Hey, this is Sasha, and in this post, I will share with you why trading options for retirement is fantastic.
If you’re retired, planning to be retired or getting close to retirement stick around for this post.
I’m going to share with you why trading options is the right approach.
There’s a lot of different trading posts out there, and some of them talk about day trading for retirement. Or I want to trade some penny stocks make some extra money.
Maybe you’re retired right now, or you’re getting close to retirement, or you are in retirement, you want to make a little bit of extra money, and you think trading is the right way to go.
There are all kinds of different ways to trade. It’s just like when you’re looking to buy a car; you could buy a van, a truck, a hybrid, or sedan. There’re all kinds of different types of vehicles out there.
There’re advantages and disadvantages to every single thing that you get. And people glance over options, but they don’t like it. I will share with you why trading options is fantastic for retirement.
I will give you two scenarios here.
If you go to a casino and I say that your odds or chances of success are 50-50. Now you could make say $2000, or you might lose $2000. But it’s like a 50-50 shot. This is scenario number one.
In scenario number two, you got a shot of an 80% chance of success. Your win rate 80% chance. But instead, a $2000 you’re not going to make as much. That’s because your chance of success is higher.
But then you have an 80% shot at making $800. And your max loss, you could reduce it. You might only lose about $200.
Here’s the big question: Which method or strategy would you rather take?
A lot of people want to shoot for the big bucks. They want high winners. They want big money. But the smart approach is different. The successful traders go for this—the 80% shot.
What if you want a 95% chance of success. With trading options, you could get that. In that case, you make a little less. You only make about $600, but you have a way higher percent chance of success.
What is this ultimately means?
It means your win rate increases. With a higher win rate, that means you make less money. But you have a higher chance of success. And this is what you can do with options that most people don’t get in don’t understand.
Let’s pick any stock here that you want. I want to trade an option on Amazon. You can select some option contracts here in just a second.
Now, normally what you would do is when you trading Amazon buy the stock or sell the stock.
I get into the stock somewhere over here, looking for a bounce, looking for to go up and hopefully make some money. But if it continues to roll over, I lose quite a lot of money.
That’s the gambling mindset. I’m just going to take my 50-50 chances. Maybe it will go up; maybe it will go down. In some cases, technical analysis can help raise that to 60-40.
Check out our courses on our website Traders Fly.
Then you can learn a lot more about technical analysis. But overall, if you’re looking to have a defined chance of success in the percentage of win ratio of how to get that?
Well, you trade options.
This is why it’s great for retirement. Let’s am interested in Amazon, and currently, that price is about 1,700.
And say I sell the option contracts. This is 71 days out. Open this up to a bunch of strike prices. With puts and calls, I could change this to option theories, probabilities, and now I have my percentage in a chance of success.
Right now, the price is 1,735. I can go over here to change my area to probability in the money, and this gives me my probabilities.
Now, if I sell 1340, I have a 95% chance of success.
Well, if you are a buyer, you have a 5% chance of success. If your seller it’s a nearly 95% chance of success. I could switch this actually, and you’ll see the probability of out of the money.
Now you have your standard chance of success. If I want a 90% chance of success, check this out.
I’m going to sell this single contract just to give you an idea. This is a naked spread, which you’ll see what I’m talking about here.
Now I’m selling this option contract. Let’s get rid of some of the slices, so they’re not confusing and will change that white line, and this will be our greenline.
We have a single spread that we put on, and what I’ll make is $830 at expiration as long as that stock stays above that 1420 marc. 1420 is my strike price. There is my put $8.30. The December, one contract, single and there I have to hold till December 21. As long as it’s above that level, I make $830. That’s how that works. Isn’t that amazing?
If you want to protect yourself, you say that it is stupid, and that’s unlimited risk. If the stock continues to go, you get trouble. Well, I could buy one for protection, buy a single right here further out.
Think about it this way. At the 1420 strike price right here that I have, it tells me exactly I got a 90% chance of success on the straight. How much better is that for retirement. It tells you. There are, of course, other factors involved, like the volatility, the Vega, which can play a role.
Sometimes you have to cushion those things. Pure disclaimers, it’s not just that easy. But it gives you the per probabilities in a chance of success.
Look at it. That stock has to go from about 1735 down 1420 for you to lose. Because otherwise, what you’re doing is as that time value right here continues to move up look at your profit loss per day.
You continue to increase profits. And why is that?
That white line continues to get closer to that green line. The white line is today’s line current day, and the green light is at expiration. With time that white line gets closer, and you make money from theta, and you could just let these expire.
Of course, if it’s going against you, you could close them out as well. So that’s how that works. If I go to 1420, think of it like this. That stock right now would have to drop till December until this level.
It would have to go down to here for you to lose. And be under that right. That’s the power behind trading options for retirement. Now I have my chance of success or probabilities. And I know I’m going to get a 95% chance of success, and 80% chances, 67% chance of success.
I could say I’m a little more greedy, and I want to make little more. I will go to 1500 and maybe protected around 1440. Now I’m making about $525 on $5400 of investment. It’s almost 10% on my money in just 60, 70 days.
That’s not a year. That 60-70 days. Think about that for a minute, and your chance of success is pretty good. You’re at about the 1500 strike price area, which at 1500, you’re at an 85% chance of success. If you’re nervous and terrified, you can go out to 1200.
In that case, you might not be making as much money because of less risk, less reward. But that’s how it works. It gives you a defined area and edge. Let’s see where you get the protection. 1180 right there. Now I’m far out while I’m not making that much money at all on these things.
1200 is far out. Let’s say $1300. I make $147 and $10,000 means I need to use more cash, and I got looking at this, 95%-96% chance of success in every day that percentage goes up because that stock stays above that level.
Look at it. That stock goes about 100, 200, or 400. There’s like a bond that goes off in this company. That’s what’s happening now. Sometimes it does go against you. You do have some problems, and then you have to manage it, adjust it, and take your losses early.
And you do have to manage the position and trade, but if you’re in a retirement account, if you want to do this for your retirement with trading options gives you probabilities and chances of success directly in the trading panel.
No other way of trading does that.
The rest is like let me buy the stock here, see if it’ll go up, take some profits there. If you’re looking at Harley-Davidson, the same concept.
Well, maybe it will go up, perhaps it won’t. There’s no specific guideline to probabilities. And that’s the big point, and that’s the big picture.
Anyway, if you’re serious about your trading education and you want to see more insights and some more training courses about options, check out our website Traders Fly.
