money on weekly options," and it was talking about iron condors.
Allen: Mm-hmm (affirmative).
Craig Davis: So I researched and said, "Oh my gosh, he was talking about that." And then they say, "Oh, you've got to get educated," so I went on some podcasts and then I came across yours. I was listening to the way that you were speaking for your people and I thought, "Yeah, yeah." Because they say sometimes if a person, you can listen to what they're saying, but you have to make the decision on what they're presenting and what they're saying.
Craig Davis: What gave me the confidence to say, "Oh, yeah, this guy seems okay..." Because when you where then talking to the student guy, you... Because there's some people, like I said, that can sugarcoat it. But you actually said to him, "No, you need to get someone that's going to make you accountable, like a trading partner, that's got a list of rules." [inaudible 00:45:09], "Okay, you didn't get the trade, what are you going to do about it?"
Craig Davis: And that kind of thing. I thought, "Yeah, I like that." Because that's what you need, is everyone, "Oh, yeah, it will be fine [crosstalk 00:45:19]." You want someone to know, really to... Yeah. So I thought, "Okay, yeah, you seem like a serious guy. You want people to benefit."
Allen: I learned from experience. That was my wife. That was my wife standing there telling me, "What are you going to do to fix this?"
Craig Davis: The best trading partner, yeah. Yeah, but that's a good incentive as well.
Allen: Yeah, every day she would come up the stairs when I was at home. Every day she would come up the stairs and stand there until I talked to her.
Craig Davis: Yeah, "What have you done? What are you doing?" So yeah, so there you go. Behind every strong man there's a strong woman, I could imagine.
Allen: Oh, yes.
Craig Davis: Like I said, so for me, that's what got me onto the parcels. And there's programs. I seen yours, I listened to that podcast, and I looked into some of your things and I thought, "Okay, I want to be an expert, so I'm going to have to put the money in. Because why not pay, say, 297 dollars if it's going to say..." I'm telling you before I was not an ambassador. I don't know why I wasn't listening before. It's like I just have the theoretical, I had to practically...
[inaudible 00:46:41] like the insurance, if it can save you money, I don't mind spending 297 dollars going in the forum, and it's going to save me 3000 dollars or something like that down the road. I haven't got a problem with that anymore. Before I might've been, "Oh, I'm going to risk it." No sense. Because it could be worse. Because as I said, there is no...
Allen: You mentioned a couple things. You said the weekly iron condors. I would not do that.
Craig Davis: Well, so don't do the weekly ones, [inaudible 00:47:18].
Allen: Those are for experts, and those are for people who like to gamble. If you don't have the money to risk, I would not do that at all. I would stay with the monthly.
Craig Davis: Yes.
Allen: The weeklys, you cannot adjust them. I'm sorry. I don't care what other people say. They just move so fast, that you cannot adjust.
Craig Davis: Right.
Allen: And the money that you make is so little, that you're only trying to make five, six percent. But that thing could, you know, you sell it for 20 cents today, tomorrow it could be a dollar, what now?
Craig Davis: Yeah.
Allen: You can't do anything. I learned the hard way that those are very dangerous, and they...
Craig Davis: Yeah.
Allen: And the [crosstalk 00:48:01] Kiasaki, he gets paid a lot of money from that Andy Tamura guy, to just be the head. You know?
Craig Davis: Yeah.
Allen: He will just use your name, and your picture, and your video, and... I mean, I love his books, I love his books, and they make a lot of sense, but yeah, so be careful of those. [crosstalk 00:48:30].
Craig Davis: He doesn't recommend the weekly options [crosstalk 00:48:34] for him. He didn't recommend that. I did see it on the Udemy, where it says, "How to make money selling options doing this weekly..."
Allen: Oh, I see, I see.
Craig Davis: So for me, I was looking at it as a learning exercise, where what is the difference between doing this weekly iron Condor to the monthly? Because they do say do it for 45 days, and do this.
Craig Davis: So, I was just looking into the process, but yours seems like you've got the accelerated version, where you've got the whole package there, you're going from start to finish, and this and that.
Allen: Yeah, I mean, and if you have any questions or anything, you just email me, I'll help you out.
Craig Davis: Yeah, definitely, definitely.
Allen: If you need anything, just let us know.
Craig Davis: Yes, yes.
Allen: But really, take the plan, do the back testing, if you can afford it.
Craig Davis: I will.
Allen: I haven't checked, there might be something out there that's cheaper.
Craig Davis: I can have a look. So if I literally Google, is it called like back testing software? Is it like that, or is it-
Allen: Yeah, so just option back testing software.
Craig Davis: Okay.
Allen: You might find something. I know this company that I use, on the screen, the Think or Swim, they have something for back testing.
Craig Davis: Okay.
Allen: It's included, it's free. It's not very good... I think it's right here, Think Back. So, it's not the best, but it's free.
Craig Davis: Okay.
Allen: You can go back in time, so let's say you want to go back a few years, go back to this day. So it'll tell you, "Okay, SPY on that day was 131." And I think this is a chart for it.
Craig Davis: Yeah.
Allen: It gives you all the prices. So, you can put on a trade and then just go through it and see. Just go day by day. Like, "Okay, this is the 7th, today's the 8th, today's the 9th, how's my trade doing?" It's not as good as the other one, but then again, it's free.
Craig Davis: Okay. I can have a look at it. I have seen the Think and Swim. I don't think they're taking account for the UK anymore.
Allen: Oh, I didn't know that.
Craig Davis: [crosstalk 00:50:42] Interactive Brokers.
Allen: I see, okay. That's horrible. Tasty Trade... Or, no, Tasty Works is another one.
Craig Davis: Okay, let me try that, Tasty Works, yeah.
Allen: They're a newer broker, and I know they opened for Australian accounts, so they might be probably open to you guys too.
Craig Davis: UK, okay.
Allen: And they are, you know, they focus on options.
Craig Davis: Oh, excellent.
Allen: They have a lot of educational stuff as well. Some of their stuff I agree with, some not.
Craig Davis: No worries.
Allen: Okay, so the guys who, they're the same guys who made Think or Swim.
Craig Davis: Oh, okay. Oh, that's good.
Allen: In the past, they were floor traders on the exchanges. Then they made Think or Swim, and you know, they started doing videos, and teaching people. They were the ones that told everybody to do the iron Condor without adjusting.
Craig Davis: Really?
Allen: That's how they got popular, yeah. And then they sold this company to Ameritrade for millions and millions of dollars.
Craig Davis: Okay.
Allen: And then after they have the buyout period, where they cannot do anything for a lockup, they cannot do anything for a certain amount of time. Then once that period expired, then they went and they opened another brokerage.
Craig Davis: Oh, okay.
Allen: They're still out there, making videos and whatnot. So, they have a lot of content that people like. But they might, let me see if they open accounts in the UK. I think they do.
Craig Davis: Okay, I'll have a look. But like as I say, with this Andy Tamura guy, you mention weekly, but he says safety, so that's where I got the safety element. But yeah, he definitely was saying, "Grow small, take your time. [inaudible 00:52:43] paper trades."
Craig Davis: But no, I don't think he wouldn't have said anything about [inaudible 00:52:49] saying about, "How do you have a losing strategy?" And rather than taking the maximum offer, he was the one that [inaudible 00:52:58]. So that gave me the idea. That's what I was leaning to. Because he said, "How do you turn a losing trade, so you don't get the max loss, and you're sort of not [inaudible 00:53:07] after having the max loss?"
Allen: Yeah, so that's basically talking about adjusting.
Craig Davis: Yeah, yeah. So yeah, man, Think or Swim [inaudible 00:53:25] said to do that, wow, they would've believed it.
Craig Davis: Well, like as I say, if it were, it depends on what context. Yeah, if they break even after 10 years and that.
Allen: I was shocked, I didn't know that. I hadn't done it, my friend did it, and I was like, "Wow, really?"
Craig Davis: Wow. If something sounds too good to be true, it most probably is or something, they might say. But no, I'll look for that. I'll look for the Tasty Works. If I can start an account, then I can look at that.
Allen: Yeah. The only reason I tell you that is because their software might be better than Interactive Brokers.
Craig Davis: Ah, okay.
Allen: It doesn't matter which one you use, but their software, because they are focusing on option traders, so their software might be better. And they're newer, so they'll respond to you. I know Interactive Brokers, they don't really respond very well. Their customer service is not the best.
Craig Davis: Right, that's all I need to know. You've got a problem, you can't get a hold of anybody.
Allen: Yeah, I opened an account with them, and I couldn't even figure out how to use it, seriously. And so I emailed them, and I didn't get any response. Then I canceled the account, and then they contacted me. They were like, "Why'd you cancel?" I was like, "Well now you contact me."
Craig Davis: No, that's not the best way.
Allen: I think they are the cheapest, but you know, you really have to know what you're doing.
Craig Davis: Yeah. [inaudible 00:55:08].
Allen: Yeah. So you have your game plan?
Craig Davis: Yes, I have definitely... Oh, man, Allen, you're a top man, you're a superstar. I've definitely got a game plan. You gave me so much food for thought, hints and tips. I've been writing down some things. I know you're said you're recording, but let me just write it down while the inspiration's there. Yeah, I'm definitely more [inaudible 00:55:30] focus on these and back testing of the plan, which I never thought about, which makes sense, just to get confidence. Not confidence, but at least I can, what's it called, develop the skill of putting on the trade, and making sure I'm doing it properly. So yeah, yeah, I like the sound of it.
And plus, yeah, I can view like how many trades over how many years in like a few minutes, so I like that. That's good. Then I could just say, I just have to get used to the [inaudible 00:56:00] where I'm coming forward, the volatility in that. So yeah, man, definitely got a game plan to go forward with. Looking forward to be working with you, and being part of this [inaudible 00:56:14] team. It's going to take me a few days until I digest everything, and get into it. But, I'll definitely be staying in contact, and if there's anything else that [crosstalk 00:56:27].
Allen: It's interesting, it's fun, but when you're doing it, it's very boring.
Craig Davis: I'm glad you're telling me that, that's okay. They say the good plans are the [inaudible 00:56:40] ones. So it sounds like I've got a bit of a...
Allen: Yeah. Like, yesterday the market was down, so it was exciting. It was like, "Oh my God, what do I do? I got to do this, I got to do this." Today, market is flat, and I've got nothing to do today. Most days you don't do anything. You just sit there and wait.
Craig Davis: Waiting for something.
Craig Davis: Man, I didn't do an adjustment or something, or I didn't do this, didn't do that.
Craig Davis: I like it, I like it. So, that's where the boring part comes.
Allen: Yeah. That is also something that you're going to have to learn with experience. You might adjust sometimes too soon, sometimes too late. It's a fine line. Like, we'll give you rules that say, "Okay, if this happens, you adjust."
Craig Davis: Yeah.
Allen: But there's always the thing that, you know, "Oh, if I didn't adjust, it would've worked out great. If I had waited another day or two, it would've worked out great." So, that always is there. When you have a firm set rule, it doesn't always work out in the best way. That rule will work most of the time, not every time. And so as you get experience, you'll realize that, "Okay, I know my rule says to adjust, but I am going to wait one more day, because I see something something on the chart, or I think this is going to happen," or something.
Craig Davis: Yeah.
Allen: That's why we don't give Vista computers. This is why we do it ourselves. Otherwise, we could just make a computer program, and let it run, and hopefully it works.
Craig Davis: Yeah. No, that's fine. No, I like it. Yeah, man. Allen, definitely [inaudible 00:58:28], it sounds like you've done a great journey. You're a great teacher, and you want to encourage people. I'm glad you've got your course, and the website, the podcasts. Yeah, man, I'm glad that you've even got this thing, where if you want to speak with you, to donate some money. So even that for me, that's a learning for me as well. But yeah, man, this is definitely much appreciated. Definitely. Plan everything for everything.
Allen: Great. I hope I was helpful, and like I said, going forward, you need anything, just email us. We're here.
Craig Davis: Yes, definitely, man. I'll email you guys. Yeah, man, definitely much appreciated for the help and support. Definitely much appreciated. Thank you.
Jun 11 2019
Rank #3: The Five Finger Strategy - 004
Welcome to another edition of the Option Genius podcast. I'm your host, Allen Sama. Today, I want to be talking about something that I call the Five Finger Theory or the Five Finger Strategy, if you will. Basically, this is something that I think is very, very crucial to your success. Not maybe your trading success, but definitely your overall financial success. I think it's, super, super important. I call it the Five finger Strategy. That's my personal twist on it. Now, you might have heard somebody mention something in the past about multiple streams of income, so it's kind of like that but it's my own take on it.
This particular strategy will help you overcome the financial pitfalls that happen to everybody. It's my opinion that you need five fingers in your life, or five separate, distinct sources of income. Now, I don't care how rich you are. If you only have one or two fingers, it can all be taken away from you very, very quickly, and in some cases over a night.
Nov 08 2017
Rank #4: Working on Your Trading Business - 28
Genius Nation, this is Allen, coming to you from the sunny sandy beach of Galveston, Texas. Galveston is a beach town about an hour and 15 minutes from home for me. And so, I come here once in a while to just relax. And today I'm here, no wife, no kids. I'm actually gonna be doing something, working on the business as I say. That's the topic of this podcast.
The cool thing about the beaches in Texas are that you can actually drive on the beach. Not every beach allows it but this one does. Most of Galveston you can drive on the beach. And so right now I am parked on the beach, sitting in my car about 15 feet away from the waves, from the water.
And so if you can hear the waves, if you can hear the seagulls, that's me sitting on the beach. And I actually expected a lot fewer people here today. It is a weekday and school has started but there are still a bunch of people here, so I guess nobody told these tourists to go home yet. But glad they're having fun.
And I'm here to actually do some work. I'm away from the office. But I took a day off today, drove down here, made a day of it. And what I'm gonna be doing is called working on the business, instead of in the business.
That is a subject that I first heard about in the book called, The E-myth by Michael Gerber. And of course you know, it's about the e-myth, it's the entrepreneurial myth. That's what he's talking about.
And it's a book about how to improve your business. And of course trading should be treated as a business. So trading is my business, one of them, options and this is another one. I'm gonna be working on both of those. But the idea between working on your business versus in your business is, you know there's two types right?
Like I said, in the business is what you do on a day to day basis to keep your business running. On the business is what you do to actually improve it and actually grow the business. So, if you take an example of an accountant, if you're an accountant, working in the business would be meeting with clients, fielding out paperwork, doing peoples taxes, managing your employees if you have any. Anything that you do on a day to day basis.
You know, paying the bills, paying the rent, all that kind of stuff. That's working in your business. You have to do it to maintain the business to keep the doors open. But that's not gonna help you grow. So working on your business for an accountant would be something like figuring out a way to get new customers.
Or looking at maybe purchasing some new software, looking at some new software that might make things easier and smoother. Or going to a continuing education type event where you're learning about new techniques or new loopholes in tax law, or whatever you guys do.
In the E-myth book, Gerber actually talks about and gives an example of a baker. So this lady she's making pies. But she's not getting ahead. Every day she makes the pies, she loves making the pies, and every day she's exhausted at the end of the day because she bakes the pies, and she sells the pies, and she cleans the store, and at the end of the day, she's just really tired and frustrated, and she can't get ahead.
He explains to her that, all that stuff, you're working in the business. Making the pies, cutting the apples, baking the pies. I think we got an ice cream truck coming. All of that stuff is working and taking care of customers, cleaning the store, that's all working in your business. It's not gonna make your business grow.
In order to make your business grow, what you need to do is create systems for everything that you do you in your business. And then once you have systems then you can actually, hopefully give it to somebody else, or streamline it.
And then you take time away from the business to actually work on it. You know, how do you get more customers? How do you work on making your systems? How do you improve your recipes and all that kind of stuff?
So in trading, if trading is our business, then for us, the day to day stuff is the actual trading. You know we think, oh yeah that's gonna improve my business. But no, that's the day to day stuff. That's working in your business. You're not actually gonna improve your trading that much by just doing trades. That's not how it really works.
We think, I need more experience, I need more experience. Putting on trades for the sake of putting on trades is great, but it's not gonna get you to improve unless you actually work on your business and go back and review those trades.
Listening to the news, that's again, reading the newspapers, or reading CNBC websites, or all that kind of stuff, listening to conference calls, working on your taxes, working on your profit and loss statement, all that kind of stuff, that's all working in the business. It has to be done. We have to do it. It's annoying sometimes, it's frustrating.
And eventually hopefully you can get to the point where you can hire somebody else to do a lot of that stuff for you. You know, your taxes and what not. You can pay for more expensive subscription services that will listen to conference calls for you. And then just give you like the cliffs notes of it or something. I don't know.
But what I want to focus on is working in the business because we're already working in the business. You already know how to do that. Working on the business is what I want to focus on. And that's what you do to become a better trader.
And one of the things that I'm here to do, and what I urge you all to do is, take some time every few months to sit down with all of your trades and actually review them. Look at the ones that worked. Look at the ones that did well. Look at the ones that did not do well.
Just go over everything and try to find patterns. Try to find why did I mess up on this trade. You know, I've been trading this one stock every month for the last two years, but I had these bad months and these three trades. Didn't work out. Why? What was the reason? So try to figure that out.
Back testing would also be something where you're working on your business. Back testing all the trades that you did not do well on. Or back testing new strategies if you've come up with something. Or a tweak to a strategy that you already have, a trading plan that you already have. That would be working on your business.
Improving your mindset is another thing that you could be doing you know? Working on yourself. Your mindset as in, what are my goals? Can I accomplish more with what I'm doing? Or why do I feel certain ways?
You know, meditation is something that I've been looking into as a way to calm my mind and increase my results. A lot of traders that you read about, the more successful ones, they admit it. They say that they do trading.
One of the books that just came out recently is called, oh man I forgot the name of it. Principles is the name of it by Ray Dalio who runs one of the biggest hedge funds in the world.
And so he talks about how he meditates on a regular basis. And whenever he gets scared or whenever his mind is out of whack, he'll just take time out and just go and meditate for five minutes, and it calms him. So that is something. Learning how to do that would definitely help you in your trading. That is something that I would classify as working on your business.
Working on controlling your emotions is another one you know? So worry, fear, anger, all of these things that we feel on a regular basis when we're putting our money at risk, all this stuff is something that you don't want to have impact your trading. And so when you're working on that stuff, that's working on your business. Getting yourself to do better.
Education would be another one you know? Taking a class, taking a course, anything like that would be working on your business. Where you're actually trying to improve. Things like listening to this podcast. That's what you're exactly doing. You might be doing it in a car, but it counts you know? You're improving your thinking. You're learning new stuff. And that's also working on your business.
I mean, in trading it doesn't take too long to work on your business you know? You don't have to spend an hour on it every day. But every few months is when I take some time out and I look at it. Especially once you have your systems in place. You know, when you have your trading plans in place. If you have all that stuff down, then it's not hard.
You just follow your trading plans on a day to day basis and then once in a while you sit back and say, all right, how can I make things better? How can I improve it? If you don't have your trading plans in place already then that's the first step. You have to know exactly what your trades are. How you're gonna plan them out. How you're gonna do them.
And then you review if you follow the trading plan. If you're not following it then you need to work on that obviously. But that's the first step. And then at least a couple times a year, you should spend a day from wherever you trade, wherever you normally trade get away from that environment.
Go out to nature maybe if that's your thing. Go to the beach, go to the forest, go by the river. Go to the mall if that helps you. Go to the coffee shop, whatever. Somewhere you're not distracted by the trading. You know, you don't have your laptop with you or it's not open to your trading account. And we're just sit to thing. Sit back, review and think right?
And you want to do this alone as well. Don't take your spouse with you. This needs to be done alone. Go over how things are going you know? How have you been doing the last few months? What your emotions have been like.
How have you been feeling physically as well, your health? You know, because that also has an impact on your trades as well. If you're not feeling well, maybe you don't trade as well. So you need to check that as well.
And then plan for the next few months. If you're happy with your latest results, if you're happy with what you've been doing from the last time you reviewed, that's great. Keep doing it you know? And you should go out and celebrate and say, hey I'm doing great. This is wonderful. I'm gonna have some fun. I'm gonna enjoy myself.
