Do you want to learn about stock options but don’t know where to start? Are you worried that it will be too complicated and overwhelming? Don’t worry – we have the perfect solution for you!
In this video, we discuss:
- What are the benefits of trading stock options?
- How do you get started trading stock options?
- What are the common misconceptions surrounding stock options?
- The 5 critical mistakes that option traders make.
- How do we beat the S&P 500?
- The 5 best stock option strategies.
- S&P 500 trend lines
- Multiple methods to confirm trades
- The 2 stages of becoming a successful options trader
- The Stock Option Coaching Program – Does an Options Coach make sense?
Real quick guys, please hit the like and subscribe buttons below as well as comment and let me know what you think about this video. Also, check out the “Complete Guide To Stock Options – Free Training for Beginners! (Everything You Need To Know)”. I’ll put a link down below. It covers everything you need to know about stock options and provides the tools needed to consistently beat the S&P.
If you are interested in learning about the coaching program, please shoot me an email at darren@darrensteves.com and we can book a FREE 15-minute video call. We can talk about your goals and if you may be a good fit for the options coaching program.
So let’s get started!
What are the benefits of trading stock options?
Imagine being your own boss and waking up to trade the market in the morning, putting a few trades on, and then coming back before the market close and making any adjustments necessary for the close. All the while making money consistently and having the freedom to spend time with your family and travel and just do the things that you want to do!
Well, this can be you! I have an engineering background and have been working in technical sales for other companies for most of my life. I’ve always wanted a side business that I could do as a hobby. Something that I enjoyed doing and could make some money while doing it. Maybe even further down the road be able to sustain myself and my family financially into the future.
Well, I’m doing it now and you can too! Trading options and making money doing the thing I love. I also have time to make a few videos to show others how to do it as well!
Really what it has done is lift a load off. It has given me the time and money to spend doing the things that I enjoy. I now know I’ll be financially good and will be able to create and have a solid income. I have the skills that I have attained while trading options. So I don’t need to rely on a company or someone else.
How do you get started trading stock options?
For me, I was always interested in the stock market and finances. So, I started buying mutual funds and stocks. I invested in a 401K with the company that I worked for from a young age. Maxing out my 401K was always my goal. The money is passively invested so I don’t touch it and let Fidelity handle it conservatively through a well-diversified safe investment strategy.
Guys, let’s be clear, and please don’t get me wrong! I am not saying to stop investing in your 401K or retirement accounts. Keep doing that and do it passively and/or even let someone else manage it conservatively. That is great! What I am talking about here, is setting up a separate options trading account with a small percentage of your money. It doesn’t take a lot to start. Just a couple thousand dollars or so to put on several trades.
I look at this money and account as a separate business in itself.
Okay, then I started learning a little about stock options. I started watching Tastytrade.com with free daily options training videos and I was hooked!
I started trading options and realized quickly that there was an edge that could be utilized to consistently make gains. All while doing it with less risk than just passively investing in the stock market long by buying stocks. The average gains through passive investing in the market were around 10% per year. However, I slowly started to see that I could earn 20, 30, or 40% annually, no problem! This is exactly what I was looking for! A side business that I enjoyed and could earn some extra money!
But wait! Not so fast! There was a bit of a learning curve and I learned some lessons along the way that I learned the hard way. The 2008 stock market crash got me. I lost quite a bit by going too big and trading naked futures options.
That is okay though! I’m grateful that I didn’t give up and pushed through and continued to rebuild my options account. I think it helped to give me an appreciation for the market and the power of the market. I was determined to not let that ever happen again. It showed me that you can lose money and make a lot of money as well!
Once I learned the skills and had some experience under my belt, I was able to consistently outperform the market.
What are the common misconceptions surrounding stock options?
When people hear the term “stock options” they right away think of gambling and losing all their money!
This couldn’t be further from the truth! When used correctly, options increase profits and decrease risks. They allow you to use less capital and make money on both sides of the market whether it is going up or down.
Basically, you just follow the rules and print money. It just takes a little time and practice to learn how to utilize the strategies correctly.
The 5 critical mistakes that option traders make.
