Podcast – Episode 021- The Option Continuum


Podcast Transcript


Okay so in this episode, I’m going to be doing things a little bit different because this is going to be a video and an audio podcast because I do have some graphics to share. Now, if you are listening to the audio and you want to watch the video, you can do that at optiongenius.com/continuum. That’s C-O-N-T-I-N-U-U-M, continuum. Don’t worry about that, the URL will be in the show notes below but for you folks, I will be describing the images as part of the video when they come up so I’ll do my best to describe what’s on the screen and what people are saying.

Cool, alright, let’s start. So I want to start with a couple of questions. Number one, how long have you been trading options? And number two, in one word, how would you describe your proficiency of trading options. So in other words, what level trader are you? Kind of gets confusing, right? Sometimes. Because you don’t know exactly. I ask this because it’s super important to know where you are before you can make any progress. You have to know where you are so you can make the necessary correct improvements and even know what needs to be improved in the first place. Because in most areas of life, this is what’s called a benchmark, right? So, if you know where you are now and you know they’ll you want to get to, then it becomes pretty easy to get there. You can make a plan and you can just follow step by step by step and get there.

No big deal. You just work on the skills that you need at the next level. But in trading, nobody ever talks about this, you know? There’s no set criteria, there’s no levels, there’s no advancement. You know, even in college, you go to college you say, “Oh yeah, you’re in college. Oh yeah, what year are you?” “Oh I’m a freshman, I’m a junior, I’m a senior.” You know where you are, you know what you have to do to get to the next level and you know how many levels there are so, you know when you’re gonna finish. In trading, we don’t have this so, you hear terms like, “Oh, I’m new to options.” Okay, what does that mean exactly, you know? Did you just start trading yesterday? Have you been trading for three months but you’re not very good, or you’re not confident in it? Who knows? Or, “Hey, I’m an advanced trader.” What does that mean? Are you making money? Do you know 15 different strategies and 12 different adjustments for each one? Does that make you an advanced trader, you know?

Or maybe you’ve just been doing it and losing money for the last 20 years trading options. Maybe that makes you an advanced trader. Or maybe you’ve been to 15 different seminars and you know all the lingo but you’ve never done trade in your life. Does that make you an advanced trader? Nobody knows, right? Because at Option Genius, we get emails about this all the time. We get people who want to know what course or membership that they should join and some of them, not all of them, but some of them try to make it easy on us by giving us a little background on themselves. But it’s almost never enough. No we are not licensed financial people so we cannot give personal advice, right? But if a product is wrong, one of our products is wrong for you, we’ll tell you, “Hey, you know, this is not for you based on what you told us.” The problem is that we don’t know these people well enough and we’ve never had a way to characterize them. For example, an email might come to us, might be something like this, says, “Hi, I’ve been trading options for three years and I really like your weekly trading system site.” For example. “I’m retired and I have $20,000 to work with.

Would this be the best product for me?” And to be honest, really, I have no idea. The email says he’s been trading for three years but trading what? What strategy? Was he profitable? Was he not? Does he really understand it or not? Why does he want to jump into weekly options? Has he been doing monthly options, he been doing leaps? I don’t know. You know? I mean we can go back and forth, emailing back and forth just to try to figure it out. So, I think you can see my conundrum, okay? No I mean, is someone who is only a covered call trader, is he a basic options trader? And someone who knows, for example, ratio spreads, are they an advanced trader? Well what if the covered call guy makes a lot more money than the ratio trader? Now who’s the more advanced trader, you know? It’s kind of confusing. So, I decided to sit down and end all this confusion.

So I have come up with what I call the, “Option Continuum,” basically, it’s a scale, which you can easily tell what level you are at in your trading. And once you know your level, you can decide what level you want to move to and then you start working on those specific skills to improve. Now, everybody does not need to know every strategy to do well, okay? That’s up to you. You could get to the top of the continuum, the end of the continuum and only know one strategy and just one way to trading. It is possible. Or you could put it on and say, “You know, I need to know five different strategies in case one doesn’t work or the market changes or whatnot and I need to know five strategies and be good at them in order for me to get to the top.” That’s fine, you know? But I don’t think that you need to know every single strategy.