If not, if you're not doing that well, if you think you can do better then work on improvements. That's the game right? We learn something. We create a plan for it. We create a system, a trading plan, and then we try it out. And if it works great. If it doesn't work we correct. And that's the only way to get better you know?
Try, fail, change, correct, and then try again. And then you follow the patter until eventually you get to a place where you are very happy with your results. And it's definitely doable. It's definitely possible. If people have done it before you, there's no reason why you shouldn't be able to do it as well you know?
Ray Dalio is a guy who starts off with like almost nothing, and builds up a multi billion dollar hedge fund. If you want, go read his book. He'll show you the way he thinks. He explains stuff, how he did it.
He's done a lot of podcast interviews lately since the book came out trying to promote the book. So listen to those and you'll see how he thinks. And then you can try to incorporate that when you review your own stuff okay? And then just be looking to get better. Just looking to get better. That's all we're doing. Just doing it one day at a time. One trade at a time. Just looking to get better.
So make sure you're working on your business. It doesn't have to be all the time. But in the beginning I would say maybe every couple months just step back and say, all right, how can I make things better you know?
And then when you are more established, I like to do it at least every six months, four months kind of if I can, if I can afford it, to get out and do it. I would like to do that. But at least once a year, I do, do it.
Normally I wouldn't be out here on such a sunny day. I forgot that it's gonna be so hot today. I thought it was gonna be a little bit more cloudy. This might be an abbreviated version for me because it's baking out here today.
But anyway, that's it for today. Work on your business, and in the next episode what I'm gonna be doing is actually going through a little bit of how or what I'm gonna be looking at when I'm reviewing my own trades all right?
Talk to you soon. Bye.
Sep 04 2018
Rank #5: Option Selling Defined - 015
I realized that we have done many episodes already where we talk about why you should be selling options, but never gave an explanation.
Option sellers trade in a market neutral way. So you don’t need to market to go up or down. You can trade it when it doesn’t even move.
Also, option sellers have probability on their side. So we do trades that have for example a 70%, 80%, or even 90% probability of working out in our favor. These calculations are done using sophisticated statistics and mathematical formulas that won the Nobel Prize.
In addition, to be even safer, we use other risk management techniques like stop losses, and spreads which limit our losses.
And the example given was the insurance company. So just like the insurance company collects premiums so do option sellers.
In fact, the insurance company analogy is a great one.
Because as well talked about in 8, the real reason options were created were as a way to lose money. They were created as a hedge. As insurance.
So the option seller acts as the insurance company be selling options to farmers, manufactures, and investors who are looking to protect their positions.
That’s one way to describe the option seller.
The second is as a casino or more accurately as the house.
The house takes bets from gamblers and has the odds in its favor. Over the long run, the house always wins.
For us, the gamblers are called speculators. These are the option buyers who are betting against the odds hoping for a big payday. Kinda like lottery ticket buyers. The option seller is the house, and takes the other side of the bet. Once in a while, the option seller loses, but over time, the house always wins. It’s just math.
And with the odds in my favor, I don’t care which way the market goes.
I don’t have to predict. If I want to do a bullish trade, I can, but I don’t have to be right to make money.
This removes so much of the stress.
When you have a 70, 80, even 90% chance of winning on a trade, you don’t have to be the best trader in the world to make money.
You see, when you buy a stock it has to go up for you to make money.
And if it does not, then your money is just sitting there not earning anything. Unless it’s a dividend stock and you get some measly return like 2%.
And if it goes down then you lose.
You have to be right about the direction.
It is the same with buying options, except it is exponentially harder
Not only do you have to be right about the direction, but you have to know by when the move will take place, and how much the stock will move. If you are wrong on any of those three elements, you lose.
Here’s the magic:
When selling options, you get to play a range. The stock does what it does and as long as it stays in the range you want, you win.
Let’s use golf as an example.
To make money with stocks you have to get the ball into the hole in 3 strokes.
To make money by buying options you have to hit a hole in one.
To make money by selling options you just have to hit the ball onto the course.
One additional point I want to make is that emotionally, winning more often does wonders for your self-esteem and confidence. And as a trader, having confidence in your trades and yourself is a key factor to success.
Because with selling options, what we are doing is hitting base hits. Over and over. Not trying to hit home runs. Because you know what happens to the guy who tries for home runs – he strikes out most of the time. And in investing, a strike out means losing money which is not a good thing.
The episodes continues with examples of. Listen to the whole thing to get the complete picture.
What to Learn How To Sell Options? Get Our Free Course at - www.optiongenius.com
Jan 21 2018
Rank #6: The Path To Options Trading Success - 46
What is the best way to learn how to trade?
Is there one best way to learn trading?
That is what I cover in this episode...
Hey, hey, hey, genius nation. How are my passive traders doing today? How are you feeling? What's going on? You know what I love? I love when you guys reach out to me and when we can communicate back and forth. So whenever one of you or if you have an issue or if you had something that you want to say to me, I would love it, and I do love it. It's one of the highlights of my day when I get a comment. If somebody, maybe they post something, they email us, or they post something on our blog as a comment or one of our Facebook groups, our free Facebook group, if they're a member in there. If you're a member, go ahead, let me know how you're doing today. Let me know what questions you have. Let me know how we can help you, myself, or my team or anything.
But I do understand that sometimes you might have a situation where you don't want to make it a little bit public. Blog post, comments, and Facebook groups, and when you write a review for the podcast, those are all pretty public, and people can see that. And I understand that if you have a longer issue or if you have a longer comment, then you can always email us. I love getting emails. We get several emails every day and the ones that my team can answer, if you're asking a question like, "Hey, what's the best broker to use," then my team will handle that. But if it's a more detailed question, if it's a personal issue or a trading issue, then I have those reserved for me, and I take some time every day to answer those.
And that's really part of how I feel that I am able to give back. So even if you're not a member of one of our services or one of our courses or whatnot, if you do have something, please reach out to us. We'll do our best to help you out as much as we can. That's getting us to our goal of helping 10,000 individual investors achieve financial freedom. So if we can do that without you giving us any money, then that's fine too. As long as it gets you to where you want to go and makes the world a better place, I guess.
And so today's podcast, I had a lesson that I wanted to impart upon you, and I'm going to cover that. But we got an email recently that was very lengthy, and it was confusing. It had me scratching my head for a little bit. It was a aggravating. It was really annoying in a way. I don't know. I mean, it gave me so many different emotions as I was reading his email that it totally confused the heck out of me. But when I went through it a couple of times, I read it two, three times, and I realized that the person that wrote this email really, really needs the lesson that I'm about to impart.
And so I thought that he would be really awesome if I could share with you just a few lines from this email. It was very lengthy. I'm not going to read the whole thing but just a few lines to get you into the framework to understand what that guy was thinking and what that guy was feeling when he wrote this. I did respond to him, and I gave him suggestions on what he can do because that's what he was looking for. But in this podcast, I want to go through that lesson to see how it applies to this.
Okay. So now I get this email. We get emails every day, but I got this one email, and it was very lengthy, and I was like, "Okay, this is going to be a good one," because he wrote, it was several paragraphs. And I'm going to read some of the things that he wrote. He started off by saying that, with pleasantries, "Hey, how are you doing? I've been following you," blah, blah blah. And then he goes on, and I'm going to read some of the lines. So he starts out by saying that, "I've heard options are manipulated. This is not an easy market, and hedging positions is important." Now this is one line of one paragraph. Okay, so I'm going to bounce around.
I'm not reading the whole thing. I'm just taking single, single points to get you to understand what I think is going through his mind. He wrote really long. So that was the first point that when I was reading through it, I was like, "Okay, I want you guys to hear this." And then then he says that, "I think most traders fail because they are the Jack of all trades, and they switch from stocks to futures to options to currencies without developing the skills in one." And at this point I'm like, "Okay, this guy, he's preaching to the choir." He knows what we're talking about because we're always talking about get that one strategy, and if you're going to be jumping around, you're not going to ever be good at anything. If they got, dive deep, gets good at something, be consistent, be profitable before you add something else. So I thought, this guy, he's been listening. He gets it. He understands it.
So let's keep going into the email. Then he says that, "I'm thinking about taking an options course." I said, "All right. That's cool." He goes, "I belong to an alert service now, and I'm happy with it." Okay, that's awesome. And then he says that, "I have a full-time job, 60 hours a week, and I cannot dedicate to trade full time right now. But that's my goal." I say, "All right, man. You are like so many of our clients, of our members, and our customers. That that is the goal, right? Maybe you can trade a little bit. Maybe you can trade during lunch. We can show you how to do that."
But that's what his goal is, and I commend him for it. So then he says, "I understand where you are coming from with money spent on education. As I have spent," this is him talking, "As I have spent $25,000 so far and not placed a single trade just yet. I am preparing to set up an LLC as I am at the point where I will start swing trading stocks soon." Now at this point, I was getting confused. I say, "Well, wait a minute. Well, hold on a second here. You work 60 hours a week. You don't have time to trade full-time or even really, 60 hours a week. You have a alert service that you're paying for every month, but you have not done a single trade ever. You've already spent $25,000 on education, but you have not done a single trade. You're paying for a service that gives you trades, and you're happy with it. How can you be happy with it if you're not making any money from it? I don't understand."
I'm confused at this point. I'm very confused. And then he goes further. He goes, "I am preparing to set up an LLC." You're preparing to spend money to set a corporation to trade in, but you have never traded a single share before. How do you even know it's going to work? Why are you going through all this extra hassle and wasting time? And then he says, "I'm at the point where I will start swing trading stock soon." Okay, you going to swing trade. All right, good. You made a decision. You're going to do something, awesome, great. I commend you for that, but then why are you telling me in the previous paragraph that you were thinking about taking an options course and that you belonged to an options trading service? This makes no sense to me. I don't understand. Help me. Please somebody explain what's going on here.
Then he continues. He's going on. He goes, "Two of my mentors day trade futures and swing trade stops." Okay. The next line, the very next sentence it says, "I would love to be coached and mentor to learn options." Again I'm like, "Wait a minute. Whoa. You have two mentors that do futures and swing trading stocks. They're two different things, right? Kind of similar but still two different things, and now you want a coach to trade options. You want to be mentored in trading options." Okay, I mean, coach, you want to get a coach. Coaching is not cheap, right? To have a tab, somebody actually work with you one on one as a coach, as a mentor, that's not cheap. But you want to spend the money do that even though you've never done a trade yet.
And then he continues. He goes, "I will be in webinars all day Thursday as I am attending the something something summit." Okay. It's just pitch, okay? It's people pitching product after product after product after product. So a guy comes on, tells you how good his trading is and that you should buy his product. Next comes on and talks about how good his trading is, and you should buy his course. Next guy comes in and says, "Oh, I'm making tons of money. You should buy my course." That's what a summit is. You get guru after guru after guru coming on, giving you really no information and then just pitching product after product after product.
So he's going to be spending all day, all day Thursday, listening to these gurus pitch their products while he works 60 hours a week, right? So he's working 60 hours a week. I guess he took the day off for this. I don't know. And then he says that, "I've attended the summit two years," so he's gone to this thing for the past two years. This will be year number three. Supposedly he's getting something out of it because he's spending all this time on it. But again, then he's never placed a single trade.
I have no clue what's going on. Then the next line, it goes, "I enjoyed your presentation last week. It will probably take me four months perfecting your strategy." He enjoyed the presentation that we did. We did a training, and he was on. That's why he was writing in because he wanted to talk to me. So then he goes on and says, "This is my phone number. Please call me. I'm available after dinner time. Please call me at night after dinner time." And it's, okay, well, first of all, dude, I don't know what to say to you, right?
There's so many different things in your email. You start off by saying, you think our options are manipulated, and it's not an easy market to trade. Okay. And then the bottom, you're telling me that you can probably, it's going to take you only four months to perfect the strategy that I was talking about. So the strategy that I showed on the training, which is already not perfected. Nothing is perfect, but I showed the way I trade, my particular strategy, and he wants to take four months to perfect it, meaning I guess improve it or make it better than what I'm doing. But then here's a guy who has never done a trade before in his life, and he thinks he can perfect something that I've been doing for the last several years.
So that's where I was. That ticked me off to be honest. But do you see? I mean, I don't know. Maybe you can see yourself in this, where this guy is completely, completely bonkers. He's confused, and I don't blame him. His heart is in the right place. His brain may be not be in the right place, but he has his goal set that he wants to retire, and he's working hard. I mean, I got to give him credit for that. It's not easy working 60 hours a week and trying to learn how to trade and make yourself better.
But what I do fault is, how do you spend money month after month on something? How do you spend $25,000 without even trying a trade? And okay, fine, maybe you got suckered into it. Maybe somebody did such a great sales pitch that you just got suckered into some product. Okay, I get that. It's happened to all of us. You go to a seminar or whatnot, and you think it's going to be great, free information, and at the end it's like, "Okay, here, sign up for $5,000 program." Okay, we do it because they make you such an awesome, amazing offer that you think you can't fail. But then we learn, oh, that it's not the truth, but okay, even, oh, that's fine too. You spend $25,000. Okay, fine.
But the fact that bothers me is that he's still spending time going to sales pitches. Why are you spending time going to sales pitches when you have all this training or whatever that you already have that you're not using. Number one, you're not using any of it. You haven't done a single trade. And then you're going to the next step of making a corporation to trade in. I mean that is, if you are already a professional trader, if you are already making a very, very good amount of money, then you should go and look at and say, "Yeah, what, I'm going to start open a company," and we've talked about that in a previous podcast.
So if that's something where you're at, then you can listen to that podcast. But if you have never done a trade before, you don't need to worry about anything about setting up a company to trade in. You need to worry about A, putting a trade on, and B, not screwing it up because you're going to screw it up, especially in the beginning and to tell me that it's going to take you four months to perfect something that I'm already doing every day, where are you coming from? You have all this confidence. You've never done a damn thing yet. Jeez.
So, I mean, hopefully you're not in this situation where if you are, then it's very simple how to get out of this situation. Number one, stop wasting your time going to pitches, okay? Stop reading emails where all they do is try to get you to buy something else. If you have to, unsubscribe from that list, okay? Because a lot of these companies, that teach you how to trade, right, that's all they do. They sell you a very cheap product. Maybe it's seven bucks or 20 bucks or 50 bucks or 100 bucks or whatever. And then every day you get bombarded with emails about how you should buy one of their other products, and they have 10,000 other products, and they're all great, and they're all making millions of dollars, and they're all, you could triple your money in two weeks in all of them. But it's all BS, right?
So get off of these email lists. Get off all of that. Pick one thing, right? Pick one thing that you can do, that you want to do it. This guy tells me he wants to do swing trading. Okay, fine. Go do swing trading. Get away from options. Get away from futures. Get away from currencies. If you want to swing trade stocks, go swing trade stocks, right? Why are you on a options trading training? Why are you going to this summit? All of them are not talking about swing trading. They're going to be talking about all kinds of stuff, and then you're going to get sidetracked again, right? When you are learning, when you are trying to do something new, when you are trying to improve your situation, the tendency that we all have is to learn everything we can about it. Okay.
And this is the lesson part. When we learn, and for some reason, we look at trading because we don't know any better when we're starting out. We look at trading as trading, one big umbrella. So stocks, buy and hold, is the same thing as swing trading is the same thing as futures as currencies as options, cryptocurrencies even. All these things get lumped in together in our brain as trading. Say if your goal is, "I want to become a trader," or "I want to make 5,000 bucks a month from trading," right? That's your goal. We think that if we read a book on stock options, we're getting to our goal. If we read a book on swing trading, we're getting to our goal. If we're taking a course on technical analysis, we're getting closer to our goal. If we're learning about buying a course on futures, we're getting to our goal. The truth is we're not because each of those is a separate path. Each of those is a separate road that is taking you further and further away from your goal. Basically, you're just going around in circles. Does that make sense?
I've said this before many, many times. We need to pick one strategy even when it comes to passive trading. There's dozens of strategies that you can use to sell options, but we don't focus on dozens of strategies. If you're starting out, you focus on one. You get good at that, and you study that, and you practice that, and then when you're consistent and profitable, then you add strategy number two if you need to. And then maybe you go to strategy number three. You really don't need more than three strategies to be honest. You can make a very, very, very nice living and trade really well and have a awesome, amazing return every year with just two strategies.
And then there are those people that I know that do amazingly well, trade for a living, with just one strategy, just one. That's all they do. They master it. They pick one. They go at it, and they master it. That's all they do. So if you want to succeed at this, that is the path. The path is not to open a company before you ever done a trade. The path is not to spend $25,000 and never do a trade. The path is not to have an advisory service give you trades, and you never do them. The path is not to say, "Oh, I have mentors and this and this, but now I'm going to go learn something totally different." No, those are not the path. Those are distractions. Those are side, whatever they're called. They are not taking you to your goal. You want to get to your goal? You need to simplify it. You need to make it cut down as much as possible. Get rid of all the noise, and then you focus on step by step.
Okay, this is very important. You pick a strategy. You learn about that strategy, and then you implement it. You go out. You get a paper trading account, and you go out and you get a backtesting software. You go out, and you just do the trade. You don't even have to know everything about the trade. You don't have to know everything about how it works. You don't have to know every single adjustment. You don't have to know anything really except how to put on the trade and a basic idea of how the trade works. Once you have that, you go, and you put on a trade. Make it a very small trade if you're losing real money, okay? If you're using paper money, go and do it. That's what you should be doing. But if you're using real money, you go out, and you put it in a very small trade, so that if it does lose money, it's not the end of the world, okay?
And then you see how the trade reacts. And then you get to another point in your progression, and then you'll get stuck. You'll say, "Oh, okay. I put the trade on. Now what do I do?" Okay, well then you learn, and you go investigate. And you say, "What do I do now? Oh, I just have to wait. Well, okay, all right. I'm going to wait. All right. Oh, hey, my trade's making money. What do I do now?" Okay, well now you can go, and you can learn the next step. You can learn the step of what do I do when my trade is making money, right? And then you have different options. "Do I let it expire? Do I get out at a certain percentage point, or do I have a stop loss? What do I do?" Right? And then, "Oh, what about if my trade is losing money? What do I do now? Oh, my God."
Okay, well at that point you learn what to do about that. You say, "Okay, I need to adjust my trade. All right. How do I do that?" Well, go find an adjustment and see how it works, and if that does not work, then you go, and you find a second adjustment. You don't need to learn 20 different adjustment strategies before you even put on a trade, okay? What I'm saying here is to take it step by step. One thing, learn about it, learn about that step, then go to the next step, and then learn about that step, and then go to the next step and learn about that step.
This will get you to your goals so much amazingly faster than all of the other people who just sit around and just get educated, get educated, get educated, get educated, and never take a single action, okay? If you want to get ahead, if you are an action taker, if you want to make this work, you have to put on the trade. That's the biggest hurdle. I don't know why people think that just, I'm just going to learn about it and learn about it and learn about it and learn about it and learn about it, and I'm actually doing something. You're not. You're wasting your time. If all you're doing is learning, you're wasting your time if you are not implementing what you're told to do.
So for example, this guy, if he wants to do swing trading, get out there and put on a freaking trade, okay? If the trade does well, then you figure out, what do I do now? If the trade does badly, it starts losing money, then you figure out, what do I do now? Okay? While you are learning, this is the fastest, fastest, fastest way to succeed in anything, right?
I mean, if you are trying to bake a cake, you don't need to know all the nutritional properties of every single ingredient. You don't. You need to know step by step what do I do. Okay, you take the onions. Oh no, not onions. You're trying to bake a cake. You take the flour. All right. What do I do with flour? Okay, go on Youtube. Find a video on how to, whatever they do. They knead flour I think, so here, knead the flour into dough. I guess, I don't know. I mean, I've never baked a cake before. I'm sorry. I don't know what the steps are, but you take something, and you do something with the flour, okay? Okay, now I'm done with the flour. Now what do I do? Okay, I think you got to bake the flour or something, so, okay, how do I do that?
