Stock Options

If you have an interest in investing and trading then you may well have heard of options.

They are often mentioned in hushed tones by so-called experts who warn beginners to stay away from them as being dangerous and unsuitable for regular investors like you and me.

Far better to stick to the funds and advice they are often selling, than dare to educate yourself in an asset class that they probably don’t even understand themselves. Utter hogwash.

They certainly don’t tell you — that if used correctly — stock options are actually less risky than buying the share outright. Think about that.

I have come across this bias and fear many times in my career as an investment educator, and it is usually rooted in a view that an average Joe could not possibly understand options and therefore needs ‘protecting’ from them.

However, what I have actually found when tutoring regular folks about options is quite the opposite. They rapidly understand the concepts involved and — with some expert options training and support — are soon creating investments like seasoned pros with a full understanding of the potential risks and rewards involved.

So, what is a stock option when it’s at home?

Selling Stock Options

Options are derivatives. They have been around for decades now and are very well understood by the financial elite and indeed many savvy retail investors. They are traded on exchanges just like shares and are based on an underlying asset such as a stock, index, or future. In other words, their value is derived from the underlying asset. Hence, the term ‘derivative’.

If you buy an option you have the opportunity to buy or sell the underlying asset at a given price within a given time frame. This can be a great way to make a leveraged investment in a stock that you believe is going to go up or down.

However, many investors — including FIRE Revolution aficionados — generally prefer to sell stock options. The reason is that you are paid a premium for selling the option in return for taking on the associated obligation to buy or sell shares at the agreed strike price for a limited period of time.

So, if you predetermine the price that you are happy to buy or sell the shares at, then selling the option obligates you to stick to that commitment if the buyer chooses to exercise their right. In effect, you are setting up a limit order to sell or buy shares at a fixed price BUT you are being paid a premium to do so. And that premium is yours to keep whatever happens.

You can often sell multiple consecutive options on a particular stock without being assigned and that allows you to build up quite a substantial pot of premium. That cash can then be withdrawn as income, reinvested, or even used to offset any drop in the share price. Hence, the fact that selling stock options is actually safer than simply buying shares outright.

Options are available on a number of underlying assets but here at FIRE Revolution we focus on stock options and specifically on stocks that we are happy to own long-term. So, we select the stocks we like in the first place and then use an elegant stock option strategy to control our entry and exit from those shares whilst all the time generating a substantial dividend-like income stream.

If you’d like to learn more than please check out my description of Cash-Secured Puts and Covered Calls.

Options Training

Selling stock options has largely flown under the radar in the UK for regular investors. That’s a real shame as I believe it’s such a great investment strategy for so many people. Indeed, in the US, there are many companies and resources available to train retail investors how to invest this way.

Alas, in the UK, we are not so lucky. There are very few companies offering options training but over the last few years, FIRE Revolution has rapidly become the ‘go to’ programme if you’d like to become an expert in this style of investing. Indeed, over 150 people have successfully completed the programme to date.

We offer an extensive 13-week programme delivered online and fully supported by Greg via a dedicated forum. That same forum is also home to a sizeable group of FIRE Revolution graduates who are always happy to help newcomers and regularly discuss the positions they are entering, the wider market, and any issues they are having.

Along with optional fortnightly Zoom meetings, the community forum is the real strength behind FIRE Revolution. As we often reiterate, there are no recommendations, but the power of collaboration means that you never feel alone.

Why Pay for Options Training?

Now of course you can find out plenty about stock options on the web for free. So, why pay for options training?

Well, you could also find out how to fly an aeroplane on the web for free, but I think you’d agree that it would be far wiser to engage an expert instructor and join a club of like-minded individuals. Not only will you get all the theory but also a ton of practical help and experience about how to operate in the real world. And that’s invaluable.

Our training programme covers investigating prospective stocks from a fundamental and technical viewpoint, analysing the most suitable puts and calls to sell, selecting a suitable broker and placing trades, managing your positions, and deciding what to do if something goes wrong. We also include 25+ advanced modules to take your options trading to the next level if you so desire.

That’s a lot of material, real world experience, and support to offer. It might cost you more upfront but in the long-term I think you’ll be very pleased with the results.