Podcast – Episode 50 – What is Passive Trading?
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Allen: What is passive trading? Passive trading is a new, revolutionary, amazing way to trade in the stock market, to invest in the stock market, while getting better returns and still having more safety than normal. Now, we do this in a couple of different ways. But, normally if you are investing in the stock market, on average you’re going to make around eight percent a year. Well, what if you could do better than that? What if you could do double, maybe 15, 16% a year, or more? While at the same time, having more safety?
Allen: Because, if your money’s in the stock market, at any time the market could drop 50% or more. You could lose half your money in the blank of an eye, and it’s possible at any time. It has happened in the past, it has happened throughout history. It can also drop 20% in a month, it could go from a bull market, to a bear market in just a few days. We’ve seen that happen over and over again in our lifetime. Corrections are 10%, you know? That’s a 10% loss of your money, and that’s considered normal.
Allen: But, what if you were doing passive trading, and instead of losing that much you had a hedge? You had a way to limit your losses, so that the losses were not so great? Wouldn’t that be exciting? I mean imagine, you could make more than normal, and still have a hedge, and lose less than normal when the stock market drops. That is what I’m talking about with passive trading.
Allen: Now, there are many other benefits to passive trading. One of the reasons I call it passive is because, I want it to take as little time as possible. My whole purpose of having it called passive it so that it is as hands off as possible. It does require some time on a monthly basis, but a few minutes to maintain your investments, to maintain your portfolio, is what is required. If you are able to trade a few minutes a month for additional gains, then passive trading is definitely for you.
Allen: Now, when we talk about investing, there are many different ways to invest your money. But, they fall into two major buckets, right? It’s either active, or considered passive to some degree. Now, when we talk about active investments, we’re talking about stuff like day trading, we talk about stuff like futures, or commodities, cryptocurrencies is very popular nowadays. For those of you who are not investing, active methods to earn and income would be stuff like getting a job, owning your own business, being a self employed professional, like a doctor, or a lawyer, or an accountant. All those are active.
Allen: Trading options is also an active way to do it. But, what I wanted to do was to find a way to do it passively. Where, I don’t spend a lot of time because that’s kind of the definition of passive, right? The definition of passive means that you don’t spend a lot of time. Normally when we think of passive investments, things come to mind like real estate. So, buying real estate and renting it out. That is considered passive to some degree. Buying and holding stocks is passive, ’cause you’re just buying them, and you’re just holding onto them come hell or high water. What else is passive? There are numerous other investments, annuities, life insurance, all of these are all passive.
Allen: But, a lot of the times when it becomes passive, you give up control. The reason that we wanted to be active, is because we want to be in control of the situation because I firmly believe that there is no one that cares about your money more than you. There is no one that cares about your investments, more than you. Yes, there are investment professionals who will give you advice. They will invest your money for you, they will run syndicates and say they have these special projects that you can invest your money in. But, they all come with risk. A lot of the risk in passive investments is that it’s illiquid, meaning you cannot cash out right away. Real estate is very illiquid. If you want to sell a house, it can take anywhere from 30 to … 30 days, to six months, depending on the market. Life insurance, annuities, all of these passive type investments are usually illiquid. That is really the knock against passive.
Allen: In order for you to invest in most of these passive type investments, you already have to have significant reserves, and significant amount of money to invest. Most people don’t have that. What if we had a way where we could control our money ourselves, and like I said, do better than the average, loss less than average, and still not have it take a lot of our time, so that we can actually go out and enjoy our lives? That is what I’m talking about in this book. That is the whole purpose behind passive trading.
Allen: Now, it gets even better. Because, normally when you’re in the stock market, you buy a stock and you hope it goes up. But, it’s really a 50/50 coin flip, you know? Over time hopefully it’ll go up, but there’s no telling. You might pick the wrong stock and it goes down, and it stays down, and goes out of business. We never know. But, what if there was a way that you could trade in the stock market, and place very, very high probability trades? What I’m talking about when I say high probability is, we take statistics, and we make trades that statistically speaking have a very high chance of working out in our favor, and actually making us money. So instead of a 50/50 coin flip, it could be a 70% probability of making money, or 80%, or 90%, or 95%. The percentage of probability that you want is up to you, when you’re placing passive trading trades.
