Podcast – Episode 117 – 2 Bulls In a China Shop Plus Allen
Welcome Passive Traders to another special edition of the Option Genius Podcast. Today I have something a little bit different for you. I was interviewed on another show called “2 Bulls in A China Shop” by a company called Financial Ineptitude. That’s actually their name,Financial Ineptitud. Basically, it’s two guys. You know, there are really cool guys named Kyle and Dan, and they’ve been talking about trading for a little bit. They’ve been trying to learn how to trade and so they made this podcast to basically help them get their thoughts out, and to record all of their lessons. Their website is really cool. Their podcast is two bulls in a china shop and I’m going to include the interview that they had here as an episode because I thought it was really good. It was a lot of fun. And hopefully you guys will get something out of it and learn from it as well. So again, that’s “2 Bulls in A China Shop” by Kyle and Dan. Enjoy the episode.
We’re so glad you’ve joined us today, folks, today is a very special day, we’ve got a fantastic guest with us. We’re gonna be joined here by Allen Sama, Head Trader and owner of Option Genius. He is an Amazon bestseller author of the book Passive Trading: How to Generate Consistent Monthly Income from the Stock Market in Just Minutes a Day. And we’re going to let you know more about that. But first, Allen, how are you doing today?
Allen: I’m doing very well. Thank you very much.
Kyle: Thanks for coming on. I know we had to work a little bit to get this. This recordin going.
Allen: Yeah, better make it good.
Allen: I’ll do my best.
Kyle: The more you work for it the sweeter to be right? Yeah,
Dan: Yeah. No pain, no gain,
Allen: The more you value it, right.
Dan: Oh, right. So so tell us a little bit about your journey to becoming the Option Genius.
Allen: So I was born as a trust fund baby and I started with $20 million.
Kyle: End of story.
Allen: Exactly, then I made a course. And then I made a course and I started selling it.
Dan: Make more money selling.
Allen: Yeah. So I have a similar story to you guys. You know, I got laid off from basically the only job I ever had. And it was really about, hey, do I go back to finding another job than job market? Or do I try my hand at trading, which I had been starting to learn while I was working because I was working remotely. So it was a great job learned a lot. But it just came to an end. The business went under in the financial crisis. And so, you know, we were actually teaching mortgage brokers how to be mortgage brokers, mortgage brokers, they owe it away. So it’s like they didn’t need me anymore. And so I said, Alright, cool. Let me you know, try my hand at trading. And I took some of my wife’s money, and I lost most of it roughly, for like 40- 43,000. Plus, very quickly.
Dan: Oh you’re kidding.
Allen: And, you know, like you guys said, you know, you learn very quickly, what doesn’t work and most of it doesn’t work. Yeah, at least for me.
Dan: I get to strangled to work one day.
Allen: Yeah. And so really, the, the best thing for me was that, you know, she had, she had faith in me, and she, she’s like, you know, you need to make this work. And so I went back, and that kind of really put a fire under my ass. And then I looked at all my records, because I keep paper records of all my trades, write down everything. And so I found that, you know, I was doing day trading, and I was doing this and I was doing that buying and selling and value and I was trying everything, you know, there was one time where I was long, the inverse ETFs you know, SDS and SSO. So SSO is the two 2X S&P Going up, and SDS is 2X going down. So I was long on both of them. I was like, I can’t lose. Right? Yeah, it’s like the only trade that I can’t lose on but guess what I did, I ended up losing money on that trade.
Dan: You’re telling my story, Allen. You’re telling my story.
Kyle: This all sounds so familiar. But there is a light at the end of the tunnel that it sounds like you..
Allen: Because the only thing that worked for me was selling options. And I had done at least one trade where, you know, I put it on, didn’t really know what I was doing. But I followed it. And I put it on and I forgot about it. And then it it was in my paper records, but it wasn’t in my account. And I’m like, where to go. My broker scamming me, you know, that should be here, you know, I put the trade on, where’s my trick, and I kept researching, and then I realized that that trade had expired, worthless, and it just had gone away. So it doesn’t show up on the screen anymore. And there’s no exit record. And so I was like, Well, this is cool. You know, this is something that I didn’t pay any attention to. And I made, you know, a good decent amount on it. And I didn’t like it was easy. So I’m like, What is this thing? So I learned more and I dug deep into it. And we went into covered calls and naked puts and spreads and iron condors and, and all these different ones. And eventually I found that, um, you know, these type of trades are a lot more forgiving. So if you’re not the most savvy, technical analysis like me, and if you’re always buying at the wrong time and selling at the wrong time, getting all emotional like me, then this really was something that was much easier to do and, you know, you probably hear it If you talk about it, but it’s like you put the odds in your favor. So it’s a little bit, I think it’s more conservative. But it’s a lot more passive in the sense where I don’t have to be in front of the screen all the time, I’ll put a trade on, and then just check it and make sure it’s okay. And that Theta decay just works in my favor. So the time decay, meaning the options go down in value, you know, every day as they should. And then eventually they expire. And when they expire, then the trade is over.
Kyle: So what kind of time frame are usually looking at when you’re selling your contracts?
Allen: Well, I’m in different strategies now. But usually, I’m going around 45 days to about 25 days.
Kyle: You basically just rolling monthly, the monthly.
Allen: Yep. So I’ll stay in two months. And then if I get out, then I’ll be like, okay, good down. Let me look at next month, sometimes I get out early, and I’ll take, you know, take a week or two off, I’m not doing anything. And then, but most of the time, yeah, it’s you know, you’re getting out of one and then you’re getting into the next one.