Learn how to bake it, put it in the oven, put it on certain degree. Okay, fine. I'm done with that. Now what do I do? Okay, now I got to put the icing on it. How do I do that? Okay. Find out how you do the icing. Okay. You go, and you make the icing, or you go, and you buy the icing. Okay. Now I'm going to decorate the cake. Okay, cool, step by step by step. If you sit there and you go, and you read a book about how to bake a cake, right? You just spent, I don't know how many days in reading a book about how to make a cake, but you still don't have a cake. If you do it the way I just told you earlier, hey, you might have the worst cake ever, but guess what? You are now a baker. You baked a cake, okay?
So now you take and you say, "Hey, I baked a cake," and somebody's going to come and say, "Well, you baked a horrible cake." "Well, yeah, I know, but I baked a cake, right? So that's good. I have one cake under my belt." And then if that other person knows how to bake a cake, they'll help you. They'll point at, "Okay, you did this wrong. You did this wrong," and then you can go, and you can fix it. But you are not afraid anymore. You're not afraid of baking a cake. And when it comes to trading, you're not afraid of putting on a trade. I mean, maybe that submit button, you put in the order, but that submit button, maybe that's the scariest thing in the world right now because you're afraid of losing money. The only way to get over that fear is to hit the button, to actually do it.
And if that's the case, then find the trade that has the least risk, that has the least amount of money, that even if it goes horribly wrong, and you lose 100%, it's not going to kill you because that experience that you get from doing that is going to be immeasurable. That confidence that you get, that "Yes, I did it. I finally did it. I finally put on the trade," immeasurable. So depending wherever you are, whatever path on the option continuum you are, maybe if you're option level two, five, six, whatever, doesn't matter where you are on your phase of learning options, forget all the noise.
Do it step by step. Do take an action and then figure out, "Okay, now I'm at a roadblock. Now I need to know, what do I do at this point?" And then you figure that out and then you take the next step and then, "Okay, I'm at another roadblock." Then you take the next step. Then you take the next step. And not only that, but when you ask for help, it is so much easier for somebody like me to be able to help you out, right? Because you've already done something, and you have a specific question. "Okay, I wanted to do a credit spread. I put on the credit spread. Now this is my situation. What do I do?"
Okay, that is so much easier to answer than this fellow's email because he was all over the place. I don't even know what he's asking me. He's swing trading, but then he's starting his LLC, but then he can't work, or he works too much, and then he's going to all these different trainings. I mean, even if he takes my course, do you think he's actually going to listen to anything I ever tell him, or is he just going to go to the next course next week, buy something else, and learn about that, and then go learn something else? I can't help you if you don't implement. Nobody can.
And if you're so vague, and please don't tell me to call you after dinner time, right? I mean, I have a life. I have kids, have family. I'm not going to call you after dinner time. If you want to sign up for our coaching, then you can sign up for coaching or one on one coaching. That's fine, but it's going to be done at a time that I can do it, right? So, I mean, I really appreciate it, this guy reaching out, and I tried to help him as best as I could, but there's only so much you can do for people that are rudderless. You're in the ocean. You don't know what direction you're going in, and you don't know how to get there. But if you pick a direction, right, and then you want to learn something, the fastest way to do it is step by step.
Do not try to learn every single thing you can do without taking any action. Once you get a few trades under your belt, once you get a few successes under your belt and a few losses as well, then you will have a much better idea of, "Hey, what do I need to focus on? What do I need to learn? Where are my blocks?" And then you can go and totally jump in and master that one particular strategy. Don't try to master all, every... Even when it comes to options trading, there is nobody that is an options master, that knows everything about options, that knows about every single strategy and is consistently profitable with every single strategy because it's all very difficult, very complicated to learn everything.
That's why you need to niche down. You need to keep it as simple as possible. Learn step by step because you are not a guru. You are not a trainer or a trader or a mentor to a million other people, right? You are responsible for your own trading account, and in that sense, all you have to do is make more money, have more money at the end of this month than last month. As long as your account balance is growing, you're in a good spot. And that's the goal. More money at the end of every month, profitable trading, consistently, consistently profitable. That's all you have to worry about.
Some people telling me that, "Oh yeah, I want to learn the most complicated strategies." You don't need to. It's not about showing off, right? If you make money every month with the most basic strategy, the bank doesn't care, right? Nobody else cares. Your wife is not going to think any lower of you because you did it, you're making money with covered calls instead of ratio spreads or box spreads. Nobody knows. Nobody cares. As long as you have a profitable trading account, that's all that matters.
Your broker doesn't care even. Your broker knows what you're doing in your account, but they don't even care, right? As long as you are consistently profitable, you are a good account for them. You're doing more trades. You're making them more money. You're going to stick around. That's the kind of person that they want. They don't want somebody who's going to open account and trade and blow up and leave in a couple of months. They want the trader that's going to be there for a long, long time to give him commissions month after month after month. Those are the types of people that they like to have accounts, and those are the type of people I like to work with that can focus on one thing, learn, grow, grow, grow, and then add other things as well.
That's what makes it fun. When you're making money, it's fun. When you're just learning, you have that false sense of I'm actually doing something. I'm actually moving forward. I'm learning, so that when I do finally started to trade, all this knowledge is going to just rush out and make me profitable. Like he says at the bottom, it's going to take him four months to be profitable. No, I don't think so. Not with all the other stuff that he shared. I mean, I don't even know if he has a trading account set up yet.
So, take it small, step by step. That's the lesson for this podcast, okay? Step by step, take it small. Don't need to immerse yourself in all the noise. Don't need to learn everything. Implement, please put on a trade, and then see where it goes. And then when you get stuck then research what you need to do next and then implement more. And then you get stuck, and then you research more, and then you learn a little bit more, then you learn a little bit more, then you learn little bit more. The trade is over, and then you're either successful or not, but you've had done a trade. You're experienced, right?
And then we have to add more and more and more experience. Do more and more and more trades, so that you learn more and more, and you learn faster. The more trades you put on, the faster you're going to learn because the more things that could happen. And the more you'll have to figure out, "Okay, what do I do next?" So that is what I wanted to impart with you today. Take it to consideration, right? And put something on please. I know it feels good to learn stuff. I know it feels good to listen to even podcasts, right? I know you're listening to this, but this is all a waste of time if you cannot go and put on a trade. If you don't that, then there's no reason for this, okay?
So please pick a strategy that you like. Put on a trade. If it's on paper, fine, great, I don't care. That's even better because you're not losing anything. Just put the dang thing on. See how it does, and then see where the roadblocks are. Learn the next step and move forward and then move forward and continuously moving, moving, moving forward. Because then when you're actually doing stuff, and you listen to podcasts, or you get more education, or you read a book, or you take a course or whatever, then you will be able to take that and apply it to what you're already doing, and it'll ROI immediately. Does that make sense? I hope it does. Remember, trade with the odds in your favor.
May 09 2019
Rank #7: Trading In A Corporation With Brian Canter - 37
Should you trade in your own name or a Corporation?
How do you protect your assets? Do you even need to?
In this episode I talk to individual investor Brian Canter who explains why he trades inside a Corporation, how he set it up, the benefits and pitfalls.
This is an episode every serious trader needs to listen to.
Jan 15 2019
Rank #8: The World’s Richest Options Trader - 42
Good day to you My fellow options trader and individual investor. This is Allen Sama coming to you with another edition of the Option Genius podcast. Thank you very much for listening. Thank you very much for supporting us. Thank you very much for accompanying me on this journey as we learn about options, about selling options, about passive trading, about making money while we sleep. It's amazing. I didn't think it was going to happen, but this month marks the 10th year anniversary of Option Genius. Company started 10 years ago, had no clue where it was going to go, what it was going to do, but it's amazing the thousands and thousands of people that we've actually been able to help over these past 10 years. And the really exciting thing is that we are just getting started to really ramp it up because, in the past, options unions were started as a lifestyle business, meaning that we didn't really want it to get very big.
We wanted to stay small, just like one website and one service and that's it. But slowly, slowly it's grown. And now, it's at the point where we're like, "Okay, we need to really get this message out there. Get other people to know what we're doing and how it's working and overcome all the obstacles that people have to a safe retirement." Not worrying about money. Not worrying about expenses and all these bills and all this stuff that people ... it's just, life is too short, and then we have to worry about all this money stuff. Right.
I really appreciate you listening. Thank you for sticking with us for so long. And if you could do me a favor and just rate and review the podcast. Five stars is better than four, but if you could leave a review for us, that would be amazing. It's easy. It's free to do whatever podcast listeners software that you use. Just rate it and review it in there. That's how other people find us. That's how other people learn about the podcast and start listening and then, hopefully, we can help more and more people get the word out that, "Hey, people need to be selling options," so I appreciate that.
Now, today's episode is going to be a little fun one. Video games. Totally, totally, really tangent, right? I'm not even trying to transition in a proper way, and I'm just like, "Oh, leave a review. Okay, now I'm going to talk about the video games." So look video games, all right, I've played them since I was little, and I love them. I still play them. I was an introverted only child, lots of time alone in myself. So you got to stay busy, right? Not that time. Nowadays, the kids, man, everybody's playing online, so you can play with people thousands and millions of people in the same game all over the world. But back in my day, it was just you and the computer. I still remember my Super Nintendo system. I spent, I don't know, countless hours with that thing. It was very fond memories. Very lonely memories, but very fond memories.
Nowadays though, I still play, but I play on my phone, and the graphics and everything it's just much faster on the phone even though it's a lot smaller, but you can play anywhere you want, and you don't play the big long games anymore they take hours and hours and hours. Those you used to play on the computer. But the little games that you play on the phone they take two or three minutes at a time and whatnot.
The companies that make these video games they make incredible, incredible amounts of money. If you haven't looked into this or if you don't know about it, I mean, it's unbelievable how much money they make. Millions and millions of people are playing these games, and it's not just one or two major games. There's like a lot of these games and millions and millions of people are playing them, and they actually spend money on these games. And these companies are making hundreds of dollars, hundreds of millions of dollars in revenue every single month. It's incredible.
Now, the way these games normally work is there're two ways that they make money. The first one is the most logical one is where people can pay the game maker, whoever made the game to advance, so these games are pretty long, and they're complicated. You have to have certain equipment, and you have to have certain space to be able to play in the game. You have to have land, and you have to have resources and upgrade your equipment, upgrade your characters and all that stuff. You can actually pay money to do that. Some games they have diamonds that you can buy. Some have ruby's or coins or whatever they're called. But in almost every single game, if you want to go faster in the game, you want to progress through the different levels faster, then you can actually put money up, real money, pay to get these coins, ruby's, whatever, and then use those in the game to buy stuff with it. That's the one way, and that's the way a lot of people do it.
But there is another way that most of the recent games came out with. Now, the older games, they were out a couple of years ago or a year ago, they didn't have this other facet, but the newer games now they are adding more and more ads to their games. Now, the ads are not intrusive, so they're not in the game. You're playing a game and then just an ad shows up in the middle. No, people hate that. And those are games that people don't play anymore but now if you want diamonds or rubies or coins or whatever, you can watch ads and get those.
For example, let's say you want to, if you have time, you'll watch a 30-second commercial, and they'll give you five rubies for that and then you're allowed to do that every hour or two. So every time you watch you get five, five, five, you just add those up and eventually then you can spend those. For the people who don't have the money to spend on the games or who don't want to spend the money on the games, like me, you can actually buy ads, and so this is overcoming one of the obstacles that these game makers had there where kids were playing and kids didn't have money to buy and the parents wouldn't give any money to buy stuff in the game. But now they can actually watch the ads and these game makers are making money from all these people that are watching ads. And it's incredible. It's a two-way revenue source. It's amazing. Who knows, maybe my next life I'm going to be a video game maker. That'd be pretty cool actually.
Most of these ads are from Facebook right now. That's just the way Facebook has really tapped into video ads and most of the games that I've been playing lately, they have these Facebook ads built in. Why am I telling you about video games? I'm leading into something. Okay. It's just part of the story. So I'm playing my favorite video game. Right now, it's called Hustle Castle. That's just the name of the game. And this little thing pops up, "Hey, you want to extra turns or spins or whatever? You can watch this video." So once in a while, I watch a video, especially when I have nothing else to do or I'm waiting for something else to happen in the game if I have 30 minutes to kill, I'll go watch an ad. So I say, "Okay, here, let me watch this ad."
And this guy comes on, nice looking guy. He has a video, he's in this private jet, laughing and smiling with a bottle of champagne or wine or something. Then he's driving this exotic sports car. I don't know what it was. Maybe it was a Ferrari Lamborghini something, who knows, but he's driving his car around and whatever. And then he's meeting all these other people and they're all well-dressed. They're all laughing and they're smiling and they're walking around, I don't know where they are, in some big office building or something or whatever. And then he starts talking and he goes, and most of the time my phone is off, the volume is off. So I don't know what he's saying, so I just ... The ad was over or whatever the first 30 seconds of the ad was up and then I could skip it. So I just skipped it. And then that ad just kept coming over and over and over again. So I was like, "What is this guy talking about?"
And then one time I had the audio was actually on, the volume was up. So he started talking and he says, "Hey, I am the richest option trader in the world, blah, blah, blah, blah, blah, blah," whatever else he was saying. And I was like, "You're the richest option trader in the world? Oh, that makes sense. That's why you're in the plane and the car and all that stuff. Okay, cool, fine." And then that intrigued me because he'd said he was an options trader. So I said, "What's this guy doing? Let me see what this guy's all about." Now, obviously, you don't believe them right away but let me check it out.
I go over to his website and it turns out that he is a option day trader and the whole point of his website and whatnot is because he's going to teach you how to make millions like he's made, supposedly, but he's doing it through day trading. Now, for those of you who have never done it, day trading stocks or Forex or commodities, futures is very, very hard. Most people lose a lot of money because you're competing in that market against high-frequency traders. You're competing against real good professionals that know what they're doing. You're competing against Wall Street with its hundreds of trillions of dollars and resources and everything. To be a day trader you're competing against all those people. So it's very difficult to make money doing that but this guy, the guy in the ad, he is an options' day trader.
So I mean you take the hard difficulty level and you multiply it by 10 because we already know right, on this podcast, we already know that buying options is a loser's game. But this guy, he's taking the risk to extreme because he's buying and selling options in seconds or in really, really short timeframes. But he's buying the options. You can't be an option seller realistically and make a lot of money day trading. You have to be a buyer. Now, I don't want to judge. I don't know. I didn't look into his numbers and whatnot. So maybe he is making a lot of money and I hope for his sake he is and I hope for his students or whatever that people are paying him, tens of thousands of dollars to teach how to do that same thing. I hope they're learning something that they can actually get their money back.
But guess what? Day trading is nothing more than a job, right? Are you with me here? Do you understand what I'm saying? Basically, you trade. Okay. Hopefully, you make money and that's it. If you're not trading, you're not making anything. And that to me that sounds really sucky because I want to make money in my sleep. I want to make money no matter what I'm doing. And I don't want to be stuck to my screen looking at my monitor, looking at this chart and that chart, what's happening in the news and having my attention span all over the place.
So while this guy was filming his commercial, right, he wasn't making any money. While he's flying in his little private jet or whatever, hopefully, it's his, he's not making any money. While he's renting his exotic cars to show off, I mean, you know what I mean? Sorry. I mean, driving his Lamborghini, he's not making any money. Me, on the other hand, as I record this option I'm sorry, as I record this episode, my options, the ones I've sold, they're decaying. They're making me money even as I'm doing whatever I do in normal life.
Theta, which is another word for time decay is just a lingo, just a jargon that we use in options trading. The theta decay of my options is working in my favor, right? I don't need market volatility. I don't need news to make my stocks go up or down. Heck, all I really need is a laptop. Or you could do it on a phone too, but I prefer the bigger screen. Getting old, eyes are it's harder to see now, so I prefer my laptop and I really would prefer my desktop. But you could easily do it on a laptop as well. It's just simple. So you have this, the commercial guy, the day trader options guy, and then on the other side you have me, which is the opposite. Right? I guess compared to him I would be a country bumpkin or I'm just laid back and I don't want to trade a million times and, and I'm still making a ton of money, but I guess it comes down to really what you want.
I mean, sure. Yeah. It'd be great to have a private jet. Right? Well, I mean, I don't really fly around that much. I like to stay with my family at home. And since I use my credit card for most of my purchases anyway, whenever you go out, you go to dinner by buy jazz whatever. I use my credit card. I have so many points and miles that whenever we do go on vacation, my points and my trips are free anyway. True, I've always wanted a Ferrari. It'd be really cool to have a Ferrari. I always wanted one but then when you think about it, realistically, where am I going to put the three car seats and the boosters for my kids? Right? We've got three kids, they're all still in boosters and car seats. Where am I going to put them? I don't have any room. So having a Ferrari and exotic sports cars is not really practical.
Our house, yeah, we could buy a bigger house, but it's already huge enough as it is. I mean, heck it has six rooms and we barely even use two of them. They're just for storage. Right. So, I mean, I think that if you want to take big risks. If you want to aim and, and go for the home runs and grand slams and get rich quick, then day trading options might be something that you want to look at. Like I said, it's super dangerous. It's super risky. You're going to lose all your money most likely but it might be for you. Let me just keep in mind that you're playing a loser's game in which most traders will lose. Most traders are going to lose their shirt and quit doing that. So I mean realistically the best way to make money in day trading is to sell day trading coaching. I said it, there you go. The best money to make money in day trading is to teach other people how to do it.
I mean I really don't know if the guy in the commercial is the richest option trader in the world or not. I mean I hope he is for his sake. Right. I mean, you wouldn't want to be lying or anything. I mean, he seemed like a nice guy, but at what cost? What are you willing to give up for the money? That's a personal thing. I'm sure if you're younger if you're in your 20s you might say, "Yeah man, I want to do day trading. I don't want to work. I don't want to, I don't want to do anything. I just want to be trading all day long and make millions of dollars and have my own plane and Ferrari." And for those type of people, if you're that age, if you have nothing to lose, then yeah, maybe that sounds awesome.
And I think that those type of commercials when you see them where they're appealing to that get rich quick type mentality people, they're aimed at those type of people. Younger, nothing to lose, not a lot of money. People gullible enough to pay tens of thousands if not hundreds of dollars, thousands of dollars to pay for coaching programs but that's not me. And I don't think that's you either because I mean I don't want to be the richest guy. You can't take it with you anyway. Right. I mean if it were me and I had a lot of extra money, I was thinking about it the other day,
A couple friends were talking and they're, "Yeah, the lottery Mega Millions, whatever is up to something." And I'm like, "Oh, cool." And they're like, "You going to buy tickets?" And I'm like, "No, man, why am I going to buy lottery tickets? That's crazy." And they're like, "Well, you never know. You could hit, it's only a couple of bucks, you can put it in ... And I'm like, "I don't even know what I would do with the money. If you give me, tomorrow if somebody calls me and says, "Hey, you won the lottery," or, "Here's $10 million that your rich uncle left you that you didn't even know about." I'd be like, I'd probably look for ways to give it away. I don't know what to do with it. I don't even want it. Right.
I would rather have time to spend with my family, to volunteer, to enjoy my life, to travel, to learn new things, to take different classes maybe. That's what I would want to do. But sitting at a screen, day trading, doing a lot of stuff, that's not it. I mean, that is why I designed passive trading as a way to make me more than enough income, but still have the life I love, so that when I do go on vacation right, and we do, our family goes on lots of different vacations and we love going on vacation. But when we do that, I make money the whole time, right? I'm not stressed out that, "Oh, my God, I'm on vacation. I'm not making any money. I got bills to pay. I've got to pay for the Ferrari payment. I can't go on vacation and I need money to make." No, that's not this kind of stress that I want.
There're a lot of people say that the thing like, "Oh, I want to be a trader. I want to trade for a living." Oh, that's great. That's wonderful. That's a very aspirational thing. But they look at it and they say, "You know what? In order to survive, I need to make $10,000 a month and I need to make it from my trading each and every month." Well, that kind of stress is going to put you in the hospital because if you have to start over at zero and you have to make 10 grand every month, and if you don't make it, then you're eating into your capital. That is going to, I mean, you're just going to be bitting your teeth and grinding your teeth all night long. You won't be able to sleep because that's crazy, crazy stress, right?
