Good morning, |
Meet Bob "the options buyer" and Sally "the options seller" |
Ever bought a call or put option and had it expire worthless? |
You're not alone. |
Options weren't created for retail traders to buy. |
They were created to act as insurance on stocks or a hedging tool. |
90-95% of traders lose money in the markets. |
Buying options is one of the main reasons. |
Here's why. |
Meet Bob "the options buyer" who has a big $200,000 stock position in TSLA. |
Elon Musk has been unpredictable lately. |
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So he "buys" $500 worth of out of the money put options, a month out, to 'insure' his big stock position against unpredictable Elon and a possible pullback in the stock. |
Bob owns a home too. It's worth $500,000. |
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He insures it for $100 a month through Geico. |
Meet his agent, Sally "the seller." |
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Sally "the seller" understands how Geico makes its billions i.e. selling policies for premiums. |
So she applies that principle in the stock market. |
Unbeknownst to Bob "the options buyer", Sally sold him those out of the money put options he bought. |
A month goes by and nothing bad happened to TSLA stock, it stayed within the expected range. |
And nothing happened to Bob's house either. |
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The $500 worth of out of the money put options he bought, to insure his $200,000 worth of TSLA stock, expire worthless. |
Sally collected that premium. |
Bob's $100 monthly home insurance premium expires worthless too. Geico collected that premium. |
In both examples, the seller collected the premium. |
If Bob wants to insure his stock holdings again, he'll need to buy new out of the money put options. |
Same for his house insurance, another $100 premium for the month ahead. |
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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 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, GEICO has increased billions since he acquired it. |
How does an insurance company make that much profit? |
They're in the business of selling premiums they know will expire worthless. |
Bob gets "peace of mind" while GEICO gets profit. |
The same dynamic is at work when it comes to trading options. |
You can either be a BUYER or SELLER of option contracts. |
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Geico calculates odds against Bob making a claim. |
Option sellers bet against buyers making profits. |
And in the $2,000 Small Account Journey that's my edge. |
What's crazy nowadays is a swarm of uneducated traders are buying options outright. |
Not to insure big stock positions. Let's call it what it is, gambling. |
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Now you know how I've won 87% of my trades in the current $2K SAJ balance. |
This edge in the market excellent to try and grow a $2,000 balance. |
It's exactly how I've grown this small $2k balance over *1,000% in just a few months. |
 | Results not typical. Trading is hard. Nothing is guaranteed. |
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A new $2k balance will start on March 1. |
Click here to get started. |
Apply coupon code: SAVE50 to lower the subscription 50% at checkout. |
The moment you join you'll unlock concise video lessons so you can get up to speed quickly. |
Check your email after joining. |
And like Lisa, you will probably see I'm serious when I say it's the ultimate options trading blueprint for ANY SIZE account. |
Jason |
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*I want to point out that I cannot speak for my members' performance, as results may not be typical and trading is HARD. And I cannot guarantee you will make money. But what I can guarantee is that I will work my BUTT OFF to teach you WHY I trade WHAT I trade. |
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