Kyle: Are you just doing these cover calls? Are you doing spreads? Or what are you doing to cap your, your, your losses, because we selling options? Contracts can be really dangerous..
Allen: Mm hmm. So we do a little bit of all of them. You know, I’ve been doing it now for 15 years. So I started with the iron condor, because that that, Oh, my God, this is awesome. You know, you can make money on both sides, and the stock doesn’t move too much. And it’s a trade that can’t lose. Obviously, I found out that yeah, you can lose. But I mean, it’s probably the most complicated trade you can start with. And that’s the one I did and then I got, you know, I got good at it. And then I did look at covered calls, we did that for a while still do them now in my. So let me break it down, in my retirement accounts, I do covered calls, naked puts, and some spreads. And the spreads are really there to just goose the returns. Because in those I’m looking for about 10% a month, the covered calls naked puts, I’m looking for one to 3% in the retirement accounts. And then in my trading account, I do spreads iron condors. And then I also do a little bit of futures options. So those are a bit more, they got a lot more oomph to them, because there’s more leverage involved. And so they’re faster. They’re very, they’re much faster trade. So I’m in and out, usually around two weeks, about 14 trading days.
Kyle: Before we get too deep into here, maybe we should kind of talk, can you explain, let’s start with an iron condor. And maybe just real quick recap of what a spread is.
Allen: Sure. So a spread and the way I trade them is I want to be selling the spread. And so it is something that where you take an option that is far out of the money, you sell that one, and then you buy another one a little bit further out of the money to hedge yourself. So it’s a risk defined trade, meaning you know, exactly “Okay, I’m gonna put in, you know, $500 into this trade, or 1000, or 5000”, or whatever you put, that’s the most you can lose. And then you get a credit for doing it, meaning you get paid when you put the trade on. That credit is the most you can make. So now on the spreads that I do. So for example, let’s say we have a stock that just going up and up and up and up. Right now, I like to play the trend, I like to play momentum. And so if it’s going up and up and up, I’m going to sell calls. So I’ll sell a call spread, I’ll get paid for that. As long as the stock doesn’t go below my calls, my trade makes money. And on those types of trades, I’m looking for about 10%, like I said, on a monthly basis. My iron condor would be doing that trade with puts and calls on the same stock at the same time. So you want, in that situation, you kind of want something that’s going sideways, you want a stock or an index or something that’s, you know, it’s not moving too much. It’s kind of lazy moving sideways, and so you sell some puts below it, and some calls above it. And so that way, you get paid for both you get paid for the calls, and you get paid for the puts. But you don’t have to, you’re not risking both sides, because you can only lose on one side. You know, so you have the same amount of risk as if you just did a one sided spread, but you get double the credit so you make twice as much money.
Kyle: Right. Oh, I was found that the more complicated things get the worse I do at them. We’ll have some links in the episode description explaining those a little bit better to anybody.
Dan: Yeah, I’ll need to follow those. Yeah.
Kyle: So you’re looking to generate about 10%. 10% A month or return on your investment then?
Allen: Yep, that’s it. Yep, that’s it go. I mean, you don’t always get there, right? You’re going to have months where you make less, there’s going to be months when you lose money. So if I aim for 10, you know, I can think hey, you know, if I get five for the month, I’m happy. You know, that’s 60% a year. That’s that’s pretty good. Yeah. So I cannot complain. There have been there have been years when I’ve done over 100% And then there’ll be two years when I’ve lost money. So, but overall for the past 15 years. It’s been working really, really well for me, so you know.
Kyle: Yeah, it sounds like you’re Your path kind of took the same path that mine actually took, like, that was what led me to quit my job is thinking like, I could sell contracts because you know, 80% of them or whatever, expire worthless, rather be on the side that has the math with it. And I’ll just, I’ll just basically trade the wheel and sell puts, you know, until I get the stock and then calls against it until they get taken away. Success has been mixed so far, but still not working. So. Oh, really? Well, we could talk about that. Well, it sounds like I need to read your book is what it really sounds like.
Allen: Yeah, I mean, you know, right now, we’re in a bull market. And so the puts that we’ve been doing the selling the puts, I mean, it’s been, it’s been working phenomenally, um, covered calls are doing well, as well, because we go pretty far out of the money. So like, you know, it’s not always 80%, sometimes I’ll go 85, 90 95%, depending on what I want to do. So in my retirement accounts, I don’t want to lose my stock. And so I’ll sell pretty far out of the money. So I’m not making as much on those. But I don’t want to lose my stock. And I’m just looking for a little bit, you know, I’m looking for, you know, 1%, one and a half percent, maybe a month, and I’m happy with that. And so the naked eye, you know, it’s also stock selection. And I think that’s one of the issues that a lot of people get mistaken. People say that, “Oh, when you’re selling options, you should be looking at the ones that are the most volatile names, because they have the most premium, and you get paid the most”. To me, I think that’s like a suicide mission. And, and I just want to be the, I just want to save ones that are boring, that are you know, everybody ignores them. You know, I like the small, the large, very large companies, they pay dividends, they don’t move very much. Those are the ones I just want to cash flow, you know, I just want to be selling naked puts on them, they’re not gonna drop 10%. If they do, it’s like, it’s like the, oh, my God, this thing dropped 10%. You know, that’s good news. So I want to sell those, and I want to keep them and collect the dividends and then just get my cost basis down as far as I can get.
Dan: Do you have a favorite company then that you find yourself going back to more than others?