But if you follow the things that I've been sharing with you guys in this podcast in these different lessons and the stuff that we teach at Option Genius, you will be able to set yourself up in a way where you get to enjoy trading. You do it in a way that's passive, doesn't take a lot of time. You earn a lot more money than you do in almost any other investment out there. And you get to do it without a lot of stress. And then eventually, yeah, you do get to trade for a living if you want to. You will be able to build up your accounts so that the theta decay and the income that you get from your stocks and your selling options portfolio will equal whatever you're making as income right now, so it's definitely easy to get there.
But to make the jump from, you know, "Hey, I'm going to quit my job today, and I need to duplicate my income right away." People, that's the dream that these type of commercials, the riches option traders, the day trading commercials, the trading academy's and whatnot, those are the things that they get you. That's how they sucker you in. That's how they get you to pay for the dream because that's what they're selling. They're selling you a dream. Realistically, if you could learn all that stuff on your own, but they're like, "Okay, we're going to give you a shortcut. We're going to show you a shortcut." Well, I mean, I don't know how they have the time to do all of that because every time that the Mr. Day Trading Option guy is teaching the class, he's not making any money from his trades. So yeah, if he's making money from teaching, then he doesn't have to trade. And I think that's the thing, right?
And that's what people ask me all the time like, "Allen, if you're making so much money, why are you teaching people how to do it?" Because I got plenty of free time. Like I said, I'm recording this episode. My options are decaying, and I'm making money just like Warren Buffet says. I mean, it's his favorite and one of my favorite quotes of his, and he's saying that if you do not find a way to make money in your sleep you are going to work until the day you die. And that's what I'm going to leave you with. All right? If you do not find a way to make money in your sleep, you are going to work until the day you die. Folks, keep the odds in your favor.
Mar 01 2019
Rank #9: How to Invest With No Money - 27
I don't know too many people that would not like to have more money, do you? But I do know a lot of people that want a lot more money, and even more people that don't have much money.
When it comes to trading and investing, well, if you want to do it, you've got to have money, right? Well, kind of. There are ways to get into investing with no money, and that is what this episode is all about.
Join me as I give you 2 Case Studies of gentlemen that got recently got me to invest with them. One of them had limited capital, the other had none at all.
But I and others still handed them thousands of dollars to invest for us.
Learn the tricks they used and how you can use the same methods to get you started when you have no capital to trade.
Jun 11 2018
Rank #10: Interview with Jeff Stanton - 013
This is going to be a special edition because not only am I here by myself but today I am joined by Jeff Stanton.
It's going to be our first ever interview podcast. So in the past all the other episodes that we've done I've basically been talking to the mic and I've been talking about whatever topic interests me and we go on and on and try to help and try to share my knowledge.
But this time I've actually been lucky enough to get Jeff on the phone and I'm going to be asking him some questions. Jeff is a professional trader who lives out in New Jersey right now.
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Jan 02 2018
Rank #11: Credit Spread Horror Story with Jeremiah Wiser - 25
This is the episode all credit spread traders MUST listen to.
Jeremiah placed a credit spread trade with the max loss of a little less than $500. This was the 35/30 put spread on DBZT.
Potential ROI was 19% in 10 days.
The stock closed on expiration day at $47.80. So the trade is a wild winner, right?
Then why did Jeremiah lose $1,250?
That is more than the max loss!
What is going on here?
And this can happen on any credit spread you sell.
Listen in to learn exactly what happened and how you can keep it from happening to you.
May 06 2018
Rank #12: Trading For A Living Without Trading - 52
Alan: Welcome, passive traders, to another episode of The Option Genius Podcast. Today, I want to be talking about trading for a living without trading. Huh? What? Allen, what are you talking about? How do you do trading without trading, but to doing it for a living? That doesn't make any sense. Alan, what you talking about? Well, allow me to explain.
Now, you see trading for a living sounds great. Whether you do it professionally and you manage other people's money and you get a percentage of the profits or whatever, or you trade for your own. You trade your own money and you grow it, grow it, grow it over time, and then you have enough money to earn a decent income from it so that you don't have to work. You don't have to do anything else. You're covering your expenses. We have people doing it both ways, and it just sounds interesting and exciting.
It's like I trade for a living and it gives you a boost to your confidence as well, I got to tell you that. If you feel bad about yourself, but you're like, yeah, I trade for living. Oh, man. You're on top of the world. That's why they call themselves, these hedge fund guys, they call themselves masters of the universe. Because he is a key man. You got your chest stuck out like, I trade for a living! It's like if you're at a party, people come up to you and say, hey, how are you doing? What do you do? And you're like, I, trade for a living! I go into the markets and I bend them to my will to do my bidding, with just my wits and my brains. I make money from thin air. Ha, ha, ha, ha.
Well, I mean, you probably don't want to do it with the evil laugh at the end. But I mean that's the way most people look at it. Unfortunately, most people have, even traders, have a misconception about trading for a living because they normally think of day traders who by definition have to trade for a living because that's their job. That's what they do. If they don't trade, they don't eat. If they have a trade on, they have to go to the bathroom, they can't. They have to wait until the trade is over. They can either pee their pants or if they leave, then they might lose money on the trades and they can't do that. But most professional traders are not like that. They let their assets or their money work for them. They let the markets come to them and they only trade when they feel they have an advantage.
This advantage, it doesn't come every day or multiple times a day. I mean, you take for example, Jesse Livermore. Now he's not famous anymore, but back in the day in the 1920s and '30's, this guy was the major trader. Everybody knew his name. He made millions back then and this is in 1920 dollars. He actually wrote a book about it called Reminiscences. I don't even know how to say this word. Reminiscences of a Stock Operator. He used a pseudonym as the author of that book, but there's another book specifically about him called Jesse Livermore, World's Greatest Stock Trader.
Now I would urge you, if you're interested in stocks and trading and whatnot, even options, you should get both of these books. I love them. I read them from time to time. He's one of my favorite classic traders and you can actually learn a lot from the way he thought by reading his books and understanding what he was going through when he was thinking about trades, when he was ... when things were happening in the markets, how he would react to them. How we would see them.
He was probably one of the first people who ever used technical analysis before they even knew what that was. At that time back then, they didn't even know or they didn't have any understanding that markets would move in certain patterns. And so, he was in his brain without even doing the charting in his brains, he was able to discover these patterns. But, he did not trade every day. He wasn't in the market all the time.
His keys to success, one of them at least was to wait. One of his most famous quotes is that the money is made in the waiting. He was called the boy plunger. So what he would do is he would wait. He had his whole big stock portfolio just sitting there waiting. Not in the markets every day. He didn't care what happened every day. But then, he would notice something happening in the market. He would notice that there is something abnormal happening and then when that happened, he would go all in. Now I'm not saying we need to do this. Eventually he did end up going bankrupt. Actually he went bankrupt several times, but the last time he couldn't recover. I don't remember if he actually killed himself or not. I don't remember that part, but he ended up, he never recovered the last time. But, he was able to make millions along the way If he had put it into other investments, he probably would've been okay, but he didn't, so there's also that lesson to be learned.
But then we have, what he was waiting for, the proper opportunity. He was waiting for the chance where the odds were in his favor. Now he wasn't selling options. I don't even think they had options back then, so he didn't have the opportunity that we have as option sellers and passive traders to wait and to do trades that have the odds in our favor from the beginning. But his thing was, he was a stock trader and so he would wait until the market showed him or a particular stock showed him that he was going to make a big move in one direction or the other. That's when he would go all in for it.
Now, I bring this up today because right now it's August, 2019. When I'm recording this, it's today's the seventh. The markets this month have started off very rough. We're down about 7% on the S&P 500 as I record this. Now, I don't know what's going to happen later on, and it doesn't really matter if you're listening to this much later. You could be listening to this to a year or two years from now. It doesn't really matter. But the fact is that this is going to happen. There are going to be times in the markets where we have big declines or we have big upswings, but mostly the declines happen really, really fast. The bull goes up the stairs, the bear goes out the window. The bear's going to go down a lot faster than the bull makes it up to the top. But in that event, what do you do? Should you be trading in such a market when in one week the market is down 7%, it's down 3%, then it's up 2% then it's down 5% or 4%.
Well, if you can make money in a volatile market or you're a pro short seller, then yes, go ahead and trade. That's your element. That's your thing. You go and you do it. But if you're a at home gamer option seller, then probably not. I had this argument with one of my students in our Blank Check Coaching Program in which we sell oil options. That's the whole program there. We sell oil options. He was upset because he was trading for a living. Doing well at it for several months, over a couple of years. But he was upset when the oil market was not cooperating.
Now I tried to explain to him, I said, look man, you don't always need to be in the market. Every month the market is not going to cooperate. It doesn't matter how good your strategy is, how good your trading plan is, how good of a trader you are. There are times when you will lose money and there's nothing you could do about it. But the reason that we sell options, we know that over time we are going to continue to win. It's a longterm game. Not just over one month or two months but over 12, 24, 36 months, we know that we're going to come out ahead. So yes, this month, August, 2019 might be a volatile month. It might be a down month and you might have lost a little bit of money. But if you're an option seller, we have the opportunity to get back in right next month and do it again and make money and then make money and make money and we'll go recover our losses. Over the long term we come out ahead.
But if you are trading for a living, sometimes you don't have that ability to look at the long term because you've got to pay the mortgage this month. And like the student, he expected to take his expense money out of the market every single month. That's just not realistic. Now you might be sold something otherwise, you might be told oh hey, you could be a day trader or take this course or take this course and we'll teach you how to make money every single time. All your expenses will be paid from the market. No, that's not realistic. I'll tell you the truth, right now the markets are down.
I currently only have one trade on in my trading account. I mean, in my retirement accounts, I still have my covered calls and I have some naked puts on that I sold to take advantage of the situation of this downturn. But in my trading account, I have one trade and it's a small trade. That one trade is not going to pay my bills this month, but that's okay because I knew that this type of event can happen. I built in a safeguard and I have a cushion. I know times like this will come when I don't want to be trading.
You look at any hedge fund, they are not fully invested all the time. Heck, they're almost never fully invested. Meaning they don't always have 100% of their money at risk in the market invested in something. They don't have to make a killing every single month to survive. They play the long game. It's about a yearly return for them. Even though we sell options and we trade and we talk about trading for a living and our expenses come every month, that doesn't mean that we have to look at our trading on a month by month basis. I mean, of course we do because we want to see how we're doing. But if you look at it on a yearly basis, you'll get a much better picture and a much better idea. If you look at long term 12, 24, 36 months, that's how your account grows.
So when people asked me, Allen, how much of my money should I put into this trade or into this strategy? Or how much money do I need to make X every month? I'm not sure what to tell them. It's surprisingly how often I get that question. Alan, I need to make $2,000 a month. How much money do I need? I can't tell you. I mean, we did an episode on that to help you figure out what number. I don't know what it podcast episode it was, but if you go on the list, that's the title of it. How Much Do I Need to Make X? You can listen to that one. I go into that more detail, but every month is different and every person is different.
I don't know. I can't give you a number and say, if you want to make $5,000 a month, well you need to have an account with, oh, let's say $50 thousand dollars and you'll make 10% every month. I can't say that because there might be some months when you do, but they're going to be other months when you don't. That would be a lie. There's too many variables. You need to have your trading money and if you trade for a living, you need to have savings, a cushion that you can tap into when you are not trading or the markets are not cooperating, which they do from time to time. The worst thing to do in this situation is to force a trade.
Because if you feel like, oh man, I have to do something. I have to do this. I have to do something. I have to take advantage of the situation. Oh the market's dropped 7% I don't think it's going to go up anymore. I think I'm going to go short the market right now. Well, when the market drops two, 3% in a day or more, it can turn around the next day and jump up the same amount or even more. If you force a trade, you stand the chance of getting your face ripped off and that's going to double the compound.
I mean, maybe you already lost money because the market went down unexpected. Okay, fine. You lost money. Well, now you're going to double down and say, all right, now I'm going to short the market and the thing's going to rally because that's what markets do. Then you're gonna lose on both sides and then you're going to be even more upset. Then you're definitely going to be on tilt, which means you're not going to be emotionally stable. You're going to be looking at all different kinds of trades and you're always like, aw man, I got to pay the bills this month. I've got to pay the mortgage. Oh my God, what do I do? What do I do?
That's not the way to trade. That's not the mental status you need to be trading. That's not the way, the time, the mental frame that you need to be in to trade effectively, to trade properly. It doesn't matter what strategy you're using. So yeah, if you want to trade for a living, you need to know when not to trade and that you don't always have to be trading. That's the whole point of this episode. Don't force trades. Don't always be trading.
Like that student I mentioned, if you have to always be trading to earn an income, then that tells me that you don't have enough funds to be trading in the first place for a living. You should go up and save more. That's the bottom line. So while the pundits on the financial media are freaking out right now and nobody knows when the markets are going to stop falling. I am just going to sit on the sideline and wait. I'm going to wait for the VIX to calm down. I'm going to wait for markets to calm down before I dip my toes back in the water. I mean, I had my trades on and this month I'm going to lose money. I already know that.
Well not necessarily, the month is still young. But I had my trades on, and the markets turned around and I got out. I took losses and I got out of every single trade except this one. I'm like okay. My losses that I took are manageable. I didn't wait and think, oh, things are going to turn around, things are going to turn on. No, I saw a change in the market and I said I'm getting out. We did that. We did that on all of our services Option Genius, Simon Says, every trade we're out. Now, when the market calms down, we're going to get back in. Then the trades that we put on, hopefully will recover what we lost and hopefully more. Or if not this month, then in the next two, three months we'll recover everything that we got back. That's how you play the long game.
Because yeah, you'll lose a little bit of money in a month or two, but you add up all the wins from all the good months and that recovers and it gives you a good yearly yield. So when you look at the longterm picture, 12, 24, 36 you come out ahead. That's what I mean by you come out ahead that way.
So again, trading for a living without trading means that if you are having to be forced to trade, if you have to be in the market all the time, there's a very good chance that you're going to lose all your money and that you're not going to be able to trade. Just like Jesse Livermore, he sat around waiting for the perfect opportunity for him. For us, we have good opportunities every month, but that doesn't mean we need to be trading. Doesn't mean we need to be in the markets. If we don't understand what's going on in the market. If the market is too volatile for our taste. If our strategy calls for a slow market and we don't have that, we wait. We only trade when the odds are in our favor. That's what it comes down to.
Thank you so much for joining me on another episode. See you next time.
Aug 12 2019
Rank #13: How to Know If You Will Succeed As a Trader - 010
Hey there, Genius Nation. How is everybody doing today? I am excited about this particular episode because I am going to share something that took me several years to figure out. Basically, what I want to share with you is how to know if a individual trader or investor is going to succeed or not. Because let's face it, everybody wants to be a trader, everybody wants to be an investor, but not everybody is cut out for it, not everybody has the ability or the stamina or whatever you want to call it. Everybody doesn't do it. Everybody doesn't succeed. Now, I don't know why, well, maybe I'll tell you why, but I don't know the exact reason why everybody doesn't have this particular trait that I'm going to be talking about today.
It seems to be something that should be there, but until you realize what it is, until either you figure it out on your own or somebody actually shares it with you like I am about to do today, a lot of people don't get it. They don't wrap their head around it, and so for that reason, I think that they give up. It's a shame because I think that when it comes to our finances, people just don't want to take responsibility, but you are not like that, and that's why you are on this podcast and that's why you're here listening, so let's get to it.
Now over the years, I have had the privilege to work with tens of thousands of investors. We've dealt with people on the phone, we've dealt with people in coaching, dealt with people in our membership site, dealt with people on email and maybe even met several people at live events. And most people come to us not knowing much about options and passive training or selling options. They don't know about it, they want to learn, they're excited about it, they're amazed at all the benefits. They're amazed at how simple it is to get started
Dec 11 2017
Rank #14: Why Options Were Really Created - 008
Welcome Genius Nation. Welcome to another edition of The Option Genius Podcast. So glad to have you here. You know, I gotta tell you. Today I'm going to be talking about something that is near and dear to my heart, because, well, I love options. If you can't tell. The guy behind OptionGenius.com, having traded options for years and years now, and really getting out there, and evangelizing options, and telling people, "Hey, you know what? You need to be trading options." I do it because, they have literally changed my life for the better, and I really feel that they are great for all types of investors.
If you're going into retirement, if you're going to try to create your financial future, and be financially free, and talk about the different types of freedoms that we really aim for at Option Genius, they are ... If you're going after those with a gun, right? Well then options are a bullet in your gun.
The problem is, that most people out there are being told myths about options. They're being told, or they're getting erroneous information. Most people lose money with options, and most people are afraid of options because they're told, "Hey, those things are risky. You better stay away from them. People lose money on those." Why? Why is that out there? It's because there's so much false information.
Well, maybe not false exactly to say, but it's been told by people who don't really know the whole story. I mean, you could read any kind of article in most of these magazines that talk about finance, you know? There's so many of them out there now. But, when they talk about alternative investments, or they talk about ways to make passive income option selling, selling options, selling premium, none of that is ever discussed. Because, it's taboo in a sense, or it's too complicated, or too advanced, you know? It's a shame that people, common, every day normal people are not told this stuff.
Nov 21 2017
Rank #15: From Struggling Trader To Making A Killing With Dan Hayden - 49
How do you go from being a struggling trader to making a killing with options? That's what I'm talking to Dan Hayden about.
You see, Dan Hayden is one of our students in our new course that we have released, it's called the Passive Trading Formula. He's been in the course for a few months, and he wrote to me, and was very enthusiastic and was very happy with his results. When I read them, I really could not believe my eyes. I was shocked and I was like, "Man, I got to interview this guy. I got to figure out exactly what he did, how he did it, and I have to share that information with you guys."
This episode is an interview with Dan Hayden and how he is learning. He was already an experienced trader. He knew a lot of strategies and everything, but it was just something in the course that helped him to take it to the next level. Then we're going to help him take it even more to the next level.
If you are struggling, even if you've known a lot of strategies, even if you've done courses or whatever, but there is something still missing, I think this episode is something for you to listen to. Hopefully you'll get something out of it. Let's go ahead, let's cue the music and get with it.
For more info on the program mentioned in this episode check out our Passive Trading Training HERE.
Dan, why don't we get started and let me know a little bit about you. Who is Dan? Why do you trade options?
Dan Hayden: Yeah, so my name is Dan. I'm in Upstate New York. I started trading options a long, long time ago just because I wanted to earn along with the normal earnings of the stock market and I wanted to complement my trading.
Way back when, I don't know how, I think it was from my family, my grandfather, I was drawn to the stock market because it seemed like that's one of the ways in order to build wealth. Not to say that I had a lot of wealth, but it's another tool in your bag to complement your normal investing that you're doing with normal stocks.
Allen Sama: Do you work full-time?
Dan Hayden: That's when you and I got in touch with each other, because I was actually laid off. I had a awesome job, I was laid off, and I was at the point where I had to decide, "Shoot, do I just retire now? Do I go back into the workforce?" I had an awesome job and loved what I did, but I did travel a lot and it took a lot out of me. Therefore, it hampered my ability to just trade options because I was so busy.
When I contacted you, you had a promotion going for your new program. Right now, I am consulting. I do some work on the side and I am trying to, with your services, and system, and help, and as well as people on your site trying to get back into it, trade, develop a strategy so that I can comfortably earn a couple of thousand dollars each month is my goal.
Allen Sama: Yeah, I mean your story is very similar to a lot of the stories that we hear. People have been working really good jobs, they're making a decent amount of money, their family gets accustomed to a certain lifestyle. Then because of the economy, or the company, or something happens, and that job and that income is not there anymore, then the question is, "What do I do now?. [inaudible 00:04:01] go back into the workforce?" If I do, a lot of times it's hard to make the same income as you were making before in the same job.
Dan Hayden: That's exactly right.
