4 Steps to Gain an Advantage with Options
The industry does a great job of getting investors to open up a brokerage account and then teaching them how to press the buttons to make an options trade. Unfortunately, that's where the confusion starts. No one ever explains exactly how you can gain an advantage with options.
In this lesson, you'll learn:
- What it take to be successful with options,
- Exactly where the Top 1% gain their advantage.
- 4 easy steps you can do to start shifting the odds back in your favor.
Requirements for Success with Options
All types of investments involve an investment process and a plan of action. Investing with options is no different. Unfortunately, there are millions of retail investors using options without:
- Fully understanding the product.
- An Investment Process.
- An Options Plan.
To be successful with options over the long-term, you'll need all three of the above. Within each of those 3 areas, you'll need to find an advantage.
For context, here's 4 areas where the Top 1% gain their advantage, or what the industry calls "Edge."
Edge #1: The Trade Idea
A large part of being successful in the stock market is your ability to be find or access good ideas. To put it simply, it won't matter how much you know about options if all you get is bad ideas.
When I ask the question:
“Where do the Top 1% of investors have an advantage?”
Most people give an answer describing how and where the best investors find their Ideas. And they would be right.
The Top 1% can better analyze their ideas because they have the more resources, capital, experience, and better access to information.
They use experts in fundamental analysis, technical analysis, and quantitative analysis, along with access to industry consultants. The Top 1% also acquire important and very expensive data that the average investor can't get access to.
All of this information helps them formulate the best possible risk-reward profile of a company and its stock price.
This is clearly their advantage (#1).
But that's just the start of it.
Edge #2: Stock vs. Options
After the Top 1% find and thoroughly analyze their idea, they have to decide how they will invest in the idea. Most beginners just assume that every idea is an Options idea.
This is a big mistake.
While the top investors can use several different ways to invest in an idea, the decision generally comes down to using stock vs. options, or both.
More specifically, they have to decide which choice offers them the best risk-reward opportunity.
Is the idea better suited as an options trade, or as a stock trade?
Understanding if and when they should use options is also their Edge (#2).
Edge #3: The Most Important Options Question
Once they decide that the idea is better suited for options, the Top 1% have to make another critical decision.
They have to choose the right Option they want to buy.
Choosing the right option is one of the most sought after answers in Options Trading. And I will tell you this... It's also the most important!
Knowing exactly how to choose the right options that maximize their returns while minimizing risk, gives the Top 1% an Edge. (#3)
Edge #4: A Plan
Finally, the fourth area where the Top 1% find edge is in their Trading Plan.
There are many facets to a Trading Plan (#4), some being:
- How much capital to invest in a position.
- Entering the trade.
- Exiting the trade.
- Risk Managing the Trade.
In my online Online Options Trading Course 3 Steps to Profit, I walk you through the nuances of an Options trading Plan.
How You Can Gain an Advantage with Options
Those are the 4 areas of the Investment Process where the best in the world gain their advantage. It’s all done for the pursuit of better profits with controlled risk management.
Here are 4 easy steps for you to gain an advantage and start trading like the Top 1%:
Step 1: Get Educated.
Options is not just about Calls and Puts. There is a lot more to understand that can help you make key decisions while trading. And I'm not talking about complicated concepts.
Quality education makes the learning experience practical. I built the Best Options Trading Course for you to do just that.
3 Steps to Profit contains brand new material with new concepts that are easy to understand. More importantly, it enhances the learning process with examples and tools you can use to gain experience.
Because of that, 3 Steps to Profit teaches you faster, helps you retain more, and gives you the advantage you need to succeed with options... Just like the Top 1%!
Step 2: Unusual Options Activity.
After completing this beginner section, I've created a starting point for Unusual Options Activity in the "Everyone Else" section.
You'll learn why it's powerful if used correctly and how you can "steal" some of the edge gained by the Top 1%. Check out this sneak peek:
Step 3: New Options Chain
Start using my patented New Options Chain to make choosing the right option easier. It's free and it will immediately give you an advantage. You can learn more about in the OptionsGeek Tools section or by watching this quick video:
Step 4: Trade Ideas
Finding great Trade Ideas is a skill you will learn over time with OptionsGeek. More specifically, you'll learn where to find them, how to analyze them, what to look for, and how to trade them. Like most things, the devil is in the details.
Make sure you are signed up to our daily Options Trading Newsletter. You get 3 interesting trade ideas going on in the market each day.
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Now, that you know where and how you can gain an advantage with options, let's get back to an example.
I want to show you (exactly) what it means to maximize returns while minimizing risk. In the next lesson, we take a further look at that important decision outlined above - Stock vs. Options.