Many traders do not trade liquid underlyings. We want to trade stocks with 2-3 cent wide strikes. We do not want to trade stocks with a dollar difference between the bid and the ask price. This means we are giving that dollar up as soon as we are filled and put on the trade, so we are almost guaranteed to lose.
Traders don’t understand how options mathematics and how they work. As a result, they make foolish decisions that cost them money. Instead of picking the strike prices and strategies that provide a high-POP probability of profit, they pick low-pop strategies.
Traders don’t use the correct strategies and allocations for the current market. Whether the market is trending down or up we can make money with options. However, with the market at all time highs we don’t want to be all long the market hoping that it just continues to go up. We want to have some short positions on as well and money on the sidelines ready for when a drop does occur.
Another mistake traders make is not having a plan. A trading plan is essential for success. Without a plan, it’s easy to make impulsive decisions that can cost you money. You want to know both the management and exit strategies when you put on the trade.
Another common mistake is going too big. If you don’t manage your risk properly, you can lose your investment. You need to be very careful with naked options and futures especially. We manage risks with stop losses or wings on high-priced options and staying small and not using too much Buying Power.
How do we beat the S&P 500?
We do it through active investing! Passive investing matches the market at the 7-10% per year average. Some years higher, some years lower but on average over time.
We shoot for 20, 30, 40, or even 50%. It will be different every year. But if we follow our rules, we will consistently outperform the S&P 500.
We use different option strategies for different market conditions. We look at where the market is versus the S&P. From there, we determine how much we are trading and which strategies we are using more than others.
The 5 best stock option strategies.
o Covered Call Options Strategy
o LEAPS Option Strategy
o Iron Condor Option Strategy
o Strangle Option Strategy
o Vertical Spread Options Strategy
We cover all of these strategies in the “Complete Guide To Stock Options – Free Training for Beginners! (Everything You Need To Know)”.
S&P 500 trend lines
Depending on how far above or below the resistance and support trend lines. We use these to help understand how much to invest to be in the market and which strategies to utilize more than others. This allows us to be profitable even when the market is stagnant or even moving down.
Multiple methods to confirm trades
We use several different methods to understand which strategies to use and which stocks or ETFs offer the best opportunities.
options math
technical analysis
fundamental analysis
conference calls & earnings reports
Even news
The 2 stages of becoming a successful options trader
The 2 stages of becoming a successful trader are preparation and execution. The preparation is all the things that I cover in the “Complete Guide To Stock Options – Free Training for Beginners! (Everything You Need To Know)”.
It’s the options math and learning the individual trade strategies. It’s knowing how to use technical and fundamental analysis, conference calls, earnings reports, and even news to understand which strategies to use and where there are opportunities.
The Execution is putting on the options trades. It’s utilizing the correct strategy for the current market. It’s evaluating and knowing the right stocks and managing the trades once they are placed. As well as knowing when to close them or roll out to the next month. This is where a coaching program can be a huge benefit and shorten the learning curve.
The Stock Option Coaching Program – Does an Options Coach make sense?
I know it seems like a lot of information. However, it really isn’t that difficult. It doesn’t happen overnight, and you don’t become a master of all the strategies in a month or two. If you are considering investing in options, and making some extra money then you should consider having a coach to start while you are learning.
If you are interested in learning about the coaching program, please shoot me an email at darren@darrensteves.com and we can book a 15-minute video call. We can talk about your goals and if you may be a good fit for the options coaching program.
I have helped students that knew nothing about options set up an account from scratch and begin trading. We go through some initial trades and I’m there to answer any questions that you may have.
You can also watch videos and read books and learn it on your own. However, I’ve got to say that it is beneficial to be able to learn from someone that has already done it and traded options successfully for many years. Whether it be myself or someone else, I highly recommend getting a coach in the beginning if you are serious about trading options and growing an options account.
It will save you time and probably a lot of money as it will likely prevent you from putting on some questionable trades. It will help you with making trades with a high probability of profit.
The people I work with make all the trades themselves. I just oversea, answer questions, and offer my opinion based on experience. I’m also happy to share exactly what I am doing in my options account as well. So, it’s a collaborative process where you learn much more quickly.
So please reach out to me through my email at darren@darrensteves.com and we can book a 15-minute call. I look forward to meeting you and helping with your trading!
Alright guys, I appreciate you watching. Make it a great day and happy trading!