I wanted a job that was low maintenance with fewer hours and where I didn’t have to work with people. (Like many young and idealistic people, I used to always think I wanted to work with people, but I soon realized that there’s all kinds of people in the world, and every barrel has just enough bad apples to ruin the whole barrel. I just don’t want the stress.) So I decided on options trading. What I have found, however, is that in many ways, options trading is just as stressful as anything else I’ve ever done. It’s just a different kind of stress.
Options on Easy Mode
The way I trade options is what I call, options on easy mode. Basically, I outsource my research and trade on the recommendations I get from industry experts. It cost a lot up front, but the advice has been fairly reliable and I think in the long run it will make me money. But getting the advice of experts is one thing, taking it is another. I keep finding myself wanting to override the advice of my experts and cash out too soon. Occasionally I‘m right, which just makes my decision tree even more complicated.
But the worst part about this is that, although in theory this is a low maintenance job where I implement the advice and then walk away, I find myself staring at my trading screen for hours on end worrying about which way my investments are going from minute to minute. It’s excruciating and I’m afraid of what it will do to me in the long run. (Even as I write this, I keep switching back to my trading platform to see how my investments are doing).
The Need for Patience
I keep telling myself that what I really need is to be patient. I’m not day trading and most of my trades won’t resolve in a day, and what they do day-to-day doesn’t matter. I need to come to an understanding with myself that I can’t allow this job to replace the stress I experienced being a lawyer with equal stress of a different flavor. The whole point of this was to be involved, in that I want to understand the markets and my investments, but to also have more personal freedom and more time that could be my own. I can have that if I’m willing to let my experts, who I’ve paid good money for, do their jobs. But if I’m going to keep second guessing and micromanaging them, this is not going to work.
One Way to Keep Sane
One way I’m trying to keep sane is by maximizing my upside and limiting my downside. In my investments, I go for base hits, not home runs. I either keep the play small, say around $1000, or I do a higher dollar play, but put a 10 percent stop loss on it. So, for example, if I invest $5000 in an option, and that option declines in price by $500, the system will automatically sell the stock at that moment. This allows me unlimited upside, but keeps my downside risk minimal so that I don’t bankrupt myself with a bad play.
The only downside of this strategy is that it makes it harder to take advantage of opportunities. I aim to invest in options on stocks that I believe are about to go up sharply. But options, and especially options dependent on a sharp rise in the underlying stock, are by their very nature volatile. Like a rubber band, they can go pretty low before they snap back up (and sometimes they never do). A given play could well dip below 10 percent of my initial investment on any given day, and then snap back up to 60% over my initial investment. Under my rules, I then miss out on that opportunity.
But my strategy is predicated on the fact that even if I miss out on some opportunities, I will get into enough plays often enough to where I can earn a profit
Time Will Tell
And I think the hardest part is the time all of this takes. On the one hand, there is no quicker way to make a fortune if you know what you are doing. On the other hand, even minute rice still takes a minute, so while it may not take years, even if I’m successful that success will come over weeks and months, not hours and days. The hard part is that I really want to prove myself, both to myself and to my family. I want to show my wife and kids that I can be a good provider for them. Of course, I imagine my wife’s needs. T has all the faith in the world in me and tells me not to let setbacks get me down. As for the kids, I doubt they are paying attention.
So I guess it comes down to me. I have to prove to myself that I can go it alone. And the question is, when will I stop needing to prove that.
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