Allen: I like stuff like McDonald’s, Walmart, Starbucks, you know, big names. Everybody’s known them there around the world, they have dividends so you know, that they’re if they’re paying the dividend, they’re still profitable. They’re making money. You know, Apple is kind of joining that list, although Apple is still a little bit more volatile than the others. But yeah, stuff like that, you know, basic big name, dao components, most of them, one of them that I really liked, that hasn’t has been doing really well over the past few years is Intuitive Surgical. It’s is ISRG so it doesn’t pay dividends. And it’s not good. It doesn’t have a lot of option volume, but for credit for covered calls, and naked puts it’s good enough. And that stock has been doing really, really well for me for the last few years. So that’s a particular name.
Kyle: So yeah, some of these are pretty expensive, though. I mean, yeah, you gotta be real careful, you don’t get stuck with a couple 100 shares, if you don’t have the account to cover that.
Allen: Yeah. So in that case, you know, what we can also do is you can always roll them. So if I get into a position where I’m sold a naked put and it goes into the money like I’ve done this with right now, my kid loves Roblox. I don’t know if you have kids, but my kids are always on that game. And I was when it came out. I was like, Oh, this is cool, you know. So I sold some naked puts on it. And now they’re in the money, and they’ve been in the money for like three months. So what I do is I just roll them to the next month. So about maybe a week or so before expiration, I will buy back the put the naked put and then sell it again for the next month, collect a little bit more premium, and then the trade just continues.
Kyle: Hmm, that’s interesting. Yeah. Wow, I didn’t even think about doing that. That’s awesome. Okay, so roll it over. I’m making notes for myself.
Allen: Now, these are on stocks that you actually think are eventually going to go back up, you know, if it’s still going down, down, down, then you’re like, No, you need to bail out and be like, yeah. But if it’s a decent company with decent, you know, fundamentals, and you know, they’re making money and all that stuff, then yeah,
Kyle: I’ve always gravitated towards the cheaper stocks when trying to sell contracts, just because at least if I’m selling, and they could put on something that’s only valued at like, $15, then I know I can’t lose more than $15 a share.
Allen: Yeah, yeah. I mean, you know, like, my thinking is that I want to be in a company that I know is not going to zero, so I don’t have to worry about it.
Kyle: I mean, Ford for a while is trading around 15. It’s at 18. Now, but yeah, I know for some solid companies that are in that range, right? There’s a lot of other ones that aren’t though.
Allen: Like if it was a $200 stock, and now it’s at 15 There’s another issue going on there.
Dan: Hertz is coming back. Good PR story. Damn it.
Kyle: I’m gonna go back to losing $40,000 of your wife’s money. So what were you doing that got you like we tried to day trade options were you..
Allen: I was doing a little bit everything I was day trading stocks, I was buying options. I was buying and selling like I was doing some value investing for a little bit. I’ll be watching Kramer every night and looking at what’s Kramer telling me to do. Okay, I’m gonna do this and that I would watch fast money every day and look for any anything that sold this is going up okay, hey, copper is going up. Let me buy some you know, SPX. Let me buy some of this. So trying to play the trend is trying to play all that stuff. I looked at futures, you know, trading futures a little bit, but that’s, that takes a lot of money.
Kyle: There’s no it actually takes less than you think. Really? $4,000 you can fund and account.
Allen: Yeah, but then I mean, like you got Japanese. Japanese yen that takes that’s a lot of money for a contracts.
Dan: Okay, Yen is in micros now.
Allen: Yeah, at that time, they didn’t. They didn’t I don’t think they had those.
Kyle: Probably. Yeah, I think minis were kind of new thing. Yeah.
Allen: But yes, I was trying a little bit everything, whatever I could, whatever book I could find whatever video I could find. Just trying a little bit everything in nothing, nothing really worked for me.
Kyle: So what was it that actually got you out of that? That, I guess Funk You can call it.
Allen: So until for several months, my wife did not know that I was losing all the money. You know, she’d come home. And she actually, I mean bless her heart, she took a second job. So she’s working two jobs while I’m at home trading. And, and we didn’t have any kids at the time. So that was good. But you know, she she’d come home tired, and she wouldn’t really want to talk about it. Because sometimes I’d be happy sometimes I’d be sad. She really couldn’t tell what was going on. And then one day, she checked the mail and the account statement had come in the mail. And she’s like, where’s all the money?
Dan: Oh, no.
Allen: And I was like, Yeah, we need to talk about that. And then I feel, you know, I could tell that, you know, the marriage was on the ropes because we were newly married, and she had saved up for years working to save up this money. And so it was really a matter of, you know, I promise you that I will give me three months. That’s what it boiled down to. So give me three months, I promise you, I will at least get back to breakeven or like, you know, not lose money every month, and then I’ll start making it back. And if I don’t, I’ll get a job. So that was it. That was my ultimatum, I had three months to turn it around, or go back to, you know, the 9 to 5 grind.
Kyle: So I gotta ask you, one of the things that took us a while to learn was basically the number one job of being a trader is risk management. So what point during that journey did that finally kick it in your head? Risk is the most important thing. So you don’t end up blowing up an account like that.
Allen: It didn’t really hit me for a long time, even after I started getting a little bit consistent. Really? Yeah.
Kyle: That’s interesting.
