Buying Options the "Right Way" or Lose
If you want to learn how to make money with Stock Options, then you should pay attention to how the elite Hedge Funds, the Top 1%, use options to profit.
The only thing that separates you from the Top 1% when trading options are the answers to 2 options questions. That's an incredible statement by itself. Even more incredible is that if you trade options without knowing the answers, then you start down a path toward mathematically-guaranteed losses.
But what's shocking is this...
The Options industry doesn't give you the answers. Even the professionals have trouble with these 2 questions. (I show actual proof here.)
This article explains the unfortunate predicament facing the average investor and finally offers you a much easier path to options profits.
Using Options the "Right Way"
On Wall Street, when you hear the word “options,” you’re probably reminded of the Black-Scholes Formula, "the Greeks," or "Volatility."
And why not?
The industry has spent more than a billion dollars over the last 40 years pushing these concepts to the average investor. The Options Industry Council (OIC), an industry sponsored group, was established to support those efforts with free education.
On the OIC homepage, it states that they’re:
"dedicated to increasing awareness, knowledge and responsible (emphasis added) use of options by individual investors, financial advisors and institutional managers.”
Have they increased the awareness of options?
Absolutely. Options usage has grown tremendously over the last 25 years. When I started on Wall Street in 1995, there were 150 million options contracts traded. In 2018, the industry reached more than 5 Billion contracts. Investors got the point: Options are an important product. Ignoring them puts any investor at a disadvantage.
Has the OIC increased the investor base knowledge?
The OIC offers hundreds, if not thousands, of pages of educational content and hours of instructional videos. They’ve definitely raised the knowledge bar over the last two decades.
Are they teaching the masses how to use options in a “responsible” way?
This is where it gets a bit tricky.
“Responsible” implies that the average investor knows how to use options in a way that provides them a benefit, or at the very least, does not create a situation where they are putting themselves at a disadvantage.
Here’s the problem. In a nutshell, Options are a probability game.
And while the industry has shown the masses how to play the game, they failed to show them how to play the game the right way – the way that shifts the odds in their favor.
This is an important distinction.
Look, pressing the buttons to buy or sell options is easy. The challenge becomes knowing what you’re doing to express your view and extract value. That is a learned process.
Who knows this process?
Only the Top 1% of investors. Unfortunately, that means 99% of investors are confused. And confusion leads to guaranteed losses.
Let me give you a simple example.
Winning at Probability Games
Would you play a game of Heads or Tails where you lose $2 and win $1?
Of course not!
Play this game over time and you are guaranteedto lose money. No confusion there. But what if we played another game…
A game where you lose $2.25 and win only 35% of the time. Would you play that game?
Now, you’re probably asking yourself: How much $ do I win if I'm right?
The better question is: How much $ do you need to expect to win in order to play?
Some of you may know the answer (given at the end of the article). But, at the very least, I got you thinking. And this is how you should be thinking about options. THIS is how the Top 1% of investors think about options and gain their edge. Unfortunately, this isn't how the available options education approaches your education.
Listen, the available options education is not wrong, it’s just misdirected. And for the average investor, it’s incomplete. That's why the average investor loses.
The education IS the problem!
The 2 Options Questions
Over the last few years, I’ve made it my mission to fill in the blanks and connect the dots. I’ve simplified options by identifying the two options questions that separate you from the Top 1% of investors, more specifically, the Top Hedge Fund Managers in the world. Names like Steve Cohen, Carl Icahn, Paul Singer, and Bill Ackman, just to name a few.
You see, these Top Hedge Fund Managers use options in a very specific way and shift the odds in their favor by knowing the answers to these 2 Options questions:
- When do I use options?
- Which Option do I choose?
While the first question seems easy, I assure you that it is not.
Not every trading idea warrants the use of options. In fact, the Top Hedge Fund Managers only use options with a small percentage of their trading ideas.
Knowing when to use options is their edge.
And once they decide to use options, the Top Hedge Fund Managers know how to answer the second question - Which Option do I choose? This is the single toughest question in options. Unfortunately, you won’t find a simple answer that gives you any confidence.
So, if you’re interested in learning how the best in the world tackle those 2 Options questions and shift the odds in their favor, then join me in free options trading tutorial where I’ve simplified the answers for everyone to understand.
Amazingly, I'll do it with without the complicated stuff. No Greeks. No Implied Volatility.
That's a promise!
P.S. A game where you lose $2.25 and win only 35% of the time? The answer is: You should play only if you can win more than $4.18. This answer is solved using a concept that's been around for almost 400 years. We call it Mathematical Edge.