Allen Sama: That supplement income has to come in [inaudible 00:04:14]. Then a lot of people come and say, "Okay, I have money that I have saved up over the years. How do I make the most of it?" I'm really excited that you're taking action.
Dan Hayden: As we spoke, you and your program has given me the confidence to realize that. All of these services, and I get way too many in my emails, and they're provocative, they stimulate your interest and you're like, "Oh, wow. Maybe I should join this. Maybe I should do this."
It was great because as I jumped in, it made me realize that I am blocking all of these other emails that come to my inbox, and I don't want to be clouded by they have the best new widget, and they have the best this and the best that. Because you've shown to me, and I have questioned you that these other places are making something very, very easy complicated. Your scanning, your reviewing of the three moving averages, and showing the trend makes it very, very simple to select the trades that are applicable.
Allen Sama: There are people who are traders and then there are people who are expert marketers. Sometimes I envy them, some of the other companies. They're like, "Man they make hundreds of millions of dollars a year selling their services. I wish I could do that."
Dan Hayden: Yeah. It's all what you want too. If you're a really good trader ... I always said, if you're a really good and you have something that's really, really a great program, why do you have to charge people right away? Let them get into it and then bill them. If you're so good at trading, why would you even offer this because you can just stay at home, do your trading and make your money there. Why do you have to offer these services?
That's where the suspicion comes in. I just had one in about a year, a year and a half go subscribe to them. That's when the market turned. I realized that they're not doing anything different than I was doing in selecting the verticals to trade. Their losses were like my losses on my own. It's like, "I can I lose my money on my own without having to plunk down $750 or $1,000, or whatever."
When you and I, when I applied to your program, it was perfect timing because I was down. I was hitting the chops because you never expect you to be laid off. Never in my life had I been laid off before. I'm like, "I had invested and been wise with my money all my life." I was at the point where I could say, "Well maybe I can just stay home and enjoy my family, and relax a little bit and start getting back into trading options."
It was perfect timing because you lifted me up and got me back into trading. It's been fun. You have a very practical approach to selecting stocks to trade on. I also like your methodology of thinking. It's almost like a cycle. You could sell puts on really good stocks that you want to own and collect dividends, because I have another fund that I do that with. You own those stock and then you can trade covered calls on those. You can bring in, if you are executed and you do now own Verizon with a 5% or whatever it is dividend, and then you start selling covered calls on those so you have more income coming in. Then you're also doing your vertical spreads so you have additional income coming in.
Technically there's three ways to create an income stream and it just made a lot of sense to me.
Allen Sama: For our listeners, I just want to let you know that Dan is part of our Passive Trading Formula program, our course. That's what he keeps mentioning, the program. That's the one that he's in.
Basically the idea behind that is I got to a point where in my own trading, where I didn't want to spend os much time watching the markets and watching my trades. You can do that in the beginning if you're just starting out with a little bit of money, you have to be a little bit more aggressive, so you have to take more risks. But eventually you get to the point where you're a little bit older or you [inaudible 00:08:47] a little bit more money, and you say, "I just want to do this in a passive way."
The myth is that if you're not as actively engaged, you won't make as much money. Dan has proven that, what would you say, Dan? In the first four months of 2019 or the first five months, your paper trading account was up about 90,000?
Dan Hayden: Yeah, but I do have to take a little bit of that back because some of that I was called out on and it impacted my results. But I think overall it was $45,000. Clearly ...
Allen Sama: In about five months?
Dan Hayden: Correct. Yes.
Allen Sama: On what type of account? Which size?
Dan Hayden: I did a paper trade account and I automatically, I think I put in $250,000 into it.
Allen Sama: All right, that's a really sweet gain. How long do you think you spend every day on your trades?
Dan Hayden: It's actually changed because from the beginning of the year, I think we got started in January, I had all the time in the world. Then I just got called for a contracting position, so I am working as a consultant with a company right now. I've pulled out a little bit more. I traded a lot for January, February, March, April. May has been a little bit less. I just have to figure out what my time scan is going to be so that I have the appropriate amount of time to be trading.
Allen Sama: Do you think that the trades that we're doing require a lot of time for you?
Dan Hayden: No. I think in and this is something that I want to learn more of and I asked on our call last week is that I want to be able to set automatic stops, which I know you're not a big of, but I want to get into a method of basically setting stops right when I set up the trade so that if I do have to fly somewhere, I don't have to be with a computer.
Time wise, not at all. I started with my watchlist, you'll see two watchlists on the left, I started with mine and then I put yours in as well. I like yours better. Now I'm also just scanning through companies that I know there's no premium to paid on them. I don't even go to them, I just go to the next one. It almost seems like I'm trading the same stocks over and over again. [inaudible 00:11:32] less and less time.
Allen Sama: Yeah, that happens. You develop some favorites and you like the way they're acting, you like the news that's coming out. Some of them might be on your list. You might trade them over and over again for two, three years. Eventually stuff will change, the stock will change, it'll change is behavior. Maybe a new competitor will pop up, or new CEO or whatever. Then it'll drop from your list. You're be like, "I don't want to trade that one any more. It's not acting the same way."
That's why we focus on that watchlist and say, "These are the same companies I want to watch every month." Then you get a second feel, like a sixth sense that it's not acting properly. Let's not trade it this month. Let's just relax and watch it, and then we'll maybe look at it again next month.
Dan Hayden: Absolutely. I hope more and more people start getting active in your site with interactions because I've learned of companies that I've never even heard of before that have very good premiums. It's been interesting picking up a stock here or a stock there that you can start to track as well.
Allen Sama: That's why one of the reasons we have everybody put the homework inside the group itself, because that helps other people. Anytime somebody puts in a homework assignment and says, "Okay, these are the trades I've found that I really like." Other people could look at those and be like, "Whoa, that's a really good trade. I think I'm going to do that one."
Dan Hayden: Exactly. [inaudible 00:13:03].
Allen Sama: There was a couple that I found from somebody that put them in and I'm like, "Oh, wow. I didn't even know this one particular stock was paying that much right now." I was like, "Wow."
Dan Hayden: Exactly. Some with very rich premiums. That's what we're all looking for.
I like it when people, when they communicate. I think people shouldn't be ashamed or nervous about asking questions because everybody is starting out at different levels so that when experienced people can support the young people, or the new people just starting out, it makes for great interaction and a great learning experience in your group.
Allen Sama: What strategies have you decided to focus on?
Dan Hayden: I have been doing some naked puts, some selling. Then I started with covered calls only because I have a couple of stocks that I have a lot of shares in and I said, "Okay, I want to build up some income," but I haven't focused on that too much. Most of it has been vertical spreads and selling puts.
If you're on right now, I guess I'm a simple guy, I got to make it really easy for myself. What I'll show everybody is basically I'll go through here on the left-hand side, and I'll start with my watchlist and the charts. You'll see here that I have the three simple moving averages, the 20, 50 and 200. You can see that I ... You want to go with the market. If the market's up ...
Allen Sama: On the screen you're showing your Thinkorswim paper trading account, right?
Dan Hayden: Correct. Yes.
Allen Sama: Yeah, okay.
Dan Hayden: Like I said, I think I started with 250 and right now net liquidating would be 484. Clearly it's been pretty nice. I wish this was really money, but this has been really fun.
As you've told me is to develop the confidence to basically start cash trading at the right time, because you did, you were very pointed to me, how long did it take me to learn my trade? Because I wanted to go right in, "Okay, hey. I've been pretty successful. Can I go right into cash now?" You said, "Give it some time, get more comfortable." It's true. Hey listen, we're going to lose some money, but if we win more than we lose, we're going to be way better off.
I'll just scroll through and see which ones are either above the 20, 50 and 200, or below the 20, 50, 200. For example, ADM I'll say no because it's right in the middle and it's just not one to be traded. AGN looks like it's down, so that's something where you could actually do a call. This is Allergan and I think Allergan pays a good premium. What I do is I come right over to ...
For people who are watching this, what I'll do is I set up basically almost three screens going at once. You can do this, and I know Allen, you did this on one of your calls, but you can do this by detaching this layout right there. I detached two layouts. All this is to do is just to make it simple and quick, so that I can scroll through, select ones. Then you see down here on the bottom left and if I'm scrolling all over the place, I apologize, but I have on my scratch pad basically the numbers that I want for my verticals in order to know that I'm at the 10% level. Right away, as easy as it sounds I always like, "Okay, I got to look. Is this 10%? Is this 10%?"
As Allergen showed, it's down. I would look and say, "Okay, let me look at some calls." I'd go to a delta of typically we're working around the 10%, so I looked between seven and 14. Maybe got to the 14, which is 140. I go over to this page and look at the 140, it's /135. Okay and it says it's not available. I don't know why it wouldn't be, but maybe it's just uploading. Not available.
Let's go to the next one. I would scroll down all of these. This one looks good too because it's above the three moving averages. However, it looks like it's dipping down a little bit for AIG. Got Applied Materials.
This is how I would scroll, as you've educated me in looking for those that are either above or the below moving averages. Altria is a good one. I'm trying to think of some of the goods ones that I like. I can go here. Broadcom, AVGO, that's one that I have traded almost every month and is a pretty good one, so let's go to it.
Allen Sama: In terms of the credit spreads or the layup spreads, do you follow the rules as laid out in the course or have you modified them?
Dan Hayden: No, I pretty much follow your rules. I probably have gotten a little sloppy this month because for example, I was gone this week traveling and I wasn't on top of it as much as possible. I'll travel with my iPad and leave my computer at home, and my computer basically is the best one. iPads I have trouble basically executing the trade with Thinkorswim.
Allen Sama: Oh, it's not the same thing? I know I do it on my phone, so I use their app on my phone. I've never done it on an iPad before.
Dan Hayden: Yeah. I can't get used to the phone app either, but either one, I'm more comfortable with the MacBook. I'm just going to bring up Broadcom to see where we are at right now. Right now it's right in the middle of these three, so I would stay away from a trade right now.
Allen Sama: About how many trades do you put on at a time?
Dan Hayden: It all depends. It all depends on what's telling me to trade. Right now I have, there's a put. The puts are on Altria and AT&T, two high dividend players. If I own them, I'm good. If just take the premium in, I'm good and then I'll do it again next month. But right now I have NVDIA, Intuitive Surgical, Campbell, Arcadia, Pacific and Broadcom.
You can see here, profit and loss. These are things about setting up automatic sells when they hit a certain point.
Allen Sama: Let's say you got about one, two, three, four, five, six, seven, eight, nine. Nine trades on.
Dan Hayden: Yup. One, two, three, four, nine.
Allen Sama: In addition to your covered calls.
Dan Hayden: Covered calls, I've stopped doing those. I used to do the covered calls on these stocks right here, but I was ... The covered calls to me, I'll get into those later. With Alexion, I have 1,000 shares of that. That's the one I really wanted to stay focused in on. But I've put that on the side burner. I'm just doing the puts in the vertical spreads.
Allen Sama: The thing is, with the different strategies, you can take and see what the market is giving you, and you can manipulate. If you're in a bull market, naked puts, they do awesome, put spreads do awesome. Covered calls, if you're not in the stock, if you don't own the stock and you just want to get out every time, then they work really well. In a sideways market, I love covered calls.
Dan Hayden: Which right now, would you consider us being in a sideway market? We're up one day, down the next, up one day. I would think ...
Allen Sama: We're still in a pretty good bull market in a sense where we're a 1% or 2% away from the all-time highs. I would say we're still bullish, especially if the fed does cut rates again. We have all this other news going on, all the noise that goes on in the market. But for the last, I don't know how many years, the bull market has been there because the fed had rates so low. I think that if they start cutting rates again, that's just going to signal to the market again that [inaudible 00:21:15] just take it up higher even more.
In my opinion, yeah, it's a pretty good bull market. Yeah, you can still make money with non-directional trades, but overall I think we're ... I like this type of market where it's going higher, but it's doing it slowing. We're not like shooting, shooting up higher. Not too much volatility for our premium to be good. We can make our 10% on our spreads and not have to worry about too much movement.
Dan Hayden: That might be help too, is to say, in a bull market, a slow rising bull market, it's best to trade the puts, covered calls. What would be the best vehicles in select markets, that might be helpful too. For me, whatever spits out as I scroll though, and I try to scroll through on Monday morning to determine what I'm purchasing for that next ... What don't we try 25 to 35 days as the best timeframe? Or a little bit longer.
For example, Allen, SPX right now, it's above the three moving averages. Technically this looks like it could be a trade. This is the vertical.
Allen Sama: I've noticed that [inaudible 00:22:36] here, when you're looking for trades you're looking at the monthly ones. But on some of your trades that you already have on, you've done the weeklys.
Dan Hayden: Yeah. I try to do it, I think you said the sweet spot is 30 to 40 days out, so I'll try to go 30 to 40 days out. I think those were set last week. That's typically why. Right here, I would look at this 35. If I'm wrong, you let me know. With SPX above the three moving averages, I look at the 35 and look over here on the puts. I would look at is the delta around ...
What do you like? You like deltas around 20?
Allen Sama: It depends on how many days. I would like to get it as low as possible, but if I'm going in there about 30 days or less, then the delta increases probably about 20. If I'm at 35, I might try to get a 15. But really, we're trying to make 10%, so I'd like to get as far away from the money but still be able to have a potential 10%. The delta in that case, I use it more as a guideline, not as a hard and fast rule that this is the delta I'm going [inaudible 00:23:45].
Dan Hayden: Just to give anybody ideas, I have it set up so you have the singles on one page, so I can automatically go to what I was looking at, which was the SPX. I'll go down and I'll look for between a 10 anda 20 delta that brings in good returns. I would go down here, let's say, to a 15 delta, 35 days out. It's somewhere around 27.20.
Then on this next page, I already have the verticals pulled up, so I can automatically look and say for the 15 deltas, 27.70, I can almost right away go to 27.20, so 27.20. I am doing 27.20, 27.25, which would be right here. I wish I could show you exactly what the bid-ask spread was, but it could be because of the bandwidth, but I'd be looking at this area. You've got plenty of open interest. It's the SPX, so you can expect that.
I would be looking in this area between a 10 delta and a 15 delta. Then I'd automatically go over to my, this is up here, so I automatically go over to my scratch pad to make sure that whatever I am trading, I'm making 10% on that money.
Allen Sama: That's why I think you need the computer instead of the iPad, because you have so many screens open.
Dan Hayden: That's probably it. But as you get going, I'll minimize these screens for the verticals, and I'll minimize the screen for the singles so that I'm actually overlaying each one. Right away I can go from one to the other, to the other and say, "Yup, that's a trade." If not, then I go right back over here, click this and go to the next stock.
If you have a big screen and you're at a desk, this is easy to do.
Allen Sama: Yeah, [inaudible 00:25:47].
Dan Hayden: But I'm lazy so I carry around a laptop and don't want to hook it into an office. I typically sit on my front porch, and make the trades and make my notes.
Allen Sama: That sounds pretty sweet, man. Making money on the porch.
Dan Hayden: I overlook one of the Finger Lakes, so you got to take advantage of that too.
Allen Sama: Okay, so you told me that your goal was to make about a couple thousand dollars a month.
Dan Hayden: Correct.
Allen Sama: Do you think you've been doing this for what about six, five months now?
Dan Hayden: Correct, yes.
Allen Sama: Do you think you have the confidence to start going real money?
Dan Hayden: I do. I do. I have confidence and I have confidence in the selection criteria. I asked you, I said, "This is way too simple. This doesn't make sense." You can get pushed up and above, but you use your rules to get in and get out. You can minimize the losses because in this crazy market, anything can happen. Macroeconomically anything can happen that can impact these markets quickly. We can get pulled around. I've seen in. Where I get in, it makes sense. [inaudible 00:27:04] trading below or above the three moving averages, and then all of a sudden the market goes crazy and does something opposite. I've seen it right at the beginning of this year.
That's the only thing that I have to build more confidence on, and I'm working with the Thinkorswim platform is that when I do make the trades, I am going to start setting stop orders so that if it hits a particular level of a loss, I'm out. If it hits a particular level of a gain, for example, at five cents, 10 cents, I'm just out. I move out, Thinkorswim has a pretty good commission rate so it's not costing me a lot to get out. At five cents I think it's free, and then I move on to the next trade.
Yeah, the confidence is there. Do I get nervous that I don't want to lose money? Absolutely. But you got to expect that if you have good rules, any money that you do lose should and could be minimized. That's the one thing that I have to integrate into my trading because hey listen, I had the time to be at the computer every single day for an hour, and check on my trades. But as recently, I really haven't because I've been flying around and meeting up with these companies. That's why I want to get good with setting up automatic stops.
Allen Sama: It's about an hour that you said, you spend about an hour looking at your trades when you can?
Dan Hayden: Yeah. It doesn't have to be every day, but probably an hour throughout the week. Especially if there's some newsworthy events happening, you want to be on there definitely during that day. But it's probably an hour a couple of times a week. That's only, that's like managing seven trades or so, something like that. It's not a lot of trades, not a lot of time, but typical to when you pick up this laptop or computer, I get carried away and I start looking for some other good dividend playing stocks [inaudible 00:29:08], because I love the scans.
Here's one that I did looking for dividends, high dividend plays and what I could maybe sell puts on. I'll do certain other things while I am looking at the trades that I have already open to try to create other opportunity.
Allen Sama: [inaudible 00:29:30] you just love this stuff. You're just into it.
Dan Hayden: I do. I do love it.
Allen Sama: If you didn't get sidetracked, it would be so easy. Just log in, check it out and I'm out.
Dan Hayden: Absolutely. People go on Facebook and all this stuff. It's great to keep up with that at stuff, but I enjoy looking at the stocks, the stock market and just trying to pull a little bit from the market into my accounts.
Allen Sama: Yup, yup, yup. Okay, you've been ... All right, what else? I had a couple questions for you in my mind. They just slipped.
Dan Hayden: See because you're probably looking at your screens right now.
Allen Sama: No, I'm looking at yours. I'm at home. I didn't even make it to the office today, so I'm just looking at the laptop. All I see is your stuff.
Wait it's funny though, you don't usually Analyze tab. I use that one almost exclusively.
Dan Hayden: Yeah. Before I got with your service, I used to use it all the time because I used to do these butterflies, and things that I picked up from all of these services that were trying to get your money. So I did use this a lot to analyze broken wing butterflies, and we used to do iron condors with butterflies in the middle to bring the iron condor up higher.
I'm not the smartest guy at this, but I was learning more and more about this as I started to throw on another trade, either to save things or to increase my profit. Maybe it's something I should be using more. Do you use it just to see about your profitability, and when it does break even and start losing?
Allen Sama: I like putting the lines on the chart, but you know how it says they are add simulated trades?
Dan Hayden: Yup.
Allen Sama: I'll just look at that one and that pops up the option chain as well. I'll go down to a specific delta. You know how you were looking at should I do this one, or should I do this spread, or should I do this spread?
Dan Hayden: Yup.
Allen Sama: Then I'll just pop it up, I'll just pick one, do it as a vertical and then it'll have the numbers down at the bottom. So it'll be like, "Okay, so the 100, 105, he's giving me 50 cents and then the 105, 110 is giving me 25 cents." I can have two or three perspective trades on the screen. Then I'll just leave it there.
Sometimes I'll do a trade and there is certain stocks, like I know IBM. It doesn't have a lot of premium, but it's a very slow moving stock. I like to trade it, but you have to get in really early. Sometimes you have to get in 40 days or 45 days to be able to get decent premium amount.
Dan Hayden: [inaudible 00:32:04] decent premium?
Allen Sama: Yeah, in order to get a decent return.
I'll go and I'll check it, and sometimes I'll leave it there. Or some other stock that maybe on the chart looks really good, but it's gone up too much or gone down too much. Right now, I'll put in a trade. I'm like, "Oh man, I really want to do this trade but it's only giving me 9%. Oh, gee. Okay." I'll just leave it there in the analyze tab, and then maybe two or three days later or a week from now, I'll come back and I'll look at it again when I'm going through my list, and I'll be like, "Oh okay, this one now, it's giving me 10 and a half percent. Okay, I can do it," because it pulled back or it moved around a little bit.