Allen: Now, passive trading has two major components. The first is that we own stocks. But, we don’t own just any stocks, we don’t want to own every single stock in the index, we don’t want to own every stock in the market. We prefer to own high quality companies that are not very volatile, that pay off dividends. That’s an important part, because when it comes to company’s telling us the truth, there are not too many ways to know if a company is actually being honest with us.
Allen: Now, you might say that, “Well Allen, the company has earnings reports, and I could read the earnings reports and find out how the company’s doing.” Or, “I could listen to the conference calls that the company does with investors, and I could hear from the executives of the company about how they’re doing.” Or, “I could talk to analysts, and the people on Wall Street that cover these companies, and know how they’re doing.” Those are all great, but they can still lie. The most classic case of this was Enron. Everybody thought Enron was doing great, until it wasn’t, until it went bankrupt. Because, they were cooking the books. If you go throughout history, they weren’t the only ones. Many, many companies have had problems, gone out of business, because they were not being honest. Many other banks have lost billions and billions of dollars, because they got greedy, because they went outside of what they should be doing.
Allen: Even take a look at mutual funds. Mutual funds are only required to tell you what they hold, what stocks they own, every quarter. So every quarter they come out with a report saying, “These are the stocks that we own, and what percentages.” But, during the quarter they can buy and sell any stock. Even if they’re not supposed to. If it’s a mutual fund that invests in utilities, that fund could own something like Facebook, and you would never know. I mean, I don’t know how often this happens, but we’ve heard stories, and it’s been in the news. It has happened in the past. But, without inside knowledge of any particular mutual fund, we don’t know if it happens in them. But, I’m just giving you an example of what could happen.
Allen: When it comes to dividends, giving the investors back a portion of the income of the company is one of the most surefire ways of knowing that a company is doing well or not. Not only that, but the dividend will increase our yield. Now, you might be saying, “Well, you know, I could invest in a company that’s a high flying company, and could make me 20, 30% a year. Or, I could put my money in a boring dividend paying company that only goes up four, five percent a year, and gives me a small dividend. That’s true. But, our purpose here is not to buy high flying companies, and to trade in and out of these high flying companies. If you want to do the research, if you want to bet that the next stock that you pick is going to be a high flying company, be my guest. That’s not very passive. That’s called active trading. That’s not what we’re doing here.
Allen: We want to buy companies that are going to be around for 100 years from now, that are going to be a dividend, so that we know that they’re safe. When they pay dividends, that decreases the volatility of the stock price. I don’t want a stock that’s going to go from $50 to $100, back to 75, to 125, back to 50. That’s not the kind of stock I want to be trading. I want to buy a stock that starts at maybe 40, and goes to 43, 47, 45, 49, 52, in a year. I would be happy with that type of company. Because of the second part of passive trading, which is where we trade options on these companies. We don’t just buy options, we sell options, and there’s a big difference. Now, we’re going to have a whole chapter on how options work, and how to understand the lingo behind them if you’ve never traded options before.
Allen: But at this point you have to realize that, when we sell options on particular companies, we get paid to do that. If a company is giving us a return of, say eight percent a year in the yield, if the company, if the stock goes up eight percent. They pay us a two percent dividend a year, that gives us a 10% gain on that particular stock. But, by selling simple options, my one simple option strategy, you can make another one to two percent per month. Even if you only made one percent a month extra from the options trading, instead of a 10% gain you now have a 22% yearly gain on the same stock. Again, with less volatility and less risk, in a company that is stable. That’s pretty cool in my book.
Allen: Now, when you’re selling options, there are many different ways to look at it. But, one of the ways to see it is as if you are selling a lottery ticket. There are many people out there that buy lottery tickets. I mean, lottery is huge multi billion dollar business. People become addicted to the lottery, and it’s sad, really. Because, they have such a small chance of winning, but that small little hope keeps them coming back, and buying more, and more, and more, and more tickets. But, what is the goal of the lottery, right? If you’re buying a lottery ticket, your goal is what? Take a small little risk, hopefully it’ll pay off really, really, really big.