Allen: You know, I kept going gung ho blazes forward until maybe like a year, year and a half. of really, you know, trading full time. The one thing the benefits of the selling options is that they’re not that many losses, you know, you don’t lose on too many trades, because it’s set up to to help you win. And so that kind of helped me, but I would, I would have these huge losses, like if I’m making 10% on a trade, the idea was not to lose more than 25 to 30%. But I would be losing, you know, 40% 50% 60%. And I just couldn’t get out of that hole. And I’ll tell you, I’ll tell you the secret. What turned it around. It was my wife, yeah. So she’s like, cuz I was talking to her at this point. I’m like, Hey, this is working. This is not working. I’m doing this. I’m doing that. She goes, You know, it seems like you have everything you need. You’re just not sticking to your own trading plan. Right? Yeah. Cuz I get emotional. You know, I think he’s gonna turn around. I think he’s gonna do this. But then, you know, CNBC said this, and then fox said this, and so she’s like, oh, let’s do this. She goes, I’m gonna come and check on you every day at a certain time and we’re gonna go through each trade. And I’m gonna ask you questions, and then you have to answer. I’m like, Okay, let’s do it. So she would come up, you know, she’d come upstairs to the office. And she’d be like, Alright, show me your trade. Alright, what’s the goal? How much are you trying to make? Alright, where’s it now? What’s the trading plan? What happens if it goes down? You know, when are you going to adjust it? Or when are you going to get out? And then if I haven’t gotten out yet, or if I haven’t adjusted, then I have to answer why. Why? Yeah. And if I don’t have a good answer, get out now.
Allen: That’s, that’s really awesome, actually. So you just delegated your risk manager hat to your wife.
Allen: Pretty much. And then, you know, there were times where I didn’t want to have her breathing down my neck anymore. And so that’s when I got better at it myself. And then, you know, after a while, she was like, Hey, I think you got it. You don’t need me anymore.
Kyle: I know you say that you think that you’re blessed to be to be able to do a dream job of earning money in the stock market and working in your PJs, but I think you I think you hit the lottery twice. It sounds like you really married a great woman.
Allen: Oh, yes, I did. I did. And she hates me. He’s telling this story about how I lost her money, she hates. She’s like, you sound like such an idiot like a dumbass.
Allen: Yep. I think we all go through it. We all do it.
Dan: Nobody just started out and just like, oh, every trade I’ve made. It’s been great. What’s your problem?
Kyle: No, most people will blow up an account too. And that’s why the things that we’ve been learning is, Dan and I are both trying to learn futures. So we’re going through some courses with the trade pro Academy. I think we’re I think Dan just flipped the live today, in week four now. But one of the main things with that is like, Okay, we fund the minimum amount we need in that account in case something goes wrong. You know, the most we can lose is whatever’s in that account. Yeah, we’re not going to fund it with you know, the life savings and then give ourselves you know a hundred thousand dollars a full wrap with,
Allen: Yeah but the cool thing is, you know, you guys have each other to bounce ideas off to talk to, you know, a lot of people try to do it on their own. And they’re just like, I did you know, I was lonely. I was doing, I couldn’t figure out what was wrong. It didn’t have anybody to talk to. Because I mean, you tried to talk to your neighbor, or your friends or your family like, oh, yeah, hey, I sold a, you know, a call spread. And they’re like, “What? What the hell are you talking about?” I couldn’t talk to anybody, so it’s awesome that you guys have somebody.
Kyle: Well, actually, I think the podcast for us is actually but what’s taking the role of the wife explaining the moves? I mean, at the end of every episode, we do a good, bad and ugly segment where we talk about something that worked something that didn’t work and something that was really bad.
Allen: Yeah that’s accountability. Right there. You got to tell the world.
Kyle: So now, yeah, when you’re getting ready to do something stupid, you’re like, how do I really want to talk about this on Saturday? Okay, I’m looking at their your, your, your sheet here that you said this. And one of the things that I see on here that’s really interesting is that you made a small investment for your four year old. Yep. What’s the deal with that?
Allen: Alright, so the biggest thing that I’ve been learning by talking to people and everything is that people are not people don’t have enough saved for retirement. You know, that’s like the one biggest thing and people come to us, and they’re like, Hey, I, you know, I’m in my 50s, I just got laid off, you know, what am I gonna do? I don’t know what to do. I got to figure out how to trade. I’m like, well, you’re under a lot of pressure. I don’t know if this is the right time, right. And so I didn’t want my kids stuff to go through that. So currently, my wife has another business. Mm hmm. And so what we did was, we have three kids, we got a 10 year old nine year old and now she’s five. So the little one is five. At that time, she was four, when we started this actually know when she was born is when we started this. So we took the kids, and we found a way for them to earn some money. And basically, we did it as we were their models. So they model and we take pictures of them for advertising, for our website, the brochures for my wife’s business. And so the kids get paid for it. And that money then goes into their Roth IRA. Okay, so that they have no, there’s no taxes, there’s no income taxes on that money that they that they make, right? Because they’re minors, and there’s a certain limit, so I’m not an accountant. So don’t, you know, none of us are, I don’t think but when we started, you know, the rule was you can make up to 12,000 As a child, and it would not be taxed. And then you know, who knows what if that’s going to change anytime soon, but we could pay them take that money, put 6000 into the Roth IRA. Now, you know, She’s five years old. So we’ve been doing that for a few years. And currently, she has about $50,000 in her account. Now, you, you can look at, you know, you can do the math on any investment calculator. She’s five years old, she’s gonna retire in 60 years. So you take that 50,000 invested in let’s say, an index fund, and you make 8% a year. Right? Compounded for 60 years. How much is she going to have at the end of that? 60 years? It’s going to be well over $2 million. Right? That’s if I don’t put any more money into it. Yep. If she never touches it, she doesn’t put anything else. You know, she’s gonna have a $2 million retirements on when she when she’s done. And, and that’s without me doing any of my options stuff or, you know, doing anything.
Dan: There I say better than a college account fund.