Nor do you need to understand say 20 different technical indicators, you don’t. So the continuum will help you in many ways including, this is a big one, not jumping at the next shiny object that comes your way. And I think you know what you’re talking about because I know how it is, I get them too. The daily emails touting the newest, the coolest, the most profitable trading strategy that’s gonna make me millions, right? I get pitched ten of those a day if not more. But once you know what level you are at, you will be able to determine what you need next and eliminate all the other noise so that you stop jumping from one course to the next, from one guru to the next. Because that ride never stops, it’s like a merry-go-round. Once you get on the merry-go-round, they keep pitching you more stuff and more stuff and more stuff. And if you’re done with one guru’s stuff, that guru will pitch you stuff from someone else and it just continues in a circle, on and on and on, you never get off that ride.

You have to jump off yourself but if you don’t know when to stop or what you need next, you’re just gonna stay on the ride and keep going in circles, okay? So that’s why I’ve come up with this continuum so you know what levels are, what you need to do and when you’re gonna be done, you know? This is a big thing, right? So here it goes, level one is what I call “Option Clueless,” okay? So basically on the screen here, I got a guy, he’s at level one, he’s just a little stick figure guy and he’s got his arms up in the air like, “You know, I don’t know.” Right? So basically, option clueless is just exactly what it sounds like, you have no idea what an option is, you’ve never heard of an option, you’re probably not on this podcast because you don’t care about options, you don’t even know what they are.

But I wanted to start at ground level and then we’ll move up and you’ll see how I go from the bottom all the way to the top but level one obviously, option clueless. If you’re already here listening to this, you’re probably not here but this is the progression, okay? Level two, this is called, “Option Scared,” and over here, we got the little stick figure guy but on his face, his eyes are big and he’s scared, and he’s nervous. This is where you’ve heard about options from others, mostly negative, “Oh, I lost a lot of money,” or, “I gave money to this guy,” or you hear something, maybe you watched a webinar or something a little bit here and there but you really don’t know what it’s about and you’re just scared and at this point, you’re not even willing to touch an option with a ten foot pole. So, most people go along this line, so first they don’t know anything about it and then second thing most people hear is about negative stuff, right? So they’re like, “Oh, okay, leave me alone, I don’t want options stuff.” Level three is the next level and this is where most of us have started, okay?

So level three is called, “Option Confused,” and over here you got the little stick figure guy and he’s thinking in his head and he just doesn’t understand what’s going on, there’s a little diagram or a little graphic with the little squiggly line above his head so, he’s trying to figure it out but he has no clue what’s going on. So this is where maybe you investigate a little bit further or maybe you read a book, right? Or you hear a sales pitch about something related to options. And it sounds interesting, it sounds like something you might be interested in but again, you heard all the negative stuff so you’re not really sure, you know? You don’t understand the lingo, what is a call, what is a put, what the heck is going on? How does this thing expire? How can I buy something that’s not real, how can I sell an option when I don’t own it? What’s going on here? This is where some people stop. This is where they stop. They get curious or they get confused, sorry and they’re just like, you know, “Yeah I’m gonna stick to what I know, I don’t want to get into my finances too much, I’m just gonna end right here, no thank you.”

Level four is when it starts getting interesting. So this is, “Option Curious,” so here we have a guy here who’s trying to research, he’s looking at something, he’s trying to figure it out, okay? So level four, you know that you want more, now you’ve got your interest is peaked, right? You say, “Oh man, what is this stuff? This sounds really interesting.” Maybe you heard a story from somebody or maybe a friend is trading options and they’re telling you, “Oh man, this is so easy,” or, “I’m doing so well,” or, “This is really cool, you gotta check this out.” You know? Here, you have an idea that options can help but you’re not sure where to turn or what to do. You’re basically interested but you’re still looking around, right? So that is a level four, option curious, you’re looking out for different things, you’re reading different things, you’re watching different things, you haven’t really committed to anything yet but you’re curious, you want to learn more.

