lystn

Hey everyone, this is Kirk here again at optionalpha.com and in today's daily call, we are going to be talking about the differences between traders and investors and really, just trying to figure out what is the difference because the term gets used interchangeably. I know that I mistakenly use the term interchangeably. It’s just very easy to say you’re an investor or you’re a trader. People think it’s the same thing. But there is a difference or I think there’s a difference in how I think about investing versus trading or how I think about this in the context of options trading versus other investing that I do. In my opinion, I think a trader is someone who exploits market pricing or market variable differences. They’re always looking to turn or roll positions over at an increasing pace, that basically, it’s a numbers game, it’s a quantity game, that you're taking advantage of some pricing differential in the market. In the case of option selling, we’re taking advantage of the implied volatility premium that's present in the market where we can sell options on average long-term and capture the premium because implied volatility is so high it over-expects the market to make huge moves and it really doesn't long-term. That's what I think about when I think about a trader. You could say that that's very similar to someone who’s a car dealer for example, like a used car dealership. They buy a car from somebody for a low price because they need cash. They have the ability to then sit and wait on the position. That’s basically what we do in options trading. We wait on the position. We let the car sit on our lot for a little bit until somebody is willing to come over and purchase that car for a higher price. It’s that same concept as what people do in the car business. I consider a car dealer or a used car dealer to be more of a trader. Investors on the other hand I think are definitely a lot more emotional and hope-based, but they are also fundamental-based. They’re long-term cash flow type people where if they’re an investor, they’re going to be an investor because they believe in a huge change over the course of a long period of time. Now, some people get into trading and they’re really investors and so, they don’t understand the mechanics or the concepts. Hence, why we have Option Alpha. But I think investors have a more long-term outlook on something and believe in something a little bit longer and are willing to actually hold through the ups and downs for the long-term gains which is something that they should do on the trading side. In my case, I'm an investor in things like real estate, technology software. Everything that we do here at Option Alpha, I consider this as a long-term play. We’ve been doing this over 10 years now and that's why I’ve been doing it for so long because I feel like there’s a long-term benefit to doing this. I have my emotions wrapped up in this for sure. I have people that I like wrapped up in this. It’s a long-term play for me. I can go through the ups and downs of people signing up and people cancelling and people saying everything is great and then they say everything is bad. I can go through that because I have the long-term vision in my mind. Same thing with real estate. In real estate, because we start investing in real estate and my wife and I have been investing in real estate for a long time, that’s more of a long-term thing for me. I know that real estate is going to be a substantial part of my long-term portfolio and wealth. And so, I’m okay starting to put a little bit of money into that now and letting it snowball by itself. But I’m not necessarily trying to flip every house that we find and try to exploit some pricing differential. Hopefully that helps out. Hopefully again, it just brings a little bit more context to the talk and conversation around trading versus investing. I don't think that necessarily, you can do both in the options market. I think that you either have to choose a side. You have to be an investor in the options market, the long-term leaps, risk reduction strategies, covered calls, etcetera or you got to be more of the trader side. I really think you have to choose which side you’re on and this maybe even a good topic to talk about. Let me know if you think you’re a trader or an investor. Hit us up on Twitter, Facebook, etcetera and share. I’d love to know what you guys think. As always, hopefully you guys enjoy these shows. Until next time, happy trading!