Allen: Yeah. Right. Yeah. And I mean, part of it is, you know, the money, she’s gonna when she takes it out, she, when she retires, she won’t have to pay any taxes on it. So we made the money, we didn’t pay any taxes on it, she’s gonna grow the money and not have to pay any taxes on and then she takes it out and there’s so there’s like no tax at all. It’s like the only loophole I’ve seen like this.
Kyle: We might need to bleep some of that out just in case. That’s interesting. We saw a story not too long ago about a senator proposing a bill to like, and I don’t think there’s any traction on the actual bill. But what was interesting was the math behind it. He said that I think it was about $2,200 for every newborn, put into an account for him, like that will basically make them retire as millionaires.
Allen: Yeah. I mean, if you start early enough, and you put it away, and you don’t touch it, it just compounds and it works. And hopefully, it’ll be at the same, you know, average at least 7 – 8% a year that the stock markets been doing historically. So you know, of course, things change in the future. We don’t know. But I’m trying to just set these kids up in a way that can help them succeed, you know, and if you if you think about it, like if she doesn’t have to worry about saving for retirement, then whatever she makes, she could like, enjoy it. She could give back to our community. She can you know, spend it do it everywhere. Yeah. Yeah.
Dan: Take care of you hopefully..
Kyle: That’s smart.
Allen: Yeah, that’s the plan. Yes, that’s my retirement.
Kyle: Tell us a little bit about your company Option Genius. What do you guys do over there?
Allen: So it started off as so when you sell options, you know, it’s kind of boring. It’s very, like I said, it’s passive. It takes just a few minutes to put on a few trades, and then just watch him watch and watch. And so when I started doing it, I got bored. And so I would go and I would bother my wife. Hey, what you doing? What do you do? Oh, you’re cooking that again? Oh, no. She’s like, can you just get out of my hair? And I’m like, Well, no, cuz I don’t have anything else to do. She goes, Why don’t you like, teach other people how to do what you’re doing? Oh, that’s a good idea. So I started a website. And the idea was, you know, I’m gonna have one website, and I’ll just do my trades, and I’ll share them with other people. It’ll be a membership site, they’ll pay me for it. If they want to do the trades, great. If they want to learn, that’s great, whatever. And, you know, hands off kind of thing that started doing really well it started growing and people start asking questions. How do you do this? How do you do? What about this strategy? What about this strategy, and it just grew from one website to many of them three. Now we have three different memberships, we got like three different courses and coaching programs, we got a couple of books out there to spread the word. And eventually, I got to the point where you know what, the emails that we would get from people would be so heartbreaking, that it’s like, there’s this better way that I think are found, and people don’t know about it. Let me, let me expose let me share the message. And so that’s really behind what Option Genius is. I mean, you know, not to brag, but you know, I’m trading a seven figure account. And so if I can make, you know, two or 3% on that in a month, I’m living a really, really nice lifestyle. You know, I don’t, I don’t have a private plane, I don’t have a Lambo. I don’t need any of that stuff. So we’re really doing well. And so this is like, if it works great. If we can help other people great. If not, I can walk away. I don’t need it. But we’ve we’ve been doing it for a while. And we’ve really, it’s heart warming. When somebody comes in, oh, man, I just did my first trade. And I made 10% Oh, man. And we have we have our own podcast. And I’ve started to interview our students. And so they come on board. And they’re like, you know, I had a small account, but we got one guy. He, we gave him a scholarship. Like every year, we have a scholarship to one of our courses. So he actually won the scholarship. And he’s like, you know, I have a small account. It’s like $4,000. And he’s a teacher. And he does now what you were talking about the wheel. So he learned that from us, and he’s doing it. And he’s like, hey, you know, I made 30% this year from my wheel. So that goes awesome. Yeah. There’s other guys. They’re making, like 7, 8% 10%. We had one guy who came in, he lost his job. And then he’s like, Hey, I’m in your program. What do I do? I’m like, do the follow up program. You paid for it. He started doing it, you know? And seven months later, he’s like, Yeah, dude, I’m making 10 grand a month. I’m like, That’s freaking awesome. And he goes, You know what he told me? He goes, I’m going back to work. I’m like, what? He goes, because it doesn’t take any time. And I want to go back to work. Whatever floats your boat.
Kyle: Learn a different skill. I mean, I guess that’s what you want to do. I guess. It’s funny though. The more people that we talk to, especially the ones that are really successful, that seems like they all want to give back somehow to the community.
Allen: Mm hmm.
Kyle: That seems to be a common theme and I don’t really think see that in a lot of other industries.
Allen: No. I mean, there’s only so much money you can make, and it doesn’t really make you that much happier anymore. But when you can like to have, you know, the Maslow’s hierarchy with a triangle going up to be like self actualized you gotta have significance you got to give back. Mm,
Dan: Yeah that’s awesome. Oh, boy. Awesome. Okay.
Allen: But I mean, you guys are doing that, you know, the podcast, and you guys are helping
Dan: We hope
Kyle: Mostly they’re learning what not to do.
Allen: There’s value in that as well.
Kyle: Yeah, I think that was our tagline once “Let us lose the money for you”.
Dan: Oh, yeah, yeah, I’ve proven myself capable of that time and time again. Mm
Kyle: hmm. All right, what else we got on here? And Dan got any other questions here?
Dan: Yeah, so when you’re starting out some people I mean, I know you mentioned you get somebody started as low as four grand Do you do you give people like a target, like try and get this much money together to start the ball rolling, or you just..