It just stays there. Then if it doesn't work out, then you could just exit out and delete it, so it's not a big deal.
Dan Hayden: Now is that in our trading videos? Do you have a session on that?
Allen Sama: No, I don't think so. That's just something I picked up myself.
Dan Hayden: Yeah, that'd be cool to go in your brain and see how you use that function with the add simulator trades, because when I went into analyze, I would always go to the risk profile. It's interesting how you use the add simulator trade.
Allen Sama: I like the risk profile too, just to tell me what is exactly the probability and then I like to put it on the chart. I like to put my break-even line on the chart and just see it. I know your fooling yourself because you think, "Oh, that's so far away. That's never going to make it." You're fooling yourself, but I just like the way that looked.
Dan Hayden: No, that would be cool for one of your programs just to say something that, "This is how I approach this in monitoring whether I should get into a trade or not get into a trade."
Allen Sama: Yeah, so we can do that. We'll do that. Let's do that on the next coaching call. I'll go in ahead and go through the screen and we'll do several of those.
One thing I also wanted to mention, you got your scratch pad. That's really cool. But for me, to keep it simple, if I'm doing a five point spread, I'm looking for 50 cents. If I'm doing a two and a half point spread, I'm looking for 25 cents.
Dan Hayden: Exactly. That's typicalLy how it [inaudible 00:34:14], $1 spread, you're looking at a buck.
Allen Sama: That's a little bit more than 10%, it's like 11% if you get exactly that. You can say, "Okay, I can go down a penny or two. I'm okay with that."
Dan Hayden: Yup. You got some flexibility. Yeah.
You know what else I noticed too, Allen, is when I go to set up a trade and it's a good trade, but it just misses the mark for example if it's a dollar spread and it comes in at 0.08 cents, a lot of times I'll put in 0.09 and leave for the day, and it hits.
Throughout the day, something happens. Maybe the stock changes a little, the prices changes a little bit, but I'm like, "I'm close enough where I'm basically at 10%, but I'm going to set the 10% and walk away." I've had more and more stocks, it fills while you're never there with a good premium.
Allen Sama: That's a good tip.
Dan Hayden: Yeah, that's something else that I've done a couple of times.
Hey, this is the time that you experiment a little bit. You don't want to nick your percentages, but you also don't want to miss out on a good trade because there's some weeks where it's tough to find a good trade. Even the consistent one's just not offering a premium for some reason.
Allen Sama: Yeah. It goes through different ups and cycles. When you have earnings, it's harder to find a good trade. Sometimes you have to go to ETFs or something. But what you just mentioned, putting in a trade like, "I really love it and it's really close. Let me try it." It's not going to hurt you. You put that on and sometimes because of the way the option premiums are priced, maybe a large order comes in, or the stock moves and down a little bit, and the premium just move more than they should sometimes and you get filled on those.
Dan Hayden: Yeah, that's been interesting.
You made it really practical, how to approach it. Also, I will say that there's one gentleman who put on the site Excel spreadsheets, which I downloaded and they're awesome. He has a really great profitability chart, so you can put the numbers in and it'll calculate it out automatically. I can't remember the name of the gentleman that did it, but really nice addition in your site.
Allen Sama: If somebody was thinking about joining the course, the Passive Trading course, what would you say to them?
Dan Hayden: I would say people can hear what they want to hear, but there's so much pollution out there from these other services. You teach a person to fish so he can feed for a lifetime, and that's what I wanted. I don't want somebody to basically take the steering wheel and drive the car. I want you to teach me how to drive the car so that I don't have to rely on other people.
I would absolutely recommend it. There's as much risk as you want in it, but you control your own destiny. That's the best place to be in because I don't want to send my $1,000 to this service and they're the ones picking out the trades, when in all reality you simplified it to such a fashion that you can join this service, but then you can learn it and move on if you want.
Hopefully they stay with you and they believe in you because I believe in you right now. You've simplified something that quite honestly as you first join, can be way overwhelming. But you made it simple, you've allowed for three different ways to have extra streams of income, and you teach us to do it. That's the best thing that you can ask for. Yes, I would definitely recommend people to join.
Allen Sama: That's funny too because you said you've studied iron condors, you've studied broken wing butterflies, which is a pretty advanced trade. But you're like, "I want to go back to this stuff that actually keeps working. I'm not going to go so advanced. I want to try to make it simple so that it doesn't take a lot of time, and you don't ave to monitor it so much and is just a lot less stressful," I think.
Dan Hayden: It absolutely is because the more things you stop placing on, the more you do have to watch the monitor, and the more you have to react and do other things to fix that broken wing butterfly.
The only reason, Allen, I got into broken wing butterflies is because I paid a service to basically teach me how to do broken wing butterflies. It's probably a really good service, but quite frankly, it's way too complicated. It's not necessary. A vertical spread, if you get good at it, it can be boring, over and over, and over again. But if it's boring and your account is growing, that's a good thing.
Allen Sama: Yeah. That's how we designed it. We want it to be boring, we want it to be passive so that we can actually go and ...
Dan Hayden: Enjoy life.
Allen Sama: ... spend time doing what we want to do. Yeah. There are people that want to be on the screen all day checking their stock, and checking their trades and what not. There's definitely a place for that.
In the beginning, I tried it that way. To me, the more complicated it got, the more I realized that maybe I'm not the smartest guy in the room, but there is so many extra things that I can miss. I'm like, "I'm just a normal person. This is getting too complicated for me. Let's just tone it down. Let's take something that works, I know it works."
What I love with you is you've put in the time, you've put on the trades. How many trades have you put on since you started paper trading? Just ballpark. 100? 200? 500?
Dan Hayden: No. It's not that many. It's probably a little over 100.
Allen Sama: Okay, so 100 over five months. So 20 a month, that's decent. You were practicing, you're gaining confidence, you're learning how you like to set it up with the three screens, and how to monitor it, and set up your charts and all that stuff. That takes a little bit of time, but now I think that you're at the point where, "Hey, I turned 250 into 484."
Dan Hayden: Right. Right
Allen Sama: That's [inaudible 00:40:29] double. That's really good. In five months, holy cow.
Now it's time for you to now slowly, slowly transition, I think, into the real money. Maybe you pick one ... Or maybe you start with a small amount of your capital, whatever amount. You start with a little bit. Maybe let's do three spreads and two covered calls a month, or two puts and three spreads, or something like that.
Dan Hayden: Exactly.
Allen Sama: Let it out.
Dan Hayden: With a lot less contracts.
Allen Sama: Oh yeah. Yeah, of course. Yeah, [inaudible 00:41:04].
Dan Hayden: Here I'll do 10 contracts every single time. There, real money, I'll probably do between one and five contracts.
Allen Sama: Whatever the amount you have to work with, [inaudible 00:41:18]. If you have 10,000 to work with, okay, I'll do $1,000 in each one or something like that.
Dan Hayden: Each one, exactly. Proper money management. Yeah, [inaudible 00:41:28].
Allen Sama: The contracts doesn't really matter, but the fact that you've almost doubled it in five months means if you were working with a $10,000 account, you would have done the same trades. You would have been almost the same thing. The numbers, you just add zeros at the end for more money.
That's what I love too that you can start out small, do the same exact trade. You don't need $8,000 to do a trade. [inaudible 00:41:48] trade, just add zeros to it.
Dan Hayden: Yup. I have a Roth account and I keep saying, "I want to grow that Roth account." I think what I've decided is that with the Roth account, I'm going to sell puts. Then if it's executed and I own those shares, I'll sell covered calls really close to the money. Basically just keep transferring the stock. Take big premium by selling very close to the money. If it hits, okay, I'm back into cash. Now I'll sell that put again really close to the money, take a good premium. If it hits, I own the stock and now I'll sell covered calls. I just want to grow that Roth IRA money so that there's a significant amount there that's all tax free.
I've segmented it there, and then start with my cash account in selling verticals. Verticals is what ... That's the primary breadwinner I should say. Then I have an account that has a company with a significant amount of shares, and I'm just going to sell covered calls on that one. It's like three different accounts with three different principles.
Allen Sama: The company that you just spoke about, I believe you told us what it was earlier. Why are you in that one? I'm just curious.
Dan Hayden: I worked for them, so I accumulated shares over the years.
Allen Sama: Okay, that makes sense. Are you allowed to sell those if you had to?
Dan Hayden: Yeah, because I don't work for them any longer.
Allen Sama: I see. Okay, cool.
Dan Hayden: Part of me thinks about selling them, part to them thinks about just taking an income each months. It's a volatile stock, that's the problem. It can be tough trading, but if you take chunks and you sell covered calls at different levels, like one close to the money where I might lose this, but okay, so I just cashed in on 250 shares, I sell a little bit further out so that I still own those shares, and then 250 I sell a little higher. I don't bring as much premium in, but I know I'm keeping the shares.
Allen Sama: That's the thing if you work for a company, you have a little bit of a inside track to see how the company is doing. Are they hiring more people? Are they letting people off? If they're letting a lot of people off, okay there's something going on. If they're hiring more people, if they're expanding, if they're spending more money on marketing. You hear all that news that as a trader ourselves, we might not be privy to all of that unless we really dig into the information.
Dan Hayden: Correct.
Allen Sama: To be able to trade a stock that you own because you work there, I think that's a big leg up.
Dan Hayden: Yeah.
Allen Sama: Even now I'm sure you still have friends and people that work there that you know. You can stay on top of that information.
Dan Hayden: Yeah, in some instances. But then again, it goes to show that the market will do what the market wants to do because I've been around where we've had awesome quarters and we got hit by the market. We lose. Nothing's a sure thing. I remember those days where we'd have a blowout quarter and we were down 10 points. It made no sense at all. Yeah, it's good to be affiliated with it, but it's also they can throw you curve balls and make it very frustrating too.
[inaudible 00:45:17] go in thinking about vertical spreads straight up and then whatever else you start accumulating through your puts, sell covered calls on, have a method to start creating your stream of income in three different ways. The way you trained us, I think is a beautiful way to begin growing your stock accounts and making money passively.
Allen Sama: Yeah, and thank you for saying that. One of my goals is the stocks that I buy, I want to get them for free. I want to get so much money back from them that I didn't pay for them. I got my money back. Then you're playing with the house money, and whatever happens happens. I'm okay because I got my money back.
Dan Hayden: Yeah, that's exactly it. That's why I think young people should be doing this as quickly as possible because they have the ability to do that, and doing it over and over again, taking in the premium which reduces the cost of the stock. Then you're saying, "Hey, it doesn't really matter because I bought this at this, I've taken this much in, and basically I own the stock for free."
Allen Sama: Then it doesn't matter if it goes down, it goes up. You're getting a dividend, you're like, "Okay, I'm happy."
Dan Hayden: Exactly. Yeah. Yup, absolutely. You still have the shares, so do whatever you want with the shares.
Allen Sama: What would you say is the biggest thing that led to your success?
Dan Hayden: Well success is ...
Allen Sama: Well I know you're being humble but seriously, but seriously, to double [inaudible 00:46:43], to double your money in five months, I've never done that. You're doing something different, you're doing something special. What do you think caused it?
Dan Hayden: For me, it was just finding out ... I needed a method to ... I just wanted a recipe. Give me something that is easy, that I can select stocks that makes sense, and then doing it.
It was basically providing the methodology, which I have because of these three simple moving averages, and then executing. That's it. It's not rocket science. This is paper traded, so you might get a little bit over ambitious with one trade over the other because it's not your money, but just to me, the most important thing was developing that method, having confidence in knowing if it's above or below that three moving averages, and the stock's trading up, and so is the marketplace trading up, it's a good sign that this is going to be a good stock to trade.
Now let's look at what the returns can be, let's look at the verticals, let's look at the individuals to find the right delta. Having that method to basically weed out what you should be trading.
Allen Sama: Yeah, a lot of people, when they first hear about it they're like, "It can't be this easy." Then you said the same thing.
Dan Hayden: I did. Yup, I wrote to you and I said, "There's got to be something else I have to throw in."
You see my screen, this is from the old days where I'd be looking at volatility, standard deviations, [inaudible 00:48:19]. I tried to come up with the best technical analysis and seeing if the stock anticipated to go up, down, what. You don't need this. This was the olden days where I had all this stuff at the bottom and I've just never turned it off. You could take out all that noise, and basically just look at the charts and have confidence in what you do. You're going to have curveballs thrown at you every so often, but be ready for those curve balls, and get out with minimum losses and you'll come out way ahead.
Allen Sama: I think that's where asset allocation comes into play, especially with the different strategies. If you're only doing spreads and you're only doing put spreads because the market's going up, but then it drops, you're behind an 8-ball, you're in trouble.
But if you're doing a little bit in the puts, a little bit in the calls, a little bit in the spreads, a little bit in something else, then you can weather the storm. It's not one trade will be doing good, the other trade will be not so good.
The way we talk about it is, every month has the potential possibility of being a very good month. If you have a good month, and a good month, and a good month, and a good month, but then you have a bad month, which is going to happen, if you do it right then the good months will overcome the bad months.
Dan Hayden: Absolutely. Yup, yup.
Allen Sama: In the long-run, if you look at it a year, two years, three years down the road, you'll be like, "Okay, I'm up a lot. This really [inaudible 00:49:50]."
Dan Hayden: Exactly. [inaudible 00:49:51].
Allen Sama: Some people look at it and say, "I tried it for a month and I lost money on two of my six trades, so this sucks." I was like, "Well, that's the way it works."
Dan Hayden: Exactly. Even the professionals lose. You just have to know how to minimize those losses, and that's the biggest thing. That's something that I have to do. You can see some of these losses that I have to be more proactive in setting up my losses when I set up my trades. The minute that trade hits, I got to go in and say, "Okay, I got to get out when it's profit of this or a loss of that." That's all in your ... I don't have my notes with me, but it's all in your notes for these losses.
I brought up this screen here that shows my puts. I have Altria, and I'm okay. I'm okay if own this. My fear when I put a put on, like you just talked about earlier, is suppose something happens macroeconomically between they decide not to lower rates, Iran does something, China does something and it drops heavy like Altria goes below that 47.50 put. Well now I just bought it at 47.50, but it's at 45. That's a hurt.
The only thing you can do to get away from that because you're fully exposed when you do this, is just to start selling calls close to the money to say, "I either get out of the Altria and take a minimal loss, or I'm good because I believe it's going to be coming back, and plus I'm making my dividends."
We talked about fear, how as a trader, you're fearful of losing money. Well I'm fearful of having to buy Altria if the market drops hard, or AT&T, the market drops hards, and I'm buying it higher than the market's actually at. That's a fear that I have. But if you stay on the sidelines, you don't do it, you don't get your dividends, you don't get the opportunity to buy these stocks at a discounted rate.
Allen Sama: That's why we do the paper trading too, because actually do it for a few months and you'll get a better idea of how many times did I have to buy the stock? I did it five times, I never even came close. Maybe this fear is a little bit unwarranted. So maybe if I do it with real money, and I do it for a year, two years, three years, maybe I'll get the stock once or twice.
That's why with the paper trading, I'll advise everybody like, "Get in trouble. Put some trades on that you wouldn't to get in trouble with it, and so that you can see, how do I navigate my way out of trouble?"
Dan Hayden: How does it respond, exactly. Yup, yup.
Allen Sama: With Altria and AT&T, okay, maybe I'll sell at the money put.
Dan Hayden: Yup, just to see what happens.
Allen Sama: Just to see, okay, I have to buy the put at this price. What do I do now? Oh, I bought this stock. Okay, how do I get out of that?
Dan Hayden: The worst time to trade is when you're in fear, you have something going against you and you're nervous. That's the worst time to place that reactive trade.
Allen Sama: Exactly, exactly. A lot of this stuff is we're dealing with stocks as well, so if you own the stock, there's a great chance the thing will rally in the next 10 years. Anyway, if you're only trading options then you lose, and the month expires, then that's it. That loss is yours, you got to eat it. You got to make it up next month, the next month. But with the stock, you can always come back.
Is there anything else you want to share?
Dan Hayden: No, I greatly appreciate what you're doing in helping others. I really have learned a lot from you. I do, I do I have the confidence again in getting into option trading and having a good plan for doing that option trading. So thank you.
Allen Sama: Great, great. Yeah, I'm excited to see how you take it and how far you go from here because you got the foundations down, you got some basics, and now it's time to start doing it.
Dan Hayden: Yeah, well it's funny too because now that I'm working with this company in doing consulting with them, I have income coming in so it's like, "Okay, well I don't have to bring in income with the option trading as much." That psyche comes into play where, "Okay, when I wasn't working I said Okay, I got to make sure that start bringing in X number of dollars a month." That's why I'm not, I shouldn't say as serious because I do look at the charts and all that stuff. I track it probably a couple times a week, but in January, February, March, when I wasn't working for any other company, I was looking at it, looking at opportunities every day, and I was very, very religious about it.
It is that psyche, but all I can recommend to everybody is even if you have a full-time job just flat out, 15 minutes, 20 minutes, an hour if you can just to monitor the trades that you have on, but also to look at new opportunities elsewhere. But get dedicated almost like I have a system now by scanning, by reviewing the chart, by reviewing the delta and by reviewing the return. I have a method, and that way have a method each night, each day to give yourself a couple of minutes to look at the trades and to scan so that it becomes second nature. That's the best thing to do.
Allen Sama: Yeah, definitely. Like you said with the mindset, when you don't have any income coming in and you have to make your nut, maybe $5,000, $10,000 a month, that's when the stress really this you from the trading. It's like, "Oh my God, this trade has to work. It has to work." That's when you mess up.
When you have even a little bit of income coming in and you're not totally dependent on your trades, then it allows you to actually trade better.
Dan Hayden: That's exactly right.
Allen Sama: That's very helpful especially when people are getting started.
I've seen some people where they jump the gun too fast and they, "I want to be a full-time trader," and they jump to fast into it, and they're like, "I have to make money every month." We had one student who did that and the stress just got to him. He placed trades that he shouldn't have and then he lost. On a mental standpoint it just sends you for a tailspin.
Dan Hayden: Did he need that money or was this supplementing his income?
Allen Sama: No, he had quit his job to trade full-time. He over traded I believe, and then he lost some money. Now you have to cut back on your lifestyle when that happens. It's not something that ... He has the skills. He'll be back, I'm sure he'll be back. But it hurts in your mind. You feel really down about it.
That's why I love it that you're starting and you're saying, "Hey, my goal is to make $2,000 a month." Well okay, if I can make 3%, 5% a month doing something pretty safe, $2,000 a month, I don't need to have a big ton of money. I can put little bit of money, make my goal, and then once you get to that goal it's $2,000 and you say, "Okay, no my goal is 3,000. Now my goal is 4,000."
Then eventually you can actually go and say, "All right. I don't need the consulting anymore. I'll just do this." If you love it, you go do the consulting too. It's up to you, your choice.
Dan Hayden: This isn't something where your going to make a ton of money tomorrow. It's not the day trading, it's not that heavy, it's not that risky type of a trade. This is something where you get good at it and you bringing in a little bit each month. Then like you just said, you bring a little bit each month, you get good at what you're doing, and then you get the confidence to say, "Okay, I'm going to now trade two contracts. I'm going to trade three contracts."
Because if you quit your job and you're getting stressed out because you're losing money, then you must be risking too much because you shouldn't be risking too much. You should have proper money management. This is my own opinion, but you shouldn't have that stress, just like you shouldn't be like, "Hey, I am so good at this because I've had all these ... "
I don't consider myself good, I consider myself that I've got a new training system so I consider myself a little bit more confident. But I'm not good in any means. But you shouldn't take chances. This isn't gambling. This is proper investing and trying to create a passive income. That's all it is, is a passive income.
Allen Sama: As you venture more into the real money world, you know that I'm always here. You can email me, we could do the coaching calls, or the Facebook group, or the community, whatever. You know that there is some support there as well.
