The Options Whiz? How About Investor Beware

In this month’s (September 2012) SmartMoney magazine, they ran an article about normal people who are trying to make their fortunes by trading. It kinda reminded me of the Tech Bubble when every article was about normal Joes making a killing day trading, and the housing bubble when everyone and their mother was out there flipping houses.

One of the profiles caught my eye. The guy’s name is Patrick, 43, and he used to work at Washington Mutual until he got laid off. So he moved back in with his parents to save money and spent a year learning how to sell options. After numerous courses and seminars, he decided to focus on iron Condors and spent 6 months trading condors in a small account.

Option Investing

All of this is great. He seems serious and really wants to learn to trade. More power to him.

What pissed me off was the fact that he just got licensed as a Registered Investment Advisor (RIA) and wants people to give him money so he can trade condors for them.

Say What?

This guy, who at 43, lives with his parents, has less than $100k to his name, hasn’t been trading for more than a couple years, wants others to let him trade for them?

Could this be the problem with the financial management industry? That people with no experience, no track record, and who frankly do not even know what they claim to know get to gamble with other peoples’ money.

Sheesh. This guy’s trading makes him so stressed out that he had to take up boxing to relief the stress. He can’t even discuss what he does with his parents because it freaks them out. He gets up at 2 am to watch what the European markets are doing. Oh, and he meets potential investors at Starbucks because of course the only alternative is to have them come to his childhood bedroom.

Hey Patrick, how about you:

  1. Make enough from your own trading to pay your own bills.
  2. Trade well enough to beat the markets for at least 5 years
  3. Stop mooching off your parents

And after all that, then you try to do the same with someone else’s money. Because in the beginning who is going to give you money to manage besides your friends and family? And once you lose their money, you are going to need a lot more than boxing lessons to relive the stress. Or maybe the boxing lessons are for self defense incase angry investors hunt you down after you lose their money.

Got something to say? Please leave your notes in the comments section below and be sure to check out our previous blog posts for option trading, option selling tips and different types of trading.

Also, please browse our options training and products section for stellar options trading course and options trading training.

21 Comments

  1. jay on August 28, 2012 at 1:00 pm

    That’s why this is America. one doesnt have to be successful to become successful. not sure why Youre so upset.

    • Genius on August 28, 2012 at 2:37 pm

      I guess I did not explain why I was angry.
      I get emails from people everyday that have a limited amount of money for retirement or savings that desperately need help making ends meet. They turn to the market hoping for a quick buck. But there is no free lunch. I tell them to spend some money on education and learn to trade for themselves. You cannot just give your money to someone and hope they don’t lose it.

      I am afraid they will turn to people like this fellow that don’t have enough experience and will lose it all. There is nothing more stressful to me than managing other peoples’ money. And when you are that stressed out, you lose focus and make mistakes.

  2. Rick on August 28, 2012 at 1:15 pm

    Well, since you bring this up — and this may sound snotty, but I really don’t mean it to be — aren’t all of you guys essentially doing the same thing? How is it that just about every options-related service I’ve come across, charges a subscription fee upwards of $50-$90/month for information that, let’s be honest, COULD be found by doing enough research in the freely-available info that’s already out there? Aren’t you covering your margin costs by charging x-amount per month just so I can copy your picks because I’m too lazy to learn how to do it myself? Or if you are personally insulted by these questions (and again, I’m not trying to insult you, just to lay our cards on the table), do you tend to think that OTHERS out there are doing what I’m describing, although your motives might be above that?

    I receive emails from you since I got on your mailing list several months back; your service along with several others I looked into. Several times I have been tempted to become a subscriber– but then a voice tells me that that money could just as well be spend funding my trading account, rather than funding somebody else’s.

    Just asking.

    • Genius on August 28, 2012 at 2:51 pm

      I can only speak for myself, not any other service.

      Can you find what I cover on my site for free online? Nope. I have tried. I have taken plenty of high dollar courses and seminars as well that cover some of the finer points that are never covered in free forums or in intro to options books.

      For example, trading by the greeks is a very difficult concept to master. I have never seen it covered in a book or online. I only learned by watching a friend and long time trader.

      I have described why I started this site in the past, so that I would have an income stream besides my trading. My wife doe snot understand what I do and she get svery stressed out about it. So I have a small income from this site and that gives her piece of mind. I also get to converse with other traders, it keeps me busy during the day, and I get to stay on top of the latest internet marketing topics.

      What I charge is to help people learn by going through the material on the site and by watching someone do the trades in real time. I have no doubt that if I had acess to a service like mine, where I actually answer trading related questions, that I would have learned to trade a lot faster and would have lost a lot less money in the process.

      • Rick on August 28, 2012 at 4:55 pm

        Fair enough. I asked and you gave a decent answer. Thanks.

  3. Sowhatt on August 28, 2012 at 1:24 pm

    How is this your problem. You don’t need 5 years to prove yourself. After less than 2 years of trading full time I’ve beaten the markets and most pros. So people just get it quicker. I understand that this may take away from your subscribers base but being envious of others success is not good karma.