Allen: Um, you know, we say, we say, if you’re going to do what we call passive trading, they can start with anything. But if you’re going to go into something like just spreads or like futures options, and we say, start with about 10,000. But even then, you want to start off with paper trading, especially if you’ve never traded options before, because you need to, you need to know what buttons to push and you know, you don’t want to hit the wrong button. Instead of the sale, you hit the buy. And it goes backwards. And you got to know what you’re doing on the platform, the software, the broker software, before you start putting real money at risk.
Kyle: Is there a specific broker that you prefer?
Allen: I have most of my money at Thinkorswim and tasty, but it doesn’t really matter.
Kyle: We’ve been getting more into Thinkorswim too. Yeah like their their bracket order than other options bracket. It took us a year to figure out the Active Trader even know it existed. But man that made a huge difference. Huge. Oh, you can just drag your stops.
Dan: But that’s more day trading options. Well, yeah. Well, we talked a little bit real quick, do you ever use the the ThinkOrSwim probabilities when you’re looking at selling your options?
Allen: Um, so we have a couple of different ways. I use the the desktop Thinkorswim Yeah. And so like, uh, you know, if you’re looking at an option, right, you look at the option chain, and it tells you what the delta is, you can pretty quickly find out what is the probability of that option. So if it’s delta 20, that means okay, this still this option has an 80% chance of probability of expiring worthless. If it’s delta 10. It’s got a 90% probability of expiring worthless. So that’s kind of like rule of thumb, really quick table math, you know, where you could be like, Okay, I want to do this, or I’ll look at the Analyze tab. You know, if it’s a more complicated trade, then I’ll look at the Analyze tab, and I’ll use the numbers that they give me there.
Dan: Okay. Okay. I remember that for a little bit with straddles and strangles. But I didn’t have much success.
Kyle: I think I heard that before with the Delta, but I never I pay attention to it more, because that’s tell you how much the underlying will move, right? Like for every dollar that the underlying moves, then you should see a 30 cent change if it’s a 30 Delta, or 20 cent if it’s 20.
Allen: Yep. But I mean, I don’t know how accurate that is, because it always changes all the time. So..
Kyle: Yes, that’s true.
Allen: It’s like I thought it was gonna move 30 cents. Well, your Vega did this and the gamma did that. So. Okay, great. Thanks.
Kyle: Plus, now the delta is different. Yeah. We started talking a little bit about crypto. Dan, should we move into move into that?
Dan: I would love to talk about it, especially coming from somebody who educated their way into Options success. Do you have anything going with crypto?
Allen: So I have been taking advantage of a couple times. We could talk about that. So I’m learning about currently a friend of mine introduced me to I guess they’re called alt coins. You know, so I do have some of the big ones, you know, the Bitcoin, the Etherium whatnot. And those I’ve just holding on to so and then I just started because I have a lot of it. I have it at Coinbase. And so I’ve put up my Etherium for it was called staking or stocking.
Allen: Oh, yes. Staking. Yeah, so they hold it on, they hold it for you and they pay you four and a half percent a year. So I’m like, Okay, I’m not gonna sell anyway, I might as well make some most of it. And I think, you know, it’s been going up and up. So hopefully by the time I actually want to take it out, it’s appreciated. And I will It’ll made that four and a half percent, which is pretty good. And so I’m doing that. And then I’m starting to get into these alt coins and trying to figure out which ones are actually going to make it big. And which ones are scams and about, I guess 99% of them are scams. And like so my friends been showing me like, hey, you know, you can tell how much money was used to create this coin, and then are they allowed, are you allowed to sell coins? Or you’re not allowed to sell coins? Or you know, what are the different little red flags that go hey, this coin is a scam this coin is a scam this coin maybe not be a scam. You know? And so you know, you put your money in and then if it goes up a little bit, you take your money out, and then you’ll play with the house money and then you let it right kind of thing.
Kyle: Yeah. So which coins have you found that piqued your interest then?
Allen: So the one that I’m getting into right now, I haven’t got like I’m pretty new at this. So I’m still learning and looking around. The one that I have found that has a good chance of success right now is called Floki.
Kyle: Floki. Like the Norse god.
Allen: Uh huh. Yeah
Kyle: The trickster god.
Allen: Yeah. Floki dot INU Floki.INU. And so his symbol is a dog with the viking helmet. Okay. So it’s it’s one of the meme coins, but they’re doing a ton of advertising. They’re coming out with some actual use for the coin soon. You know, so that one has already gone up in value a lot. And there’s probably a lot more to go in my opinion. So that’s one that I’m going into.
Kyle: What’s one that you’re that you found some red flags on them?
Allen: There’s been a bunch. The names I don’t know off the top my head but there was one. Oh, it’s like world peace earth or something like that. You know, there’s like, so there’s so many of them. There’s like, they call them weird names. Whatever’s trending at the moment like just endgame coin and Avengers coin.
Dan: Oh, I just read a story that the squid game coin is apparently the creators fleeced everybody. What?
Kyle: What, what’s your thoughts on hamster coins? Jack Dorsey’s favorite. He thinks that’s gonna overtake Etherium.
Allen: Oh, really? I haven’t heard of that one.
Dan: Nobody has.
Kyle: Nobody has, I know.
Dan: Don’t listen to Jack Dorsey. That’s all I have to say.
Allen: I mean, you know, it’s so it’s, it’s like the Wild West is full of gambling. And you know, the guy that teached me about it. He’s like, Yeah, you know, we probably have maybe another year or two years before this all this stuff gets regulated. And all these alt coins are just gone.
Kyle: It’s kind of started already to Yeah, Mm hmm. I think didn’t I see something about the SEC getting authority over was stable coins, stable coins just issued today.
Allen: Oh, that’s today. Okay.