Allen: When you look at it that way, yeah, I’ll spend five bucks on lottery tickets, or $10 on lottery tickets. That is the thinking of a gambler, that is the mentality of a gambler. Now, the people that sell the lottery tickets, they know that it’s a loser’s game. They know that they are going to sell a lot more in tickets, than they’re going to pay out in prizes. That’s why they do it, right? It’s very similar when we’re selling options. We are selling options to gamblers, to speculators. People who want to bet that a particular company, or a particular market is going to shoot in one direction. The problem for them is that, it is incredibly difficult for that bet to pay off. That is why when we sell options, we have such a high probability of profit. We have such a high probability that our trades are going to make us money, and for the person who buys the option, to lose their money.
Allen: We’re going to get into some examples later on, but for now I want you to understand that selling options is a simple way to add yield to your account by just clicking a few buttons. Once we go through the examples you’re going to see how easy it is, and how little time it takes. But, if you’ve never sold an option before, you might be a little bit concerned. But, the way we do it is perfectly safe. And, because of the way we do it, it allows the passive trader to have consistent profits, as well as consistent gains. I know people who trade in different ways, and one of the biggest complaints that they have, is that there’s very little consistency. They are dependent upon the market. If they are a day trader, they need a lot of volatility to be able to find trades. If they are a bull-ish investor, like most people are, they find it very hard to find trades and make money in a bear-ish market.
Allen: If the markets are going sideways, most traders find it very difficult to make money. And, the overwhelming truth is that, most markets are moving sideways 70% of the time. So, 70% of, take any time period. One year, five years, 10 years, you will notice that, that particular market or stock is heading sideways. Only 30% of the time is it in a uptrend, or a downtrend. With passive trading, we take advantage of that, and we can make money in all types of markets. Upwards markets, bull-ish markets, bear-ish markets, and sideways markets. In fact, the sideways market is my absolute favorite market. Because, I can easily sell my options over, and over, and over again, and consistently take out income from the markets, without having to do very much.
Allen: Because, when you’re selling an option, like I said, you’re selling a lottery ticket. The lottery ticket, well, it doesn’t last forever. It has a timing on it, so when is the lottery going to take place? Same thing with our options. Our options have an expiration date, and so the option buyer has to pick a stock that they think is going to move in a direction. They have to be right on the direction. They have to say, “Okay, this stock is either going to move up, or it’s going to move down.” They also have to be right on how much is it going to move up or down? Is it going to move up five percent, six percent, 10%, 20%? They have to be right on that as well.
Allen: And, they have to be right on when the move is going to occur. Is it going to happen in a day, a month, a year? They have to be right on all three of those metrics. That is why experts have said that over 80% of options expire worthless. Meaning, that somebody bought the lottery ticket, and it did not pay off. 80% of the time. You can imagine as an options seller, we are winning on most of our trades. When you win on most of your trades, that provides you with consistency, and profitability. So, we do not have a rollercoaster. Most active, most investors, especially stock traders, they have the rollercoaster equity curve. Meaning, they make money, and then they lose money. Then they make money, and then they lose money. They make a lot of money, and then they lose a lot of money. That’s not our goal.
Allen: Our goal here with passive trading, is not to hit home runs or grand slams. We are not looking to become millionaires, or billionaires over night. You are not going to retire over night. This is a process that puts the odds in your favor, but it does take time for your gains to add up. What we’re talking about, is we’re talking about making two, three, four, 10% per month. Now, that’s not going to make you retire over night, or turn you into a mega millionaire over night. But, month after month, year after year, if you continue and you compound, or you take out money for income. But, if your account continues to grow, that turns into a very, very large sum of money very quickly. Faster than you imagine. That is the whole point of passive trading.
Allen: Now, when I started, I’ve been trading options, I’ve been a full-time trader for over 15 years. I started by trying all different types of trading. I tried futures trading, I tried day trading stocks, I tried 4X … Not, not the 4X markets, I tried commodities, I tried options, I tried all manner of things. But, I learned that most of these types of active trading require you to be very good at what’s known as technical analysis. Now, technical analysis in simple terms is, the ability to look at a stock chart, and determine what the stock is going to do next.
