9 Lesson Option Course
Lesson 1 - Getting Rich By
What the heck is an option and why do we want
to sell these things?
I like to think of an option as a coupon. Let's
say you are thinking of buying a watermelon in
the not too distant future. And you think that
the price of watermelons is going to increase.
So you want to lock in today's price.
In this case, I agree to sell you a coupon (option)
to buy a watermelon from me for $1.00 which is
today's price. But I will charge you 10 cents
for this coupon and it expires in 90 days.
Let's say 89 days go by. Your coupon expires
tomorrow. If the price of watermelons is more
than $1.00 and you still want your watermelon
you should use the coupon. If the price of watermelons
is below $1, you should forget the coupon and
just buy a watermelon at the market price. This
will allow the coupon to expire worthless and
I would make a nice profit of 10 cents.
But what if you didn't want the watermelon but
the price went up to $2. You could either buy
the watermelon yourself using the coupon and sell
it to someone else for $2, making you a nice 90
cents profit. (Remember you paid 10 cents for
the coupon.) Or you can sell the coupon to someone
else, for $1, also making you 90 cents. Either
way you win, and I lose.
It's the same with stocks. Thousands of stocks,
indexes, and ETFs have options available to trade.
Options are gaining in popularity because of the
immense leverage. In our example, all you have
to invest was 10 cents to control $1 worth of
Let's look at our example above again. You buy
an option for 10 cents, and you later can sell
that option for $1 making you 90 cents. That's
a 900% return on your money. If instead you had
bought a watermelon at $1 and sold it later at
$2, you would have made $1, or 100% return. 100%
is great, but not compared to 900%.
What about me, the option seller?
In this scenario I would have to sell you a watermelon
at $1. If I had one, you could have it. But if
I did not have one, I would have to buy one in
the market at $2 and sell it to you for $1.
Let's look at the other side. What if prices
went down? Imagine prices went down to 50 cents.
Your option that you bought for 10 cents would
be worthless and you would have a loss of 10 cents.
But what if instead, you had bought the watermelon
at $1? You would have a 50 cent loss!
As the option seller, I keep the entire 10 cents
you paid me.
As you can see, options are cheaper to invest
in, they limit your loss, and they also provide
leverage for higher percentage of profits.
Sounds like the perfect investment right? Let's
go out and buy a bunch of these suckers.
In our example prices went way up to $2 and way
down to 50 cents. But what if prices didn't move
much at all? What if the price stayed at $1? Then
your option would expire and you would lose your
That would be the perfect scenario for the option
seller. And guess what? This is what happens most
of the time. In the news, you hear about the wild
fluctuations of the markets. You hear about the
stock that went from $10 to $100 or the ones that
went the other way from $100 to $0. But these
are the few exceptions amongst the thousands of
stocks that trade everyday. The majority of stocks
move very little at all. Sure they move up, but
then they also move down. Overall the move is
measured in small percentages. If a stock moves
10% in a year it's a big deal.
Options need big moves to make money. That's
why according to industry sources, 80% of all
options expire worthless!
In the following lessons, we will cover
Lesson 2 - How options are a decaying asset.
As an option gets closer to expiration, it losses
value. So by selling options, everyday that goes
by, makes you money. I call it Selling Time.
Lesson 3 - Making money if the stock goes up,
down or sideways. If we sell a call option (I'll
explain what a call option is in this lesson),
we make money if the stock goes down or sideways,
but we can also position our trade to make money
if the stock goes up only a little. Making money
three ways is much better than buying a stock
and praying it goes up.
Lesson 4- Your Own Casino. Casinos have the odds
stacked in their favor. Some people get lucky
and win more than they lose, but casinos know
that over the long term they will make money.
That's their edge. Our edge is the same. As option
sellers we can stack the odds in our favor. How
does 80% probability of success sound to you?
I'll show you how.
Lesson 5 - Not being glued to the screen all
day. Option selling allows you to have a life,
to get out during the day and not have to watch
my monitor all day. You can put on my trades and
spend about 15 minutes monitoring them a day.
If you have a job or would like to have a life,
my system of option selling is perfect for you.
Lesson 6 - No guesswork. You don't need to guess
which way a stock will move, or use fancy technical
or fundamental analysis. Don't need to know how
to read the MACD or Stochastic or other indicators.
I use simple statistics to figure my probabilities
and can manage my positions using concrete math,
not voodoo or guesswork.
Lesson 7 - Limiting your risk. In this lesson
I will show you how to limit the risk on every
option trade you do. I hate losing money. So every
trade I out on has limited risk. I know what my
maximum loss can be on every trade, and if the
trade goes against me, I make adjustments to my
position to protect my profit or myself from the
maximum loss. Even with an 80% probability of
success, you will still have 2 out of 10 trades
go against you. I do not believe in putting on
a trade and not protecting it.
Lesson 8- Sure, steady, reliable income. In this
lesson I will give you examples of trades that
make 10% in a month. It's possible and there are
people, like me, doing it each and every month.
You can either leave your profit in the account
and let it grow or withdraw it to live on.
Lesson 9 - We couldn't do this a couple years
ago. Up until recently only market makers and
very large traders could do these trades. The
reason: commissions. As soon as three to four
years ago you would have to pay $30-$40 to buy
or sell a single option. Now you can to the same
trade for less than $1. Online trading and lower
commissions have allowed regular people like you
and me the opportunity to trade for a living.
Let's Go to