Dan: Biden said if you don’t do it, we’ll issue an executive order to make it happen? So it’s on the way? Yeah, it’s happening. They’re there. They’re the beginnings of regulation. Or I should say not like, we won’t get there for a bit.
Allen: So because I mean, we think that, you know, the people behind these coins are like, really sophisticated and smart developers, and they spent all this time and effort, you know, creating a coin. It costs like $1 to make a coin.
Kyle: Yeah. Dan and I were actually looking at making our own. Yeah, the two bowls going.
Allen: You know, so it’s like, yeah, it doesn’t take a lot. And it’s pretty simple. And people, they’re, like, new coins come out every like five minutes. There’s a new board. And so it’s like, geez, yeah, you’re
Kyle: Constantly fighting that delusion.
Allen: Mm hmm. So it’s interesting. It’s something that is, you know, I’m playing with it. But it’s money that I can afford to lose. And the bread and butter is still, you know, stock market options trading.
Kyle: That’s why I was gonna ask you what I mean, because now that you have a real risk manager side to you, like, what’s your, how do you limit your risk then onto that? I’m assuming you do it based on like, a small percentage of your portfolio or like this is probably just play around money, right, especially when you’re learning?
Allen: Yeah. Yeah. So um, you know, I bought 30 grand of Ethereum. And that’s is what I’m about to put at risk and all this stuff. So, but some of these coins like they’re brand new, right? So they’re little, and they can go up 500, 800, 10000% and then they will back down. Yeah. You can have a really big move. And some of the people that I know, they’ve this year, this past year, and this is why I got into it, because they took like really small amounts, and they’ve made you know, they have a million dollars or $5 million, or $3 million worth of cryptocurrencies. And I was like, why aren’t you selling, you know, yeah. And then they go off and they’re like, Well, you know, it’s gonna go up more and you know, I gotta pay taxes. I don’t want to pay 50 2% taxes or more moved to Puerto Rico and so they have all their reasons for..
Dan: Transfer for a more stable one.
Allen: Mm hmm.
Kyle: Dan just had this same conversation with a couple of his friends.
Dan: Yeah, yeah, mate. Yeah.
Kyle: 50% on the latest dip on Bitcoin and then refuses to sell any
Kyle: It’s 10% Yeah, yeah. Yeah, exactly. That’s like like you’re saying like, take your money out. Let let it be house money. Yeah, exactly. Not getting risk on anything come on.
Kyle: And then you got money to reload because it drops again. Yes, I want to have some ammo laying around the to jump into something when the opportunity strikes
Allen: Yep. Now I think you guys are you guys are traders you know you guys are watching the markets, you guys are there in the front of the screen, I’m not that much into it, you know, I’ll keep my screen open but I’m not checking all the time. And so for me that’s a little bit harder. And so, you know, I for my bitcoin and Etherium or whatever I’m not, I’m not selling, you know, even if it dips or goes up, I’m not selling I know I’m gonna hold it for another maybe 10-15 years. So hopefully it keeps going up, but we’ll see how it goes. But for now the idea was, hey, just buy it, hold it. And if it keeps going up maybe you add a little bit here and there. So I’ve been doing that.
Dan: No,but yeah, that’s your plan. It’s a long term plan. You’re not trying to strike it rich the people that are buying into these things trying to strike it rich and then refusing to ever sell.
Allen: Oh, that’s silly. Yeah
Dan: Yes. Like you gotta get paid some point
Allen: There was one guy on the had an article where he became a Dodge coin millionaire and he’s like, I’m not selling like..
Dan: Oh, no, not a millionaire anymore.
Allen: What’s the point?
Dan: You never were a millionaire, coz you never sold.
Kyle: Exactly. Have you come across anything? I guess staking is kind of similar to derivatives. But like, If there comes a time where you can sell calls on your Bitcoin you can do something like that.
Allen: So yeah, so they just came out with, is it bati? I forget the name of it. Dang it. The the first ETF Bitcoin ETF just came out.
Dan: That’s Yes, that’s right. Um, that was a futures based one too, though, isn’t it?
Allen: Bitl. There we go. So, that’s tradable. And that that has options. So, you know, right now it’s at $39. I don’t know if that’s cheap enough for your wheel. But..
Dan: I think what cuz that’s if that’s based around a futures contract, it’s going to be constantly losing money too overtime, right?
Dan: Won’t you get like double decay if you. So decay of the futures contract. And every time,
Allen: Yeah every time they roll it forward a month they lose, right? Because I have all the fees and stuff to pay. So that is something..
Dan: That might be a really good one to sell Options.
Allen: Yep. So I mean, I, you know, I’ve sold some calls on it, because I was like, Okay, if bitcoin goes up, and they’re saying, you know, bitcoins gonna be 100,000 by the end of the year, I was like, Okay, I’ll sell some calls on it. And or no, sorry, I’ll buy some calls. I bought some calls. This is one of the few ones where I’m actually buying calls. Now that trade is still negative. But you know, it’s a bet, you know, it’s a bet. If it goes up, great.
Dan: Yeah, just manage that risk.
Allen: Mm hmm.
Dan: So let’s wrap things up with I want to ask you some questions about just some of the most common mistakes that you see from your students, or just the biggest struggles that they have and how they had to overcome those. Okay, yeah. So if you’re going to give us like, just the top couple pitches, see?