Eventually, you do get to level five, which is the next step in the progression, in the continuum. This is what I call, “Option Dangerous,” okay? And it’s dangerous because you are a danger to your own portfolio and this is where we have the stick figure who is actually angry, he’s got steam coming out of his head, okay? So this is what I mean by option dangerous. This is the dangerous stage. This is where you have spent money on learning and training but when you go to implement, you lose money because we all know 80 to 90% of traders lose money so, they’re mostly at this stage. You lose, you screw up, something bad happens, you’re down this pipe dream that you were sold or this course that you were preached doesn’t pan out or something. Maybe you went to a very high priced seminar, like I’ve been to in the past where they teach you just enough to be dangerous, you know? It’s like I remember, we paid I think $5,000 for a weekend seminar, my father and I, we went to this thing and we would have learned more in a introduction to options book at the book store, seriously. Or at the library, honestly.

But we paid $5,000 for this course, it was a weekend course, they taught us stuff like these are calls, these are puts, this is a covered call, this is how you do stocks, this is a red arrow, this is a green area so they told us a little bit about these couple different indicators and then basically it was a pitch to buy their software, to join their $30,000 coaching program, to take their $10,000 other courses if you wanted to learn more but at that point, it was like, “You know, I already spent five grand, let me try to use what I already have,” right? Instead of me making more, let me try to get my 5,000 back and then I can reinvest in more courses and more trainings and coaching and what not. Because at this point, I still don’t know what I need to do.

So, went back home, started trading and try to follow their system, try to use their software as best as I can, you know? And you get all three green arrows, you buy. You get all three red arrows, you sell. And I proceeded to lose a lot of money. And that’s why I call it, “Option Dangerous,” because I was a danger to myself, because I did not know what I did not know, right? So, you know, I got no support, which is like most online courses, there’s very little support. Or either you do that or you even got a lousy training, which I did. It was a very lousy training, didn’t really tell me anything I really needed to know and I was just like, “Okay, here you go, go do it.” And they wanted you to fail in that seminar, I’m pretty sure. They want you to fail so that they can call you up and pitch you on something else and then when they hear that, “Oh you lost money? Oh, that’s because you didn’t take this course.” And, “Oh, you didn’t take our coaching,” and that’s what they want so that they can keep you on the merry-go-round, going round and round in circles. This level is where most people give up, you know?

They try to get a little information, they say, “Oh yeah, I’m gonna take this course.” They make all these promises in the course or the seminar or the book or whatever it is, I’m gonna follow this thing, I’m gonna do it and for some reason, it just doesn’t live up to the hype. Either the training wasn’t very good, the person was not a trader, he was a marketer or there was no support to help you out if you had any questions or what not. So people say, “Oh, this stuff doesn’t work. Oh man, forget this, I lost a lot of money, my wife is gonna kill me. Oh it took me so many years to save up this money and I lost it all in a weekend.” Right? That’s why it’s dangerous. So not only, you’re a dangerous to yourself, your a danger to the progression, you’re a danger to the continuum because this is where most people give up and stop and it’s a shame and actually this is where a lot of people, they live.

You know? They live at this level where they go from lousy course to lousy course and they never make it to the next level. The next level is level six, which is option humble and the graphic here is you have a guy with his arms held up, hands together, kind of like he’s in a humble little mode there, you know? And if you make it to this stage, if you make it past the dangerous stage and no into the humble stage, things can turn around because here, you have taken your lumps and you keep going. You know that you don’t know nearly enough but you were humble enough to look for some real help and now at this level, you have enough knowledge to be able to tell who can help you and who is just yanking your chain, trying to make a buck off of you, trying to sell you more and more stuff, okay? So this is the next step where you know some of the lingo, you know some of the stuff, you’ve been through the trainings, you’ve studied, you’ve tried, you’ve lost money and now you realized, “I still want to do this.

