Caution: Danger Ahead

Options act as insurance on stocks. Bob has a big stock position in TSLA, but Elon Musk has been unpredictable lately, so 'Bob the buyer' buys put options out a month to protect against 'unpredictable Elon'. Meet 'Bob the buyer' And 'Bob the buyer' knows a thing or two about 'buying' insurance. His big stock position in TSLA isn't his only big investment. Bob owns a home too, so he went to State Farm and 'Bob the buyer' bought monthly home insurance for $100. Now meet State Farm agent 'Sally the seller' and retail trader. Sally is the State Farm agent who sold 'Bob the buyer' his home insurance. Sally also likes to trade on her lunch and because she knows a thing or two about probability, unbeknownst to her, sold 'Bob the buyer' those puts options out a month. Bob goes about his business and the month flies by.   TSLA stock price ends up going slightly higher that month, which is great for 'Bob the buyers' big stock position. But those put options out a month, 'Sally the seller' collects the premium Bob paid. The insurance expired worthless. And if Elon acts unpredictable again, Bob feels okay about buying put option insurance out another month. During that month, neighborhood kids broke a window at Bob's house. But because Bob has a deductible, Bob's insurance doesn't cover the $300 cost. Nothing else happens to Bob's house that month, so again, 'Sally the seller' collects Bob's full premium. The insurance expired worthless. Bob wants his house to be safe, so he's okay to pay the monthly premium again. What 'Sally the seller' knows from being a State Farm agent is that most monthly insurance premiums expire worthless and that's one way she at State Farm makes big money. Sally also knows most options expire worthless, so she likes to play probability in the stock market too, acting as the seller of options, afterall, they are insurance contracts with expirations, just like home insurance. Bottom line, 'Sally the seller' collects the full home insurance premium in multiple ways: If nothing happens to 'Bob the buyers' home If nothing bigger than the deductible happens to 'Bob the buyers' home   Same for the TSLA put option insurance Bob bought: 'Sally the seller' collects the premium if the stock goes slightly lower She collects if the stock goes sideways And she collects if the stock goes up 'Bob the buyer' can only use his home insurance if something devastating happens and the same is true for the put options he bought. Who has the probability? Bob the buyer or Sally the seller? Which brings me to Warren Buffett.  Do you know what Warren Buffett's favorite investment was? Hint: it's not Coca-Cola, Wells Fargo, Chevron, or even Apple. Although all of those have been great investments, he told Forbes: "My favorite investment… is GEICO, which I learned about when I was 20 years old." Which makes sense considering GEICO has increased between $29-53 billion since he acquired it. How does an insurance company make that much profit?  It's because they're in the business of SELLING contracts (aka an insurance policy) that they know will most likely expire worthless. So the customer gets "peace of mind" while GEICO gets profit. The same dynamic are at work when it comes to trading options… You can either be a BUYER or SELLER of option contracts. And since 77% of option contracts expire worthless when held to expiration, the odds are in favor of sellers. In other words, when you sell options you're like GEICO selling contracts to their customers. Of course, there's more to it than that… Which is why my friend Jeff Bishop, who is an excellent teacher, taught me his Wall St. Bookie strategy he uses to do this. And just yesterday we announced teaming up to teach it to you. And since you're already a reader of mine, we're going to hook you up. Not retail $2,499. Not $1,999 or even $1,499. >> Click here to get your BLACK FRIDAY STARTS NOW 50% discount to our Wall St. Bookie newsletter Subscribers learn:  How one simple decision can help improve your probability of winning option trades from 30-40% to 60-70%.  A simple way to understand how "time decay" works with option contracts (and the specific "sweet spot" we target for expiration dates) One simple tweak we made to our options trading strategy that flipped the odds in our favor and helped us become more consistent Why trading options the "normal way" is a losing strategy where the odds are already stacked against you (and what do instead) I highly recommend you grab this 50% discount now before it expires tonight! p.s. I forgot to mention... DOUBLE the trade alerts now that Jeff Bishop is on board.  Jason Bond Text "RAGE" to 74121 or 855-488-4211 to get exclusive trade alerts & offers 📦 A marketing platform delivering the goods – gotta love that * sponsored content 🧾 Talk Is Cheap. 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