    • Genius on August 28, 2012 at 2:40 pm

      No it’s not my problem. It’s everyone’s problem. Fools like him and fools that give him money eventually lose their money. Then they complain to the government who steps in and creates more regulations which increases trading costs from everyone. That’s already why so many peole have trouble getting approved for the highest levels of option trading accounts.

      If you have only been trading for 2 years, you havent been though any real market turbulence. Good luck to you when it shows up.

  4. Dave on August 28, 2012 at 1:29 pm

    haha this is pretty funny. iron condor/credit spreads are one of the fastest ways to lose money. just wait for the next volatility spike and how this will affect these trades. trading someone else’s money is ok because these are idiots as well, giving away their money blindly.

    • Genius on August 28, 2012 at 2:42 pm

      Well that’s not true either. Condors and credit spreads are not as affected by volatility spikes as other strategies and do very well, if managed properly.

  5. Dennis Kennedy on August 28, 2012 at 1:38 pm

    The scary thing Alan is that he just may find a fish or two with his stink bait. I have been trading 12 yrs and wouldn’t be arrogant enough to trade anyone else’s hard earned dough but my own.

  6. Kim on August 28, 2012 at 1:42 pm

    So true and sad at the same time.

    The problem is that technically, trading is so easy. You need to study 4 years to become an engineer, 7 years to become a doctor, another few years of practice to become a good one. With trading, the only barrier is having some money. And after few months, just do a few months course and you can trade money for others.

  7. derry on August 28, 2012 at 2:02 pm

    How much capital do I need to trade with you?derry

  8. harry on August 28, 2012 at 2:39 pm

    Agree with Jay – it’s up to Patrick what he wants to do, and no one else has the right to tell him that he’s not allowed to invest other people’s money, if the authorities have seen him fit enough to grant him a licence.

    OptionsGenius – why not do the same thing as Patrick?
    Surely with your experience and track record, you should have no competition from people like him?

    Just a thought

    • Genius on August 28, 2012 at 3:00 pm

      I am not saying he shouldn’t do it. I just want people that manage money to actually know what they are doing. They should have to prove that they have actually been successful at what they are proposing to do for others.

      Maybe there could be like a ranking or scorecard for money managers. With criteria such as how well they have done in the past, how long they have been trading, how much education they have, if they are risking their own money and how much, etc.

      For example, take financial advisors. These are people that take classes to learn how to advise about finances. But if they are so smart and know so much, why aren’t they rich? That’s why fee-based advisors are very popular right now. Instead of being salesmen, they are actully advisors.

      I have thought about managing money, but the stress is too high. I hate losing my own money. I cannot even imagine how bad I would feel risking/losing someone else’s money.

  9. Kim on August 28, 2012 at 3:11 pm

    The biggest problem is that people are looking for shortcuts. They are tempted by false promises to double their money in a short period of time and don’t understand that there are no free lunches. There are a lot of bad services and advisers out there and they make a bad name to the whole industry.

    From what I could see, Optiongenius is one of the better and more honest and transparent services. I’m not a subscriber and not affiliated with Optiongenius in any way, but you can usually learn a lot from the way the service is marketing itself.

    Trading is like any other profession, it requires hard work, experience and time to succeed.

  10. Barry on August 28, 2012 at 3:40 pm

    As someone who dispels trading advice myself, I find that those who ultimately end up doing well … and succeeding in the markets are those that do take the time to learn how the markets operate … and how to trade them.

    Like you genius, I’ve spent thousands and Lord knows how much time trying to discover how to beat the markets. If this were an easy endeavor, everyone could do it.

    But we know it does not work that way.

    Heck, if it did, you could buy one of those highly touted Forex robots and just sit back and watch your equity grow!

    Thanks,

    Barry

  11. David on August 28, 2012 at 4:40 pm

    2 words…..Bernie Madhoff (sorry about the spelling)
    Anyone can lose anyone else’s money. Learn to do it on your own or be prepared to lose…..your own fault if you do.

  12. Jacob on August 29, 2012 at 12:12 pm

    Why let others invest your own money, do it your self. You definitely will get lots of excitement during trading. I agree with Mr. Alan, one or two years trading is just the time needed to strengthen the trading foundation.

  13. Mike on September 10, 2012 at 8:35 am

    If I ever have a chance to manage other people’s money I would jump on that chance in a heart beat. Think about it – you get paid no matter how good or bad your performance is. Look at a typical hedge fund compensation structure: 2% or assets plus 20% of profits. Worst case is 2% of a 100 mil? Sign me up!

  14. wannabe trader on September 12, 2012 at 3:14 pm

    with 9 figures plus under management, it is a good gig.

  15. Rowena Lim on April 30, 2013 at 12:28 am

    I think one has to live up with his own judgement. If he thinks he’s ready enough to take a risk for other people’s money then he better be ready for whatever consequences it might bring him. Personally though, I’d say use the resources you have at hand only after enough considerations and learning have been made on your part. Like what I have said, one has to live up with his own judgement.

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