Dan Hayden: Absolutely. Yeah, no. You've gotten back to me, you've slapped me on the hand a couple times. Even going onto your site, I wish there was a little bit more interaction between the members because that's where I learned and I picked up that Excel spreadsheet from your one member. I love reading it because it's like, "Okay, I want to learn more. I always want to keep learning."
But yeah, I felt, "Hey, I've got these trades. I've really done pretty well. Should I start doing cash trades now?" You said, "How long did it take you to learn your skill? Your lifelong skill?" We said, "30 years." You say, "Well, it's going to take you a little bit longer to get comfortable with it with the practice trading."
Allen Sama: Yeah, [inaudible 00:59:35].
Dan Hayden: Yeah, yeah. The support's there, and you do get right back to it relatively quickly. I think it's on our side now where we have to start interacting a little bit more, coming up with, "Hey, this was successful to me, this is what I was looking for, this is what I got, this didn't work out for me, what should I have done differently?" Things like that.
Allen Sama: We're working on that. Right now, the course itself, we've only marketed it to our own list, so we haven't really gone to the public with it. We haven't let a lot of people in. We only open it up once a month for a few people, a handful of people, and then we shut it down again because I'm working with people, and we're working it out. But once we do expand it a little bit more, I'm working on a couple projects coming up that we'll definitely open up the course and we'll have a lot more people in. Once we do, then that interaction will grow.
Currently I'm working ... Right now my major project is I'm working on a book called Passive Trading. Once we get that book into people's hands, they'll see like, "Hey. Wow, this is awesome. I never knew I could do this." [inaudible 01:00:36] in there from students who are doing really, really well. I think that will help as well.
Dan Hayden: That's awesome.
Allen Sama: When we get more people in the group then yeah, it'll definitely pick up. But I appreciate you posting in there and doing stuff. Even on the call, I appreciate you coming on a call, and sharing all your knowledge and experience.
Dan Hayden: Like I said, knowledge and success, it's ... These net liquidating trades, and overall profit or loss, I can't figure them all out because there's other trades that came into play with it as well. I'm probably 10 grand a month or something like that in the profit. That's pretty good since I started.
Allen Sama: Yeah. You started five months ago, so yeah, that's pretty good.
Dan Hayden: It's exceeded what my initial goals were. If I can now taper it down a little bit with my cash because I'm not going to be as aggressive and all that stuff, especially to start out with, but yeah, it's been a lot of fun to learn and that's the best thing about it is that I'm not having somebody else have to tell me what to do. I'm learning it and I'm appreciative of that. Thank you.
Allen Sama: Yeah, man. You could do this for the rest of your life as long as we get older and we slow down a little bit, and our arms don't ... When your back hurts and this hurts, and that hurts, working a job or doing all that traveling might not be an option. But sitting on your porch, like you said, with your laptop, yeah, you'll be able to do that for a while.
Dan Hayden: Absolutely. If I can get good at this and then teach my kids how to do it ...
Allen Sama: Oh, game changer.
Dan Hayden: A game changer is right.
Allen Sama: That's one of the things I want to do as well.
Dan Hayden: [inaudible 01:02:14] because you're taking something that's complicating, making it simple, and teaching others to do that. That's great. Good for you.
Allen Sama: Because this stuff has been around for a long time. But with the advent of the internet, and the brokers, and now everything's at our fingers. Anybody can do this from anywhere around the world, so it's really opened it up for us as individual investors. I think for our kids, it's just going to get even better.
We're limited to a little bit of the U.S. stock system. I think when our kids are older or whatever, they'll be trading around the world, they'll be trading on the moon. It's going to be crazy.
Dan Hayden: It's true. No, it's true. Anything's possible. It's amazing because if you're ... The times that I've gotten into trouble is the times that I haven't got out of trades because, "Oh, it's going to turn around. It certainly can't keep going." It's going down two or three days in a row. You think it's going to turn around, but if you play by the rules, you have your rules, that's where you don't get into trouble and you're out.
You said, "Hey, I'll take this little hit. I've made a little loss, but I'll make it back." Or, "I made it on the front side." Almost like your puts. You've owned these stocks and you've gotten so much premium that you own it for free. How much damage can be done?
There's no need to take risks, to take chances. If you follow the rules, when to get in, when to get out, it's all good. You're going to have minimal losses and maximum gains.
Allen Sama: Mm-hmm (affirmative). Yup. You just play it month by month, year after year. The returns, they take care of themselves pretty much.
Dan Hayden: Yup, and you get so bored that you just say, "Well, here's Monday again. I got to go make some money."
Allen Sama: Well that's the biggest thing. That's one of the biggest risks is that you get bored and then you don't pay attention. I've noticed that when I first started out. I'll put on my trades and I'd be like, "Uh, nothing's happening. All right." Then, "Oh, nothing's happening." Then I'll just forget to check them, and then, "Oh, something did happen and I didn't ... Ah, don't worry about it. It'll be fine." That's when you get in trouble, when you get too bored.
Dan Hayden: That's where I am right now because as I'm traveling with this other consulting, you're bored because, "Well, I've made this much money. If they go wrong, I'll just set up new trades because it's paper money." But I got to get more disciplined in my paper exiting so that ... To me, that's the last part of my training right now, is just setting up the trades as I enter the trades to get out.
Allen Sama: Well you have Thinkorswim, so they have something called OCO orders.
Dan Hayden: Correct, one cancels the other.
Allen Sama: Yeah, most brokers have something like that. If you call them up and I'm sure they'll walk you through how to set it up or they might even have the videos on their website.
Dan Hayden: They do have videos. Yeah, they do have videos.
Allen Sama: They show you how to do that. If that's what you're looking for, there is a way to do it.
Or if you want, you can just have them alert you on your phone.
Dan Hayden: Yes, you talked about that last week, which is awesome. You can have them text or ...
Allen Sama: There's ways to run it if you want to find it that way. Then it's totally automatic. Put the trade on and then just put the orders in, "Okay, I'm done. I don't have to do anything at all."
Dan Hayden: Yeah. Yeah. I lost, but I only lost a couple hundred dollars. Yeah I gained and I made $500, whatever it is. Yeah, that to me, that's relaxation because you don't have to, in that heat of the moment when, "Oh my gosh, it really turned against me. Now I'm down $300. What do I do?" That's the wrong time to be making a decision. Yeah, if the decisions can be already made for me, all the better.
For more information on the program Dan is part of and how you can join go to PassiveTrading.com
And also visit us at OptionGenius.com
Jun 30 2019
Rank #16: Teach Your Kids How to Trade - 003
Imagine giving the gift to your kids of them being able to follow their calling, whatever it is. Maybe they want to be a social worker, maybe they want to be a missionary, maybe they want to be a world traveler. Right now, if they go get a marketing degree or an accounting degree or whatnot, they can't do it. They don't have that freedom. Imagine them having the ability to follow their heart and their freedom, not worrying about money because they know how to go into the markets and just take it out at will. That's what option trading, the way we do it, gives you that opportunity, that ability.
Good morning, Genius Nation! Woo. That was my tribute to Robin Williams and Good Morning, Vietnam. I loved Robin Williams. He was a great actor. I didn't think he was always funny. He was very funny, not always. Amazing actor. I liked his more serious roles a lot, as well. Recently, we just, on Netflix the other day, I was just flipping through and they said, "Hey, Dead Poet's Society." I was like, "Oh man. I'm going to put that on my list because I'm going to watch that one, man."
I remember that one. That was one of the movies that really shaped or ... It's one of my favorite movies. I don't know how well I have lived up to its message. When I saw it, I was young. I don't know how old I was. We saw it in the theater, with my parents. I didn't get the message. Only later on, did I get it. If you haven't seen the movie, I'm going to spoil it in this. I'm going to spoil it for you today. It's an awesome, awesome movie. "Gather the rosebuds while ye may." I don't remember the poet who said that, but it's an amazing line and it sums up ... That line sums up the whole movie.
Basically, in Dead Poet's Society, Robin Williams is a teacher. He goes to, I think it's a prep school. They're not in college yet, but it's a boarding school for really rich high schoolers. Either that, or it's like some small little college, a liberal arts college somewhere. He is a teacher there. I think he's an English teacher, and he takes the class, and it's all boys. The whole school, it's an all boy school. He takes the boys, and these guys are ... They look pretty rich, they look like nerds, virgins probably most of them. Nothing really adventurous about them. He takes them to this trophy case in this school and there's this picture of one of the older teams that, decades ago, where they were standing there with their little football uniforms on or something. At that time, they didn't have helmets and pads and whatnot, so they're just wearing these little leather caps on their heads and cleats. I think they had cleats.
He's telling them to look at that picture, to really look in the eyes of the people that were in that picture. Every single one of the people in that picture is already dead. The message that those people, those dead people have, for these young kids, is to gather the rosebuds while ye may. Meaning, to carpe diem or seize the day. Don't let a day go by where it's just another boring day. Live for the moment. Live your life to the fullest, is the message. That's the whole message of the whole movie.
He shows them this in different, different ways. One of the ways that he shows them is by getting them to change their perspective. Think back to when you were in high school or college and whatnot, and you had assigned seating. You would go and you would shuffle into the room and you would go to your little desk and you would sit down. That is the image that you have of the room. That's what you see, whatever's in your vision, that's what you see around. What if you turn it around and you go and you sit at the teacher's desk? Most of us have never done that. If you go and you sit at the teacher's chair, the whole room is totally different. You can see so many different things that you didn't notice before.
One of the things that Robin Williams does, is he has them come to the teacher's desk and then he has them stand up on the desk, which they've never done before. They're all rule followers. They don't break the rules, they're all rule followers. He gets them to stand up on the desk. Standing up on furniture, with your shoes on. That's a big concept. Not only that, but you got to stand up on the teacher's desk. You could get thrown out of school for something like that. He has them standing up and looking around and seeing the new perspective, seeing how everything looks different. That's just one little tidbit exercise that he had them do.
It's a great, great, great message, great, great, great story. One of the things that I definitely, I want to see it again. I definitely want to see it again, because I haven't been living it. We do think that we are living it and we try to live it, but then day to day grind gets to you and you forget. You get tired. One of the things that is so awesome about having little kids, and this probably happens at the older ages too, but you notice it a lot more when they're little, I think, that they grow so fast. They learn so many new things so quickly. It's like every day I come home, and there's something new. We have three kids, six year old boy, five year old boy, and one and a half year old daughter. She's at the age right now where she's shooting up. I still remember the days when she couldn't even walk, where you'd have to carry her everywhere.
Now she doesn't want to be carried. Now, she runs everywhere ever since she started learning to walk, she wants to go everywhere, and she wants to go quick. She learns all these things, and she's learning to talk right now. Every day, it's a different word. It's so cool. Her mom keeps telling her, "You're so cute, I just want to eat you up. Can I eat you up? Can I eat you up?" She goes, "No, no." She shakes her head. Now she's wagging her finger. She's like, "No, no, no. You can't eat me up, you can't eat me up." It's just the cutest freaking thing.
For those of you who have little kids and those of you who have kids, I'm sure you remember this. I go home, I used to work from home. Recently, I just got an office. I used to work from home and I had my separate room there. I had my office room, and I have my library, so I got two rooms in the house that are all mine, kids aren't allowed to go in. When my older son, my two sons, when they were young, when they were born, they were in the house. We had a nanny for a while, for them. My wife was there for the first one, we had a nanny for the second one. Whenever I got bored or whenever I got tired or whenever I heard them laughing or crying or whatnot, I would always run down and pick them up and hug [inaudible 00:06:52] and feed them and put them to naps. It was such an awesome, awesome time.
For this one, I'm not there. We do have an nanny for her, and the nanny's awesome, but I'm not there every day. It was like, "Man." That was the biggest thing of why I didn't want to get an office. I wanted to get an office, it just got too loud at home and I couldn't get any work done. My hours of work were shrinking because I'm not a morning person. I don't really start my day until 10:00, 10:30. I would go upstairs at that time, start working, and then the kids would come home at like three o'clock, and then that's it. Hey, I'm going to go play with my kids, because I could do that. The style of trading I have, it doesn't take that long. For a while. For several years, it was awesome. I had that opportunity to spend with my kids, to watch them every day as they grow up, to learn what words and to teach them.
All the little things that I was teaching them and helping them with walking and talking and eating and wiping your butt and all that kind of stuff. It's just awesome. Now after the time, I just hit 40, and I don't know if I'm going through a midlife crisis or what, but I'm like "Hey you know what? I really need to get this message about there. It's great that I can trade this way, it's great that I can live this way, but if I can put in a couple hours extra more and help other people to live the same way, that would be my legacy. I think my kids are going to be my legacy so I'm not really worried about that. I don't want statues or anything for me. I think helping more people is, for me, the next stage of growth. I've had Option Genius, the website, I've had weekly training system, the website, I've had other things.
I wasn't really paying that much attention, as I should have, to growing it. It people came into the system, if people came to our website, they had became members, I would do everything I can, or I still do, everything I could to help them out, to teach them, to help them out, to guide them. Now I think it's time to push the limit to open it up, to get more stuff out there and to help more people. For me, that's how I'm seizing the day. I'm making new goals and I'm getting out there, and I'm putting the time in.
I'm still trading obviously, I got to pay the bills, but I am able to, now that I got an office, I'm actually trading a little bit better than before, now that I have an office. I'm in front of the computer more. I'm also helping more people and I'm seizing the day in that sense. I do miss things with my daughter, but I spend time with her when I get home. I spend a good three hours with her every day at home. That makes up for it, I think. She's too little, she's not going to remember anyway.
I noticed that with my older boys, I don't remember a lot of the things that they used to do. I'm getting older or what, maybe there are just too many memories in my head now. I'm not remembering as much. We go back to the movies and I'm like, "I remember you used to say, "Ba-na-na-na-na," like that, man, that's so cute. Really, I'm now looking at the future and what my legacy is and how I'm going to help more and more people, and that's what I want to do. That's why we're getting the word out there. That's why we're doing recordings like this one. That's why we're doing videos. That's why we're doing blog post and more products and more trainings, just to help other people.
Back to my original point with the movie and carpe diem, and it also has to deal with kids. The point I wanted to make is that if you have a teenager or if you have somebody in college or if you have anybody, really, but especially if you have kids. Some pre-teens might be 11, 12, 13 years old. Teenagers, maybe college kids. If you have those, you need to sit together and you need to watch this movie, and then you need to help them, to make a plan or to keep them grounded, because life will make you forget to seize today. I would like you to give them that gift and say, "Hey, you know what? Let's do this together. What do you think about it? What are some steps you can take, maybe on a regular basis, to bring you back and to remember this message?"
One thing I always like you to do is as you are trading and as you are learning to trade, wherever you are on this trading journey, obviously you're probably listening to this because you are trading and you are investing your own capital, teach your kids how to do it. Have them do it with you. They don't have to be masters. You don't have to teach them Fibonacci if that's your thing. You don't have to teach them all that stuff. Give them the basics, show them how it works. Show them how money works. Most kids nowadays have no clue how money works. Most kids who even graduate college still have no clue. The only thing they're taught in college is how to go and be an employee.
Even if you take entrepreneurship classes, even if you take marketing classes and small business classes, one thing is they're not taught by real people who are making things happen every day, small business owners. These kids don't have that frame of reference. Nowadays, with the internet and with all the social media stuff and all this technology that's coming out with the smartphones and the apps and artificial intelligence, the sky is the limit. Kids today can literally change the world and it doesn't even cost that much money. When Facebook started, he didn't pay a lot of money to develop Facebook. He did it himself. He learned to code, Zuckerberg learned how to code, and then he made it himself and then he hired other people that also learned how to do it themselves, and they just built it that way. A lot of apps can be built by kids. They are. There's software out there that can teach you how to make an app.
There was a kid, I was watching these videos the other day. What this guy does is he talks about crypto currencies, which is like bit coin, and Ethereum. There are thousands of them. It's really hot right now, so crypto currency and bit coin is getting very, very popular. It's in the news. What this guy does is he makes a video every day, and he posts it on YouTube. That's what he does. He's went 100% into this bit coin thing, into this crypto currency thing. He spent his time researching it, learning about it, and then he makes a video every day, and he posts it online. He has I don't know how many thousands of subscribers and hundreds of thousands of people are watching his videos, on a regular basis.
The other day, he did one where he talked about how much money he made from bit coin. That was the title of the video, "How I made $100,000 in one year from bit coin." That's what his video was. I was like, "I want to hear that story." I clicked on there, I watched the video, and he was showing how he started with $500. He's a high school kid, he's still living with his parents. He had $500, and he invested in a bit coin and whatnot, but the thing is, that he did not make $100,000 from his bit coin investment.
What he did was he made money, most of his money, probably 95% of that $100,000 that he made, he made from his YouTube channel, where he's making these videos every day, and he's posting them and then he's telling people in the video that, "Hey, you know what? There's this particular broker, bit coin broker, who's really good. You should try them out." You would have a link. If they clicked on the link and signed up, he would get a commission.
He would tell them, "Oh, there's this other company that's doing really well, you can [inaudible 00:14:42] over here." He would get a commission if people bought from his link. He would tell them about something else, and he would get a commission. He made over $90,000 last year, in one year, from commissions from a YouTube channel, without any advertising, without any knowledge, without any education. He would just go online, read the stuff, and then talk about it in his daily video, and then tell people what to do. Basically, he became like an educator. He became a teacher. This high school kid is teaching other people around the world about bit coin. How is he learning?
He's going on the computer and learning and then he's doing the same thing that the people watching the video could do. He's putting it in a video and people want to watch videos instead of going online, learning themselves. They watch his videos and they learn and they buy stuff through his links, and he makes money that way. My point is that it's incredible, the different ways that kids and people can make money nowadays, online.
That old model of going to college and paying hundreds of thousands of dollars, and getting into debt, it just doesn't work anymore. You're not going to get that big, cushy job that's going to make you 100,000 or 50,000 or 60,000. Even if you do, you have two or $300,000 worth of debt. That's why we have all these news articles every day, "Millennials don't want to buy houses because they have too much debt," "Millennials are moving back in with their parents because they have too much debt and they're not making enough money."
I had a girl who called me the other day, she's graduating from the University of Houston, and she called me. Her mother knows my wife and her mother asked, "Hey, is Allen hiring?" She said, "Maybe, give him a call. Here's the number." The girl called me up, said, "Hey, you know, I'm graduating from advertising. I got a degree, a major in advertising and a minor in marketing. I'd like to come work for you." I said, "You know what? Come on by, let's talk." The girl didn't know anything. She's done. She's out of school. She did her four years in advertising and in marketing, and she did not know the basics.
I asked her, "What have you done? What kind of marketing have you done?" She goes, "I've done SEO," which is search engine optimization. Basically, that's getting your website to the top of Google. I'm like, "That's cool. I know a little bit about that. I've done that before. How did you do it? What was your method?" She's just looking at me, like I asked her some ... Like I'm an alien or something. She didn't have an answer. She told me she did SEO, but she didn't know how to do it. She was like, "Well, we had one project in school, but I wasn't the main person on the project. I was just helping out."
I said, "Okay. Do you know anything about SEO?" "No, no, I don't know anything about it." Cool, so you didn't do anything. "What'd you do about advertising?" "I made logos and I made graphics and I've done that kind of stuff." I was like, "Okay, well that's not advertising. That's graphics. That's graphic design. What do you know about advertising? What do you know about marketing?" She didn't know anything. Her parents have paid thousands of dollars for her to go to school and now she's out, and she can't find a job.
I'm like, "You're pretty desperate for a job." She's like, "Yeah, I really need a job right now." I'm sure there are other people, like bigger companies, that come and recruit at your school, right? Job fairs and whatnot? Have you been to those? She goes, "I've been to those, I've been on interviews, but I still can't find a job." That's the state of where we are today. What I want you to do is not to put your kids into that same position.
A few years ago, we got a testimonial, or an email, which was a testimonial, and I want to read it to you. It was from one of our long term members. Let me pull it up. Basically, this is his words. He goes, "A success story from my daughter, as she has been learning from your ideas. She is currently 14 years old, a freshman of a San Francisco high school. She started to read your free lessons in August of this year. By the help of her Hong Kong uncle, with $25,000, trading in his account, she started selling SBX and Iron Condors, purely from ideas from your membership.