Allen: Okay, so first off, I would say is that they try to do too much too soon. And so one of the things that I always stress is, Hey, pick one strategy that fits who you are. And just focus on that one strategy, get really good at it, hammer it, do back testing, or get some back testing software, pay for it if you have to, and just do trade after trade after trade after trade until you understand it, until it’s like, you know, second nature to you and you’re consistently profitable. Only at that time, should you then venture off and say okay, let me add another strategy. Right. So that’s the that’s the first thing that I tell everybody a second thing is not all strategies are for every person. Mm hmm. Like for me if you told me Hey, you know, I’m gonna put a gun to your head and you have to be be profitable at futures trading, or be like well, you know, goodbye
Allen: You know, tell my wife I love here. you know, telling her that life insurance is very well
Allen: So it’s not for me, you know, my temperament my style, the way I I am the risk temper the the risk appetite that I have is different than everybody else. And so you got to figure out what strategy and there’s 1000 strategies and there’s every every strategy out there you can make money there are people out there making money with futures day trading and, and Options on futures and, you know, pairs trading and whatever you can think of people are doing it, some of them making money, most are not, but if you find the thing that fits you and you’re like, you know what, this this really, really makes sense to me, I really get this, then that’s the one that you should focus on. Most people are just like, Oh, hey, you know, I found my friend is doing this or I can make a lot of money doing this or I saw an advertisement, I saw an email, and then they run into it, and then they get blown out of the water.
Dan: We actually just had a discussion on that not too long ago, Dan, about, you know, when you try to copy somebody else’s strategy, it’s not your own, you don’t have time and effort that you’ve got put into learning it, you’re not passionate about it. So what you’re saying makes a whole lot of sense. Like, yeah, you need to find the thing that speaks to you.
Allen: Mm hmm. And I guess, if I give you one more, it’ll be that time goes by a lot faster than we realize, hmm. And so if there are people out there that have already paved the way, and you know, for a fact that they’re doing well, then just do what they’re doing, you know, or at least learn from them. Yeah, learn from, you know, if you can hire them, hire them, and just see what they’re doing, learn, watch their strategies, and just do what they’re doing. And hopefully it should work, right. And then you can tweak it once you do what they’re doing. And once you’re getting good results, then you can start tweaking it and be like, okay, you know, I’m gonna make it a little bit more conservative, a little more aggressive, a little bit this little bit that, but follow the plan first, you know, make it work, and then you add your own twist to it. We have so many people that come in, they’re like, you know, I’ve been following you or I’ve been listening to you for two years. Okay, how many trades have you done? Well, not really. You know, I’ve been trying to do it on my own and watching free YouTube videos, like, Okay, well, you only get so far watching free Youtube videos, because you don’t number one, you don’t know how legit they’re right? That’s one thing. Anybody can like I say that, you know, any idiot can make a YouTube video.
Allen: It used to be hard to write a book, you know, you have to go to a publisher get published and have references and all that stuff nowadays. Man, you put up a PDF on Amazon, it takes like a weekend. So don’t be like, Oh, I’m an author. Okay, great. You know, everybody’s an author. No. So it’s really you got to be really careful of what you listen to.
Kyle: Speaking of which, where can they find your book? PassiveTrading.com. Yeah, that’s PassiveTrading.com. It’s a free book, you know, just pay for the shipping, and we’ll ship you out a printed copy of it.
Dan: So PassiveTrading.com, we’ll link in the description for that. Yeah. Is there anything else that you want to share with the listeners before we sign off here?
Allen: No. I mean, it’s been a lot of fun. You know, you guys, you guys are awesome. And I love it that you guys are honest. And you share the wins and the losses. Most of the time, you only see oh, I made 1,000,000% Oh, I made 20%. You don’t see the losses, you don’t see the the nitty gritty behind the scenes stuff. And you guys are showing that. So that’s I love that part.
Dan: Well it’s the same thing with gamblers too, right? You talk to a guy who goes to the casino and says, Oh, I won $300 last night. Oh, how much did you lose the night before? Yeah.
Allen: Um, but yeah, I mean, if people are interested in Options, it’s a great, it’s a great way to add some passive money, you know? And if that’s, if that fits, you know, it doesn’t fit for everybody. Like some people, they come in and, and they’re like, Yeah, I’m trying to do this, but I’m, I’m doing this and do that. I’m like, Dude, you’re too aggressive. You know, if you want to be trading every day or every other day, then this is not for you. You know, find something you can do this part time, and then do with the rest of your time. Play something that fits your style more, but that’s really important. You know, find your style, and then it’ll just it just a whole lot easier. It’s just which is way easier.
Dan: What else can they, so we find your OptionGenius.com. You’ve also got your podcast.
Allen: Yep. It’s called the Option Genius Podcast.
Kyle: Oh, hey.
Allen: Yeah, we got really creative with our very own brains.
Dan: All right, perfect. Yeah, we’ll make sure we link all that stuff. Right. So if anybody wants to find out more they can check it out the description.
Kyle: Yeah, yeah, absolutely. Thank you so much for joining us Allen, this has been a great conversation all of your your knowledge and experience has been a good time to listen to. We really appreciate you coming by the shop and talking with us today.
Dan: Yeah, the hardships too, because I feel like you learn more from those sometimes.
Allen: Mm, yeah. They hit on the head. You know, sometimes you got to do it over and over again. Eventually, they eventually they sink in.
Kyle: Alright, well there you have it, folks. We’ll have all of that fun stuff in the episode description all those links for you. Any parting word, Allen?
Allen: Just you know, I I tell everybody you know, trade with the odds in your favor.
Dan: The odds be ever in your favor.
Kyle: It’s like in the movie?
Kyle: All right. Well, I guess it’s time to kick everybody out. You don’t got to go home but you can’t stay here. Until next time. Happy trades.
Allen: Bye, guys.
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