How Options Trading Led this Engineer to Financial Independence in His 30s

[@TwoSidesOfFI]

What questions do you have about options? Let us know

[@MinnesotaCabin6]

We are beginner investors (our net worth is less than a million), and do not understand if options are within our capabilities. We manage our 401k and Deferred Comp accounts, but most of our retirement investment money is with an investment firm. We like this channel because Jason and Eric are such great personalities; some of the topics are over our heads!

[@shawnleary]

Failing at options in 2013 got me into the honey badger of money, thank you options! :)

[@susans6951]

This was a great subject!! I'm retired and do some options trading too, but only inside my retirement portfolio so that I don't have to worry about tax consequences from individual trades. Using only a portion of the portfolio, I sell options very much part time and only for fun. I find it pretty exciting but It's super important to have a well thought-out strategy. I only trade stocks I'd care to own, I look for the right opportunities that fit my strategy, I don't get greedy, and I don't chase premiums, thereby avoiding a whole host of problems. Been doing this now for about 4 years and it's amazing how much of a boost it gives to my overall portfolio returns!

[@TwoSidesOfFI]

Thanks for sharing! Sounds like you’ve found an approach that works well for you.

[@Maxime1131]

Very interesting. What kind of additional performance can you expect compared to simply owning the SP500 or VT ? Any examples you can share ? I always wondered if it was like 1-2% additional per year, or more like 5-10%

[@susans6951]

@@Maxime1131 That's a great question!! After crunching the numbers, I've averaged 1.7% annually of additional performance to the overall portfolio since trading options. I would also like to mention that there are many different ways to trade options and my particular method is not the same one that I believe Jason is trading. I found the program he had with Karsten Jeske quite interesting where they discussed it. I have not taken a deep dive on it, but I may do so in the future since I found it interesting. And by the way, if you think you might be interested in options trading, I just can't emphasize enough how really important it is to learn about it thoroughly (as Jason and David discussed) before doing any actual trading!! I use a type of "wheel" method for trading options. There are a number of ways to trade the wheel, and while this might not be right for everyone, this is what I do... FIRST, I only do this with PART of my retirement portfolio. SECOND, I do options trading with individual stocks, and I ONLY trade on companies that I would feel comfortable owning in case I end up holding the stock for a little while. THIRD, I only do options trading within retirement accounts, so that I never have to worry about a direct tax impact from each individual trade. FOURTH, I never trade on margin. I only use my stocks or money market cash in the accounts, selling Covered Calls or Cash Secure Puts. I don't leverage as much this way, but I never ever have to worry about margin calls either. FIFTH, I trade options with WEEKLY expirations and I only SELL options for premium. I don't speculate as a buyer. This way, I'm the one collecting the premium on the trades. Sometimes I close a trade early when I find I can keep a large percentage of premium. Other times, I might decide to let the calls or puts expire without closing them. Or, I may decide to let the option get assigned. If I get assigned, then I have to buy or sell the stock at the agreed upon price, depending upon whether I had sold a call or a put. NEXT, I simply repeat the process of selling calls and puts, retaining the profits made so that whenever stocks are called away, they do so at a gain. I hope this helps! 🙂

[@jeske100]

Great episode! Thanks, David, for your kind words. I also learned a lot from your work!

[@TwoSidesOfFI]

Thanks, Karsten! We learned so much from both you and David.

[@scsu300]

No questions here. Great episode! I just let YieldMax, Defiance, and other companies do the options trading for me. Spouse and I recently FI in our early and late 30s.

[@tomstock9546]

Ha, first! Trading options is what I do as well. However, it’s much harder to have long-term success than people think. If you want to get to that level, it will be serious work to get there.

[@TwoSidesOfFI]

No disagreement there!

[@boybitschua]

yeah..if it's easy, everyone will be doing it

[@shawnleary]

TASTY TRADE!! YES!!!

[@mylor1066]

Good interview.

[@TwoSidesOfFI]

🙏

[@stevehall8227]

I have traded typical options in the past. Then in one week i make almost 10k in a week, then I input a ticker incorrectly and lost 10k in a day so I quit for a few years. Now days i trade options within my Roth, but I only trade leaps options so they aren’t as volatile.

[@TwoSidesOfFI]

Yikes! Sounds like a scary experience. Definitely one of the reasons I like automating my trades. I trust a script a lot more than myself! Glad to hear it sounds like you’ve got something you’re happy with.

[@neovi6424]

Jason, you already won dude. Go enjoy your life with your family and appreciate what you have instead of thinking about money. Time is running out but there's no end to chasing money.

[@TwoSidesOfFI]

We are enjoying life for sure, no worries there.

[@lucasmodesto1433]

In terms of non traditional FI, how would you guys consider the impact of high volatile investments into the Safe Withdrawal Rate? I've been thinking how having crypto in your portfolio would affect the probabilities of success

[@TwoSidesOfFI]

That seems rather tricky to quantify. Not sure where to begin but like all, you’ll need to make assumptions about annualized growth rate.