She has been up three months in a row, generating 12.5%, 14.57%, and 15.25%, with margin requirement of $15,000 each month, which is 60% of her 25,000. She has a profit of $6,365. She uses 25% of her profit for her pocket money, and 75% for cash reserve to pay back her uncle. She lets all trades expire as OG, option genius, designed perfect ranges, and far enough strike prices of both SPX and [inaudible 00:19:36], within six weeks of expiration. The option membership is really brilliant." [inaudible 00:19:42] San Francisco, California.
This was a few years ago and she's much older now, she's probably in high school, maybe even in college. Probably not in college, she's probably still in high school by now. No, she was 14 and she was a freshman in high school. She's probably out. She's probably in college right now. I can imagine if this girl, a 14 year old girl, can learn how to trade Iron Condors by following along with me, trading her own Iron Condors and making 12%, 14%, 15% a month, can you imagine the confidence that this girl's going to have in her life? Can you imagine what it's going to be like for her when somebody comes and offers her a job and says, "We'll pay you 30,000 a year ... Or 50,000 a year."
She's going to be like, "I don't want to do that. I can make my own income doing my own trading. I don't need to work in a cubicle." Nobody dreams to work in a cubicle. None of these kids who go to college today, they don't dream of having to work for a big ass company that's going to pay them some decent amount, but they're going to have to work their butts off for the rest of their lives. Nobody wants that. The old American dream where you work until you're 60, 62, 65, it keeps increasing. It used to be 60, where you could retire with a pension and your company would take care of you, and you would just retire, play golf, travel, that American dream is pretty much gone.
If you look at the numbers now, if you look at the statistics, most Americans have ... Over half of Americans today, over 50%, have less than $1,000 in their checking account, saved. That's their savings. It's heartbreaking. The amount of people that are retiring, baby boomers right now, that are living only on social security, that's the only income they have, it just ... It's crushing. It's soul crushing. We get emails every day from people, "I got laid off. I'm 50 years old and I got laid off and I'm trying to get a job but nobody wants to hire me at my old salary and I have all these expenses, and my kids are in college."
I'm sorry buddy, but you're probably not going to find the same job at a different place, paying you the same salary that you were making. Number one, you're 50. People would rather hire somebody out of college because they're cheaper and they can get pushed around. They can work longer hours. They have more stamina. They remember better. It's just a fact of life. We get emails like that every day. What I want is for your kids to not be in that position. For a lot of these people who email me, it's almost too late. We try to help them, but sometimes you can't. If the only income you have is your social security check, you don't have any money to trade. My thing is not for you. If I was teaching you how to get a second job or something, or get young again, you could use that and make more money. To trade, you have to have some money. You have to have some capital.
For your kids, it's a whole different story, because they have their whole lives ahead of them. Teach them to trade. You're doing it. Teach them what you do, teach them what you're learning. Learn with them. Do it as a project together. Can you imagine the freedom that your kids would have, knowing that they can go to any college that they want? Any college that they can get into? The money will not be a factor. Cost will not be a factor. When I got out of school, when I got out of high school, I got into some really, really nice schools. Ivy league schools. I could not go, because I could not afford it. The school that I went to, Florida State, and eventually I had to drop out of, I went there because they paid me to go there.
At that time, tuition, room, and board and everything was about $7,000 a year. They gave me a financial aid package of $8,000 for the year. They actually paid me $1,000 more than I needed. That's why I went there. I hated that place. Nothing wrong with it, it just didn't fit for me. It's a great school. It didn't fit for me. I applied to NYU and I got in. After my first year, I applied to NYU and I got in. At that time, NYU tuition plus room and board, everything was going to cost about $35,000 a year. Right now, it's a hell of a lot more than that. This is 1994, '95, I'm talking about. At that time, it was 35 and they gave me a financial aid package of about 16,000, which is half, about half.
I told my dad, I'm like, "Dad, dad, you can do it, right? You can pay for it? You can work harder in your business or get loans or something?" He's like, "No. Not going to happen. You can't go." I couldn't go. I don't want that to happen to my kids and I'm sure you don't want that to happen to your kid. If your kid gets into Harvard, imagine you telling him, "Hey, son, I'm sorry. Sweetie pie, my daughter, you can't get in there because I can't afford it. You're going to have to go to a local public school," which is not cheap anymore, either.
Imagine that they can go to any school that they want that they can get into, and cost is not a factor. Imagine that they can choose whatever major they want to study, whatever field of study they want to go into, without having to worry about the money. Some field that excites them. Maybe it's robotics, maybe it's teaching. Teachers don't make anything. People who go into teaching know they're going to be poor. Teachers are pretty much poor. If they really love to teach, they can go and do that because they know that they know how to trade, and that they can go into the markets and take the money when they want it.
I have had people come over our friends come over, and their daughters are ready to go to college. It's like, "So, what are you going to study in college?" That's obviously the first question you're going to ask them. Where are you going, that's the first question, what school are you going to, and then what are you going to study? The response was, "Computer engineering." I was like, "What?" I knew the girl. I was like, "I've never even seen you on a computer. You don't seem to be the engineering type. You're more social, you're more active." She was like, "Well, that's the field that has the hottest jobs right now. That's the hottest industry right now with the best jobs."
I was like, "That's how you're going to decide what to do for your life, based on what industry is hot right now?" She goes, "Yeah, because I'm going to have to take out a bunch of loans to go to school, and then I'll have to have a good paying job to be able to pay them off and have a good future. It was really disheartening. It broke my heart. Being a computer engineer, there's nothing wrong with it. Her father is a computer engineer and he loves his life. He loves his job, he loves his life, but I don't know if that's right for her. It didn't seem like she was too excited about it. I tried to talk her out of it, but at that point, it was too late because that was their situation. That was their thing. Your kids don't have to be in that situation. My kids are too small. They're five, six, and one. I can't teach them right now, but I want to. Eventually, when they're older, I will. I want them to have that freedom to do whatever they want.
Imagine giving the gift to your kids of them being able to follow their calling, whatever it is, whatever their calling is. Maybe they want to be a social worker, maybe they want to be a missionary, maybe they want to be a world traveler. Right now, if they go get a marketing degree or an accounting degree or whatnot, they can't do it. They don't have that freedom. Imagine them having the ability to follow their heart and their freedom, not worrying about money because they know how to go into the markets and just take it out at will. That's what option trading, the way we do it, gives you that opportunity, that ability.
Our trades are done month by month by month. You can if you want, but you can have really, really long one one year, two year trades if you want, but most of our trades are short time frames. You can trade for like three months and then stop, take that money out, and go on a trip. Come back, start trading again. Take that money out, go on another trip or go do something else. You can trade in your spare time. Literally, it doesn't take me more than 20, 30 minutes a day to do my trades and I make a very good income from it. A very good living from it. Imagine that. Imagine your kids had that ability. Wouldn't that be awesome? Could you give them a better gift?
Of course, you can give them a few other things like teach them how to be a good person and how to live properly and respect of other people and how to love yourself and love your spouse and all that, love your kids. The gift of financial freedom? Imagine if you started them on that journey today. Even if you don't teach them about how to trade right now, or trade options, at least get them investing. Open a brokerage account for them, put some money in there. Buy an index fund if you have to. Don't buy an index fund, buy an index ETF, like SPY or IWM. Get them involved.
One thing I did with a friend of ours, she passed away now, but she was like my sister. I'm an only child, but she basically ... We became friends, she became my wife's best friend and I was friends with her husband. The kids were like ours, we would treat them like our own kids. She started calling me her brother, her older brother. She had always wanted an older brother. She started treating me like an older brother. She became my little sister. For her daughter, I think she was 10 or 11 years old at the time, I wanted her to get involved in trading and investing, and I wanted to teach her how the world works, how money works, that you don't have to work for money. You want to get your money to work for you. That was the whole lesson behind it.
I opened up an account for her at Fidelity, and it was a minor account with her mom being in charge of it. Every year on her birthday, she would buy stock. I would tell her, "Pick a company and I'm going to buy you $100 worth of its stock." One year, the first year, this girl was ... She was a normal teenager, but she was a little bit materialistic in things like makeup and clothes and shoes and whatnot. She knew about Ulta. She was like, "I really like Ulta. Does Ulta have a share?" I'm like, "I don't even know." I didn't know about Ulta at the time. We looked it up and yes, Ulta did. Ulta had a shares trading. We bought, I don't know how much it was, but we bought some shares of Ulta.
Since then, that stock has gone up like two, 300%. Every year, she would buy one company. I put in maybe ... We did it for four or five years. I probably put in about 500 bucks. Right now, she just went to college, she just left for college. There is over $2,000 in that account. She was an amazing stock picker for not even knowing what a stock was. That's one way of teaching them. If you don't want to teach them options trading, get them invested in stocks and start with a little bit instead of giving them a big birthday gift or something, that's their birthday present. You can even do that for all types of events, for weddings. Have a smaller wedding, and put that money away for your future. Crazy concept, it might work for some people.
Now that I think about it, I think I've changed my mind. My kids aren't too little. They're five, six, and one. Maybe not the one year old, but the five and the six year old. My six year old already beats me at Chess. I think he could understand how the stock market works. I think it's time to start trading with them, teach them the basics. They won't understand what a [inaudible 00:32:18] is, but teach them the basics. I think they'll get the hang of it. I think they'll be interested. I think they're already interested in what daddy does. They don't know what daddy does, but they're interested. They ask me questions and stuff. I think it's time to bring them on board and to learn. I can't imagine how awesome that would be for them. Crazy.
Folks, that was my message for today. Carpe diem. Teach your kids to trade as you would learn yourself, as you get better. They might even be better traders than you are, which would be awesome, right? Give them that gift. Remember to always trade with the odds in your favor.
Nov 05 2017
Rank #17: Interview With Trader Dale Hefner - 016
Dale Hefner is a 81 year old retired business owner in Amarillo Texas.
He has fun spending time with his wife, going into town, and trading options.
Listen in as he shares how he turned a $4,000 account into $21,000 - a $17,000 gain in just 12 months!
Allen: So, 2011 that was the Option Genius that you signed up with?
Dale: Yes. I was originally started and I started doing spreads following you on the Rut, SPX, ETF’s, and during the Iron Condors and the spread. Didn’t do as many Iron Condors as you were doing, but I did do some. And then I went to doing the spreads and I had good luck of spreads, but I had many, many spreads back then and still do and I had been exposed to the oil field industry some years back and I started looking at that and then all the sudden out of the clear blue you, you announced that you were going to start Blank Check Traders and I was elated when you did.
I thought, well, this-this is going to be right down my alley and you haven’t let me down or any of your students from the way I can read on the Facebook page.
Allen: Yeah, well we try not to [laughing]. So, do you do this, you’re still working or your full time trading or how long, how many, how long does it take?
Dale: I’m more or less, well, I guess you could call it full-time, I have nothing other than that to do that pays.
Dale: And, I probably make three to four trades a month. I think last year I made a total of 30-31 trades and after I took my losses off of some of the trades I made I think I made it about $17,000.
Allen: But like… So, Dale, but how long… how long does it take you to do the trading in time wise?
Dale: Well, I don’t I try not to stay in a trade over 20 days if I can.
Allen: Okay. No, but I’m talking like in a minute. Does it take you two hours a day? Four hours a day?
Dale: Oh. No. My gosh no. Uh, you know I’ll get up, I’m an early riser, I get up at 5:30/6:00 o’clock, I have my coffee, then when the market opens I’ve already got my screen up. My think or swim platform up, maybe read up on fundamentals, things of that nature then, uh, then I start watching the market and if it looks pretty non volatile I may go into town, spend some time there, I may go over to my old business office and spend some time there and then that afternoon I might check it and see if I need to make an adjustment or get out.
Dale: I’d say if I spent a total of an hour a day that-that would be, uh, probably extravagant.
Allen: Okay. Alright. And I do have a personal question for you because I know that we get a lot of folks who are retired or looking to retire soon and I often get this comment from a lot of people that, you know, “Hey Allen I’m in my 60’s” or “Allen, I’m, you know, I’m close to 70 and I just don’t have, I don’t know if I’m going to be able to learn something new. It’s going to be complicated, I’ve never done this type of trading before.” What-what would you say to that.
Dale: Well, you just almost to the verbatim said some things that some of my friends and associates that I know ask me. They said how are you doing retiring what you are doing with yourself. And I get around to tell them that, you know, that I met you on the internet a long time ago back in ’11 and that I’m selling options and that intrigues them and then I get to tell in them about it, then you can see some of them get impressed about it and some of them get very skeptical and you said it well, I don’t know if I can learn it and I just tell them, frankly, what is there to learn, really? I said, hell, you can spend a few hundred bucks and I can put you on to a young man that if you follow his advice and follow his webinars and you can follow hiss trades along with it, you know, if you want to go with ETF’s or Indexes or whatever, but I said I’ll just… I’ve made it my goal to learn the commodities market. I love it and that’s why I’ve told you in the past in past conversations that I feel like I’ve met my that I’ve found my niche. I’m 78 years old, I don’t have to make a lot of money, but it sure is nice to have a 25, 30m $45,000 or more coming in.
Dale: And for people… and for people that get bored during the day I think it would be, you know, there’s times that I come here and look and if it’s snowing outside or bad weather outside, this is a contradiction maybe, but if I got my screen up I’ll come in and check it once every hour. Just for something to do, it gives me something to do.
Allen: [laughing] Yep. Well, I mean if you’re making that much and the time you’re spending on it, you know, per hour you’re doing pretty well, so, you know…
Dale: I’ll put it this way, had I known that it was like this and that I could, find someone like you that could explain it in terms that I understood, without making it, uh, you know, sound like it was, you know like some people they bring the Greeks into it and all that. Well, I’ve studied the Greeks and-and rightfully so, you need to know something about the Greeks if you’re going to play options, but, I just… I think it’s the greatest thing that ever happened. I wish it happened to me 20 years ago.
Dale: I’d of probably retired had it of happened and I had the fortune of-of-of meeting you, the good fortune of meeting you 20 years ago I’d probably retire 10 years since.
Feb 06 2018
Rank #18: What is Passive Trading? - 50
To celebrate episode 50 I thought I would do something special. As you may know, I am writing a book to introduce the masses to the art of Passive Trading. And while the book is still being finished, I thought I would give you a sneak peek.
So here is Chapter 1 of the book. But keep in mind this is in rough draft form. It still has to be edited.
I am sharing it because, well, I am too excited not to.
This episode answers the question, "What Is Passive Trading?".
Jul 07 2019
Rank #19: 2018 Predictions - 014
Around the end of every year and beginning of the next, the world is flooded with folks giving their predictions about what will occur in the coming year.
Some of these actually come true. But most are just for fun. These fortune tellers think that something might happen and because of that something else might occur. Mostly these folks are just looking for some free publicity. Which is why I hate predictions.
Don’t give me a guess. Give me some real information that I can use to make an educated guess
So what I like to do instead of to look at trends. Long term trends. I am a more Macroeconomic guy than micro if you know what that means.
And one of the folks I look up to is Jim Rogers. This guy started the Quamtum Fund with George Soros and made billions.
His whole philosophy is to see where the money is sitting in the corner and go pick it up. No need to fight for it or work too hard.
Sounds pretty good to me. So then how do we use this info
Well you look at what has been happening in the world, compare it to history and see what you see.
Stop looking at the minutia, the day to day news and look at the big picture.
These are the Top 5 Trends that will shape 2018.
Resources and links mentioned in this episode:
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Join Our Free Facebook Group called The Option Trader's Alliance:
Jan 17 2018
Rank #20: Beware the $30k Scam - 24
I still remember when I first learned about options, so many years ago. My father, who is an infomercial and a get-rich-quick junkie, had gone to some free, two-hour options seminar in some hotel.
You might have seen these commercials on TV, where they come to your town, and they have different hotels where they have two-hour free seminars where they teach you how to get rich with options. They're supposed to teach you how to get rich with options, but instead, it's basically a sales pitch for a much high-priced seminar.
He went to this two-hour thing, and he came home $5000 lighter, because he spent it on a seminar that they were doing that weekend. Lucky enough for me, he was allowed to bring someone along, and so I got drafted. It wasn't really a choice. You know, I guess that's one of the benefits of being an only child.
We went to the seminar. We were excited. I was like, "Okay, this might work. We might make some money out of it. Hopefully it's good." A lot of the stuff that they talked about was really cool, first time ever hearing about puts and calls and all this different terminology, and it was exciting. I mean, they taught us what a chart was. They taught us what an indicator was, that you could make money in stocks and options by just reading and doing what the indicators told you to do. I mean, I was like, "Whoa, this is so simple. Holy cow!"
When you get three green arrows, that means that three indicators are all bullish, and you buy. It was that simple. You get three green arrows on their software, you buy, and then you hold it until you get three red arrows, meaning that all three of the indicators were bearish. I mean, that's pretty easy, right? Heck, yeah, we were going to make millions. That's all we had to do, just look at the charts, and keep looking at different charts until you see three green arrows. That's the stock you buy, or options, you call options on that, and then you get out when you get the three red arrows. That's all you have to do.
My father and I fell for it, hook, line, and sinker. I mean, "Great job, Dad! Awesome! Whoo-hoo! That's the best $5000 you ever spent! All right, we're going to make millions!" Now, I didn't have any money at that time, because I was still, I don't remember how old. I was pretty young, but my dad ... He's the get-rich-quick junkie, so he's been to these type of seminars before, and unfortunately, he brought all the credit cards with him that still had some balances on them.
Now, I wish he had not done that, but he did. He brought them, and so he spent more money at the seminar. He bought some software. He bought some video courses that they had. They had other stuff, other seminars you could take. I don't remember exactly what package he bought, but it wasn't until the second day that the instructors really laid it on us.
I mean, that was when the pitch for coaching really got started. They kept telling us over and over again that if you really wanted to be good at training, you couldn't learn it in a two-day seminar. They can give you some basics. They can give you some stuff to go home and try, but if you really, really wanted to get good at trading, then you would have to have a coach work with you, one-to-one basis, because then the coach could tell you what you did right, what you did wrong, give you some ideas, let you look over their shoulder. For that reason, you've got to have a coach, right?
All the greatest athletes, Michael Jordan, Tiger Woods, all these guys, they have coaches, right? Yeah, so you need a coach, too, because that's where they taught the really good stuff. In the seminar they couldn't teach you everything, but all the top secret stuff ... That's what was taught in the coaching program.
What was the cost of this amazing, wonderful, super, can't-live-without coaching program? Well, they were going to give us a great deal. They were, because we were they're real good customers. We had spent two days with them. They were our friends now. We were talking to them during the break and everything. We were telling stories, and laughing at their jokes, so they had to give us a great deal, right?
They were only going to charge us $30,000 for six months of coaching, but we had to act quickly, because they only had a limited number of spots, right? They couldn't take everybody, because their time was limited. There were four instructors there that weekend, and so we could pick whichever one we wanted as our coach and go in the back room, pay the $30,000, and then they would set you up with one of the coaches.
I was like, wow! Whew! Can you believe that? For just the price of a car, you can get coached by a real trader, a real trader that's making money in the markets. At that point, it didn't dawn on me that this real trader, if he was doing so well, why the heck was he pitching coaching in seminars on the weekend? Why was he flying halfway around the country every weekend to do this seminar to pitch coaching.
At that point it didn't dawn on me. It later did, but thank God my dad did not have the $30,000. Oh, my God, I can't imagine what would've happened if he did. I mean, after spending all his money on the seminar, which, basically, all the stuff that they taught us was basic introduction to options trading stuff. The software they gave us, the home study course. Luckily my dad didn't have any money left to trade. I mean, that's the funny part about it. We spent $5000 on the seminar. We spent several thousand more dollars on the software and the video and whatever else there was. At the end, there was no money left to trade, so we didn't get the $30,000 coaching program, thank God, but we couldn't really use the stuff that we learned anyway, to see if it was actually good or not.
Apr 16 2018