Revised November 18, 2021
Before I get into the nuts and bolts of option trading, I want to give you a little history of how I started to Trade Options.
My life journey as an investor may sound much like your own. This would not surprise me at all.
Where did I start
The very first time I invested in any security was in 1980.
A friend who had worked for a brokerage firm in New York was visiting us in San Francisco.
One day he invited me to go with him to visit the Pacific Stock Exchange. I had never visited an exchange before. I was very excited to get the tour from someone in the business. A few days later I decided to open an account with his firm and was ready to jump in and trade.
At the time I knew nothing about stock trading. And I was young, impulsive and ready to take on the financial world by storm. He suggested I start with something small.
By mid afternoon, I was the proud owner of 100 shares of Southern Pacific Petroleum, a penny stock trading at the time on the american stock exchange. I bought 100 shares for a whopping sum of $45.00. The stock went up to $1.25 in a very short time and I decided to hold on. A week later it was trading for $.20. I was certain it would go back up I held on again. Before too long the stock was about $.05 and was very hard to sell.
I kept the stock certificate for many years as a reminder of my introduction into the world of making and losing money in trading.
During those early years I never considered trading as something I would do for a living. I knew I needed to save for my future, but my idea of investing for that eventuality went as far as putting money into a savings account at the local bank and let it earn interest.
Meeting a Financial Adviser
As the years passed, my savings grew and I was introduced to a Financial Adviser, who took me under her wing and set me on the path to financial independence.
Or so I thought.
Her job was really an asset gatherer, which, as I learned many years later was mainly the job of most financial advisers. As time passed and I began to scrutinize my monthly statements, I realized that the real gains in the account came from my monthly contributions and not from capital gains, which was my goal initially. I must admit that when I came to retire, the amount available was sizable even though it had been hobbling along in safe investments. I guess one can say, “All is well that ends well”.
Who other than yourself really has your best interests at heart
The point of telling you all if this is to point out that my experience was probably much like your own. You may have dabbled in a few stocks, then found an adviser, who is a good friend of a good. They seem trustworthy. And you go all in on their advice, is fine as far as it goes. You see, we are all conditioned to believe that only someone else can manage owe money for us. The entire broker and investment community is selling us that idea all the time. But the reality is that you can lean to invest for yourself. It isn’t that difficult. It just take a little direction and knowledge and , of course, work.
Where am I today
When I retired I knew i wanted to keep on managing my own account. I enjoyed the process of researching opportunities and making my own decision about where to invest my assets. So as not to take undue risk, I left a large percentage of the funds in the SEP/IRA and only traded what I knew I felt comfortable losing. It was a very small account at first and I began to chant the tastytrade mantra, “Trade small, trade often”. More about tastytrade later.
Well the more I traded the better I got. Naturally, there were losses, but the losses were smaller than the winners. And the win rate steadily improved. The more I traded the more I wanted to know about different and more varied products. Options had always been on my radar screen and I figured, if I could find a resource that comprehensively covered the field of Options trading, I should dive in.That resource came in the form of a book by Lawrence G. McMillan – Options as a Strategic Investment”.
A strategic investment. That was exactly what I needed. I didn’t just want to make trades. I wanted to design a strategy that had purpose. I wanted to be able to set and accomplish some goals with my trading and not feel that I was throwing darts at the wall and hoping they would stick. I felt I was now going in the right direction. I had acquired a working knowledge of Options and I was having success. But this was huge. Not only would I be better able to apply what I knew, but, now I had a blueprint for building a much better structure for my trading.
But this was only the beginning. As I walked through the door, A whole new world opened up before me. One idea led to the next. One resource led to two and three more.Soon I had enough confidence to spread my wings and fly.