FAQ
This is completely confusing. Do you do any mentoring?
I do offer one-on-one mentoring on a case-by-case basis but its not my purpose or focus. My mentoring is very expensive and intense so its only for the those folks with a million dollars or more of investable assets who are serious about becoming world class traders. For 99.9% of the population I would recommend that you find a good option school to get your basic training and come join us in our forums discussion. Registration is free.
Why isn’t mentoring your focus?
I want to make my money trading and not from training other traders. I started this blog as a way for me to improve my trading and to hopefully meet other successful traders. Once someone gets the basic mechanics down they are only about 20% of the way. The real growth occurs with having an established, successful, and supportive trading group to keep you on task, exchange trades, and make adjustments. That’s the real key and that’s where I’m concentrating.
Why are you only making 3% a month but most of your trades are returning 20%+?I calculate my monthly return on the total profit or loss per month (expiration to expiration) divided my total portfolio. So even though I may make 20% on the last five trades I’m likely sitting with a lot of cash that’s not being used. Spreading out the profits on those five trades which maybe only consumed 10% of my capital over the total 100% of my capital reduces my monthly return. Does that make sense?
Also, most of the time people don’t believe my returns anyway so anything I can do to be conservative and reduce my stated returns is good for me.
What would you say is the number key to your success?
The key to my results are the fellow traders in our trading group. I’m very fortunate to have attracted some of the best traders in the country to Insane Money and we are pulling together to provide support, coaching, and encouragement to each other. I couldn’t ask for a better group of peers.
Why aren’t you trading full time?
I wanted to learn to trade and have the option of keeping my day job, going to school, or being on travel. I didn’t want to exchange one full-time job for another full-time job.
What do you mean when you say a stock is “Bullish” or “Bearish”?
When a stock is “bullish” we mean that we believe the stock is likely to go up. When a stock is “bearish” we mean that we believe the stock is likely to go down. An easy way to remember this is to remember that when a bull attacks, he gores you with his horns and throws you up. When a bear attacks he claws from top down.
What is an option? How is that different than a stock?
An option is a contract to buy or sell a stock at a specific price during a specific time. Options are divided into calls and puts and you can either buy or sell each. Let’s say you buy a March 2008 call at 500 on Google for $30. You have bought the right to purchase 100 shares of Google at $500 a share anytime before March expiration (expiration is the third Friday of each month). If the price of Google is $600 a share you’ve just made $70 per share (current stock price of 600 - strike price of your call 500 - the money you spent to buy the call 30 = 70). If the price of Google is $400 a share you have only lost the money you spent to buy the call. Does that make sense?
What’s the difference between a Call and a Put?
A call gives the owner the right but not the obligation to buy the stock at a specific price in the future. A put gives owner the right but not the obligation to sell the stock at a specific price in the future. If you think a stock is going up you might want to buy a call. If you think a stock is going down you might want to buy a put.
A spread trade is a trade where you have sold one option and purchased another option on the same stock. This is usually done for a credit and to hedge risk. This is a more advanced but (at least in my opinion) safer way to trade the underlying stock than owning the stock or options outright.
What do you mean when you say “Option Greeks”?
Option Greeks refer to the “gears” of options. These are the basic underlying forces at play that determine option pricing and movement. You will hear me talk about delta, theta, gamma, and vega. I think its critical for an option trader to at least understand each of these components and how they may affect their trades. A good book to read (albeit a bit advanced) is McMillian’s Options as a Strategic Investment.
How are you able to beat the professionals on WallStreet?
In several ways. One, we care more about our money and retirement than anyone else. Two, we are looking for good returns and not just to keep our job. Three, we trade in a cooperative environment where we believe the sum of parts is greater than the whole. Four, as retail traders our orders get filled before the big boys. Five, if we don’t like the market we can sit in cash. Most mutual funds are limited to no more than 10% in cash. Six, we are more liquid being able to adjust anytime the market is open. Seven, we can make money if the market goes up, down, or sideways. Most mutual funds only make money in bullish market. Eight, we don’t have the overhead, advertising, and administration fees pushing down our returns.
Mojo
