A Word from the Author: Hi everyone! I hope everyone’s having a great week. If you’re enjoying this blog, why not share the love? I enjoy learning and writing about these topics to make sure you’re doing great things with your money. As always, I’m not a financial advisor but I am a person who enjoys this topic!
Maybe stocks don’t always go up? Lately, the S&P 500 hasn’t seen the explosive growth that we’ve seen in the last year and the index is beginning to travel sideways. I speculate that we’re awaiting more economic data to see where the market is headed.
Taking a look at Vanguard’s VOO, you can see the S&P 500 beginning to even out as of April 2021 when looking at the yearly view.
My personal portfolio has been all over the place these past couple of months. Some days, I’m up big only to have lost the gains the next day. I haven’t been selling my securities because I don’t feel justified yet but I’m in a spot where I can (having invested over a year to avoid short-term taxes).
With stocks so incredibly mixed, my current play is going back into the trenches of options trading as I don’t see any mid-term value in investing at current prices.
What am I doing currently? Trading options!
Get Rich or Die Trying
Options are a tricky game that can leave many people penniless. Your option will expire and you’ll have lost your money in many cases. This was the case when I first tried options with spare money I was comfortable with losing.
Here are the basics:
An option is a contract giving the buyer the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date. - Investopedia
If that above definition didn’t make sense, you’re putting a bet essentially on whether the stock will increase/decrease to a certain price within a certain timeframe. Sounds complicated?
Imagine I place a bet on the Houston Astros to win the World Series this year. Depending on how far out I place the bet, how the Astros are currently playing, and other variables, you’ll quote me on what I should pay. As time and expectations shift, my quote will fluctuate until the end of the game (time expiration).
There are a variety of bets but the most basic are:
“Calls” - I bet the stock will go up
“Puts” - I bet the stock will go down
Since these feels like casino plays, investors can have sounder strategies like covered options, debit spreads, and credit spreads. I’m exploring covered options currently and will need 100 shares of the underlying stock to partake safely.
There are these variables called the Greeks when buying stock options and you should keep an eye out as they’ll influence your play. I won’t go into too much detail here but please use this guide as a reference.
Takeaway
All in all, trading options is a risky game so please don’t gamble your life savings away. I’ll admit I got lucky when I was first trading options and thought I was the Wolf of Wall Street but please do your research. This isn’t a note to discourage your journey but to make sure you do your due diligence when making these plays. Trading options gave me the opportunity to receive a substantial amount of income and use that to generate more income. If I didn’t get lucky, I would have significantly less than I do today.
Have a great week
-Jordan