I think I can do this. I’ve seen other people do it, why can’t I do it? I need to keep looking,” and then, you know, like they say, “When the student is ready, the teacher will appear.” So hopefully the person who’s a real trader, you’ll run across them or you’ll find them or something will happen and you’ll be able to tell if they’re real or not, okay? So that is level six, option humble. Then we have level seven, which is the, “Option Under Achiever,” and now the graphic here is just the same stick figure but now he’s sad. He’s moved on from humble but now he’s an under achiever, okay? Because by now, you’re very well versed in options and strategies, you know how they work.

You’ve done many, many trades but something is still holding you back. Something is still blocking you from the results that should be yours. You’re so close to success that you can taste it but you’re missing something. You do well on many trades but you’re still not profitable or if you are, you’re not really sure why. Or what to do when the trades do turn against you, okay? So this is option underachiever, you’re following the plan and you think you’re doing it properly and you do have successes a long the way but you’re not there yet, there’s still stuff that throws you for a loop, you know? The market changes and you get flustered, you don’t know happened, you don’t know how to do it so, if you’re an options seller, this is the person who is understanding the trade, understanding the strategy and doing the trade month after month, winning, winning, winning and then all of the sudden, boom, big blow up and they lose three, four, five, six months of income.

Okay? Like I said, there is something missing. There is some knowledge, some particular adjustment method or some risk protection method that is not there, that they don’t know yet. And that is the underachiever, they know they can have the results, they had some results but they’re still underachieving where they should be, okay? Once you turn the corner, you get to level eight, “Option Confident,” and the graphic here is the guy jumping in the air. He’s got his arms out stretched up and he seems happy, he’s jumping in the air. This is where you’ve turned the corner. You have a plan in place and you are trading the plan properly, trades are working out but you still do have some leftover stuff to work on. Stuff like self-discipline and systems in your trading. Once you master those, you can easily get to the next level so, when you’re at level eight, option confident, you kind of have a little swagger because things are working out. You might even be profitable at this stage, okay?

This is almost at the end of the tunnel. You’re almost there, you can feel it, you can smell, you’re almost there, you know, you’re walking down that hallway and you just gotta go into the next door. There’s a few things that you need to work on, like I said, self-discipline, maybe having the proper systems in your trading but you know that you’re confident, that you can get there. So, level nine, this is what most of us have been looking for, this is level nine, “Option Consistent,” and the graphic here is there’s a guy, he’s standing on the steps, arms out stretched, he’s in a suit and tie, he’s made it, he’s there. This is the goal of most traders and for most of you, this is probably what your goal is gonna be, to be consistently profitable. Now, sure you’re gonna have loses, right? Because this is trading, everybody lose money on trade to trade but the gains easily overcome the losses, okay? The main word here is, “consistently profitable.” All your hard work and determination finally pay off. All the rewards are now yours, it is your decision, if you want to move to the next level or if you are okay with what you have, okay?

Because if you’re still running a business or if you’re still working a day job or if you’re retired and you just need another 1,000, 2,000, 5,000 dollars a month than this is where they want to get to, right? This is the goal, option consistent, I have a strategy that works, maybe one or more, I know what I’m doing and month after month, I am doing well and at this point, when you’re option consistent, I would even urge you to go and to change roles and to go from the learner and the trader to the mentor, okay? So, if you’ve been fortunate enough to have a mentor or a guide or a coach to bring you to this level, I would urge you to turn around and to help somebody else. Maybe your own child, maybe a family member, maybe a friend, maybe some of these groups where option traders get together and if you find someone at a lower level, you can take them under your wing and you can guide them along, show them what you did and maybe they can emulate you and eventually they can get to option consistent, okay? Because that is when you really learn. I mean, I know you’ve gotten to option consistent, you’re there, you know?

