lystn

Hey everyone, Kirk here again and welcome back to the daily call. On today’s daily call, I want to talk about the downsides to trading options for income. I think it’s important just to talk about these openly about what you’re going to get into if you really want to open up a business in the options market. I really always use that analogy because I think that’s what you’re doing. I think you’re starting a business. No different than if you opened a restaurant or a shop or something. I mean, it’s a commitment and I tell people that often that you have to make that commitment to be successful in doing it. It can’t be just like a weekend hobby if you're really trying to generate income from it, if you’re trying to replace income from it. I think for me, the biggest downside… I overcome this through the Option Alpha community, but the biggest downside that I found initially was just that it’s a lonely business. I mean, it really is. You get into the options market and you become an investor, there’s so much going on and there’s so much you can read and so many things you can join and it becomes a lonely business because you're doing it totally by yourself. In most cases, options trading is something that’s way over a lot of people’s heads. It’s a very sophisticated high level type of thinker that you need to be, to be in the options market. Most people are comfortable in talking about stocks and talking generally about the markets, but then you start talking about options trading and it’s like “Woo!” Go right over the head. It becomes a lonely market to trade in and a lonely business to be in when you’re doing it by yourself and from home, especially if you don't have supportive family members or spouses, significant others, etcetera. But again, for me, I overcome it through the community. I know that a lot of people have found a community. It doesn’t have to be Option Alpha. It can be whatever you want. But just some sort of community aspect where you’re in a room with like-minded people talking about trading can obviously be helpful because I mean, look, by nature, we’re just creatures of a community and habit and we want to be around other people. It's just in our DNA. The other thing I can talk about, about the downside of options for income I think is the fact that it's definitely a grind sometimes and that income is sporadic. Now, this is something that most people just don’t understand when they first start and that is that income can be totally sporadic. You can have really good months and then you can have a string of just nothing, small wins, small gains, small losses, scratch trades. That can happen for a couple of months. I think it’s important that you understand that going into it because you don’t know the sequence of returns that you're going to get. A lot of times, people will email me and they’ll say, “Kirk, what do you expect to make next month?” I’ll email right back and say, “Well, where do you expect the market to go?” They’ll say, “I don’t know.” I’m like, “Well, neither do I.” I don’t know what I’m going to make next month or what I’m not going to make next month. I don’t know what the sequence of returns are going to be for my account. Am I going to have seven months? The first seven months out of the year are going to be profitable. The last three are going to be losing. Is it going to be the other way around? The first three are going to be losing and the last seven are going to be profitable. I don’t know. Nobody knows. Nobody can tell you honestly what the sequence of returns is going to be. And so, for options trading, that becomes a real downer. I mean, that’s a downside type of event where you just don't know or have no predictability in your income. I think what you have to do to overcome this is obviously not take distributions when you make money, but take a level steady income. What I've done before… Those of you who’ve been on webinars and coaching calls with me know that this is how I run this business. But I take a steady level salary from my options trading account every single month and I have been doing this for now nearly 10 years. That salary never changes. If I make money more than the salary, I’d still take the salary amount. If I make less, I’ll still take my salary. I take it out of the account because that’s what I’m going to live off of and I know that long-term, I can generate enough money to cover that salary. We have I think at the end of Track 3 inside of the website… It talks about distributions and what percentage of your account you should take. If you want more details on that, check that out. But I think the key here is that you take a level salary from the business and you don't just take the profits if you make money one month. I’ve seen a lot of traders, probably more than I can count that if they make $15,000, they’ll take $15,000. But the next month they might lose $5,000, well, they don’t put $5,000 back in. They just leave the account as is and then they lose $5,000 and then they lose $3,000 and then they lose $2,000 and they just have a bad string of trades. It’s not that they did wrong. It’s just how the markets and probabilities fell. And so, they put themselves in a really bad situation because they took way too much money out of the account and they don’t leave enough in there. I think the first thing is you have to understand that your sequence of returns is going to be very sporadic. You don't know what your sequence of return is going to be. I think that the other downside of trading options for a living is its lifestyle. I think that although most people would say that it's totally glamorous or that’s what you at least see online, I’ll tell you here that I don’t want that lifestyle. l did this because I want to be with my kids, because I want not to be in the rat race. I mean, I worked in New York, I worked on Wall Street. I worked for a big investment bank. I worked in DC for a big commercial research firm and investment bank as well. I did all that. I worked in hustle and bustle and that’s personally just not where I want to be. And so, for us, we made the decision that we wanted to move back to Pennsylvania where my wife's family is, now my family is and all my in laws and just kind of like slow down our lifestyle, so that options trading could facilitate that. That's just a decision that you have to make. I’m not saying that you have to do that, but I think you just have to look at what lifestyle you want. I think try to make options trading fit around that. In most cases, if you can downsize your expenses or your monthly cost, you have much more potential to trade options for income. I had talked to people often that I do coaching with or either… Like just recently, a guy was living in San Francisco and his monthly rent was like $10,000 and I’m thinking to myself like – I’ve got a beautiful nice size house, like just three-bedroom, old. I think our house was built like in the 1920s. It’s an old house, but it’s been renovated, etcetera. But we bought this thing for like $150,000 and my payment on this thing is like practically nothing and then he’s paying $10,000 a month. That really limits your capability to trade options, to generate more money in your account, to leave more money in your account that doesn’t go to expenses. I don’t know. I think it’s just something to think about obviously as you keep going forward. One more downside to options trading and then I’ll jump off here. I know I'm just talking just randomly about this stuff, but I think it’s important because I was thinking about it this morning as I woke up. But I think another downside to trading options is obviously, you miss out in some cases, on big moves in markets. I’m thinking about the bitcoin phenomenon right now and what’s going on there. I think eventually, that market might crash or just see a lot of volatility happen in the future, but a lot of people have made a lot of money in it and good for them. It is what it is and it’s just not my game. But even like the stock market itself and particular runs and securities, when you start committing to options trading, you have to understand that your commitment to options trading means that you will generate more consistent money, but you won't have the spikes and drops as everyone else. Now, everyone loves to talk about all the spikes that happens, all the huge run-ups, but you don’t really hear about the huge crashes, the huge failures in the media and the news and social media. People never post about that, but it happens. In all these other markets, you usually see a huge run-up in price or value, people either make a lot of money and then they lose it or they lose a lot of money and try to make it back. It’s just a huge ebb and flow and I just don't personally want to be involved in that. I'm fascinated by it, I think it’s interesting and I love following it, but as a regular course of business, I'm okay understanding that I might give up some of that early upside potential maybe this year for the fact that I won’t lose as much if the market crashes next year. I'm okay with that type of trade-off. And so, I think understanding that that's what you commit yourself to is really important because it helps you psychologically just understand where you’re at and not get sucked down the rabbit hole of all these different investing or internet or market phenomenon’s that’s are happening, the market trends, just like these shiny objects that people end up chasing all over the place. Hopefully this helps out. If you have any comments or questions, I’d love to know. Hit me up on Facebook or on Twitter, also on Instagram. Just let me know. Share your thoughts on what you think about today’s show. Until next time, happy trading!