You got the goal, but there will still be, because options are very complicated, you know? You can spend your whole life still learning and learning and learning but when you go from the learner or the student to the teacher, you actually learn a lot more. Your learning goes to a different level when you have to explain these concepts to somebody else and so, this will actually help you in your own trading. And maybe that’s what … maybe the option underachiever to go from level eight, option confident, to option consistent. Maybe that’s what you need to do, maybe you need to become a mentor at level eight, option confident in order to get you to option consistent because then you’re gonna have to follow up, okay? And then we have level number ten, our final level, which is, the “Option Professional,” this is the full time trader that is making more than enough money from his or her trading to pay the bills, this level brings it’s own challenges but of a different nature.

Because now, you know how to trade, you got it down, everything is fine, you know the strategies, you know the adjustments, you know how to watch the market, you know all that stuff. But now, money management, diversification and hedging become much, much more crucial because this is your lifeline, right? Your trading is your income and so you have to change the way your mentality works. So it’s not about, how much can I make? It’s protecting capital and still growing the account and still taking out enough that you can earn a living from it. So there are different challenges, different set of strategies that go along with this that you have to learn and then implement them. So at this point, you have no problem making enough money but in order to make it a long term thing for years and years as a trader because you don’t want to blow up, right? You want to learn this money management, hedging, diversification skills so that you have staying power because I’ve seen many people.

They go from, you know, the bottom of the continuum to close to the top, level nine, level ten, they think that they know everything, their head gets too big, they’re not humble anymore and then they blow up, you know? And they go back down and then they go get a job. So they still have the trading skills, they still know how to trade, but they weren’t probably diversified, they didn’t have enough risk management, they didn’t have enough diversification in what they were doing, they took too much risk and they blew up. So, those are the ten different levels of the option continuum so, really the question is now, where are you? Right? Are you option clueless? Are you option scared? Are you level three, you know? Or level four, option curious? Or are you still stuck at option dangerous? Where you’re a danger to your account and you’re a danger to the whole system, you know?

You’re a danger to your mentality as well. Or are you option humble where you’re trying to learn. Or are you an underachiever. Right? You’re making some trades, some stuff is working but you’re not there yet, you’re not achieving what you should be yet. And then hopefully you’re either option confident and then you’re trying to get, you’re really close to option consistent because that’s where most of us want to get to. Now if you know where you are on this continuum, that’s gonna help you, that’s gonna really move you forward and if you want to go to the next level, then if you want, we can help you.

Just email us at [email protected] and we will guide you in the right direction. We might have something for you, we might now but once you know what level you’re at, then you can say, “Okay, this is my level, this is what I want to get to, this is what I have resources at my disposal, how do I get there?” And then we can actually give you a plan and say, “Okay, well to the next level, you need to do this, this, this.

So, the next level, you need to do this, this and this.” And it might be one of our products or it might be something you can do on your own but either way, if you need help going from one level to the next, let us know, we’ll do what we can to help you, we are always here so, that is the option continuum and I hope that this really helps because now in the future, we’re gonna be looking at our own products and being able to pinpoint and say, “We have … okay, we have this course,” which let’s say I have the blank check trading course, right? Which is about oil options so if I am option clueless, should I be taking this course? Probably not, you know? It’s not for you, right? But if you’re higher up on the scale, then yeah.

I mean, because that’s the thing because we want you to be successful at whatever you do and whatever … even if you take one of our courses, it’s not gonna do any good if you’re not successful at it or if it’s above your level, right? So if you’re at a lower level and you don’t understand all the criteria and whatnot, even if you join the course, so what we have, we have some people who have never traded options and they join the course and they tell us, “Hey, I’ve never traded options before.” So we said, “Okay, you know what, before you start taking all the modules, we need to give you some material so that you can get up to speed very quickly.” So, we have other you know, very basic materials, introduction to option materials that we can give you, get you up to speed, and that’s what we normally do and then you start taking the lessons in the course so that it makes more sense, okay? So that’s how


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