Allen: You’ve heard different analysts come on the financial media, or maybe you’ve subscribed to some emails of theirs where, they tell you that there is … They look at a chart, and they start drawing lines all over the chart, and they show you, “Oh, there’s a moving average, and there’s support over here. This stock is going to bounce off of this number here, and it’s not going to go higher than here.” Then, they might use very complicated, technical indicators. There are thousands of them, actually. Many thousands technical indicators that people use to try to get a leg up on the stock market.
Allen: Unfortunately, most of these indicators do not work at all, or if they do work they do not work with any regularity. Because, if they did work, then these technical analysts would be so rich, that they wouldn’t have to be doing technical analysis anymore. They’d be the richest people in the world, because they could look at a chart and tell you what’s going to happen. But, that’s not true. There are very few wealthy technical analysts that got that way because of their skills. Most of them become wealthy, the good ones become wealthy because of their marketing skills, because they teach the other people how to do the analysis, or they will sell you their newsletter to tell you what they think is going to happen. Or, they write books, or they create new indicators for you to buy. All of which is self defeating, because they still don’t work. In the end, technical analysis doesn’t really help.
Allen: And so, in passive trading we use technical analysis somewhat, but we are not overly reliant on it. If you are an active trader, you need to use technical analysis to try to figure out what your trading instrument is going to do next. But, most people can’t tell you, because most of the indicators are not working consistently. It might work, it might not work. You never know, so you cannot be completely dependent upon it. That is why most active traders lose money. That is why most people trying to make millions from their trading, lose money. That is why I lost money, because I for one, do not know very much about technical indicators, and I am not that good at technical analysis. I know enough, and that’s all I want to know because it’s good enough for my purpose.
Allen: And so, when I found what saved me, what saved my family, what saved my health, my income, was the strategies of selling options. Those strategies is what helped me to turn my trading around, to become a consistent trader, to become a wealthy trader. But, I always thought in the back of my mind, that I wanted a simpler approach, because selling options can be very complicated. There are many different strategies to learn, there are many different ways to fix those strategies, to adjust those trades. And, unless you spend a lot of time learning and trading, you can lose money.
Allen: What I wanted was a way that I could spend even less time trading, and more time doing what I want to do in life. While, still making very good income, and very good returns from my investment, from my portfolio. That’s when passive trading was born. Because, if you only trade options, you do not have the stability of stocks. You do not have a firm foundation. If you only trade stocks, you have a foundation, but you don’t have any rocket ships that can really, really boost your returns. When you have the foundation and you have the rocket ships, you have the ability to take a small amount, and really make astronomical gains. Turn it into a very large amount, very quickly. That is what sets passive trading apart from all other types of trading.
Allen: Now, when I talk about how much time it takes, that really depends on how much time you want to devote to it. Just like anything else, you can be very conservative in passive trading, or you can be a little bit aggressive. If you are very conservative, then adding another 10% to your returns every year, very doable, very easy to do. Whether you do it in a retirement account, or a taxable account, you can do that in probably less than 30 minutes a month, no matter how large your portfolio is.
Allen: If you’re more aggressive, then you can make a lot more. And so, 100% yearly gains are very achievable. They will take more time. But again, probably not more than an hour or two a month. The thing to know with these options is that, when they expire, the trade is over. Options have, there are many different types of options that have different expiration cycles. You could have an option that expires in a week, you could have an option that expires in a month, two months, six months, a year, two years. I like to focus for passive trading on options that expire less than two months. Two months or less. When they expire, that trade is over, so I get to sell more options, and get into another trade. That is why I say that it will take a certain amount of time every month. You cannot just put these trades on and forget about them. You do have to check in on a basis, maybe every month, maybe every week, or whatever you feel comfortable with. But, you do need to check in on them.
Allen: But, like any other passive investment, you still have to check in on it. If you own a residential property that you are renting out, if you are managing it, then it’s not really passive, because you can get phone calls all, all hours of the day or night. If the rent doesn’t come in, you have to get on the phone. You might have to go through the eviction process, you might have to do all of that.
Allen: Now, to make it truly passive, you can then turn it over to a property manager who will then take a very hefty fee for managing the property, and handling most of the headaches. But then, you lose a large portion of your gains. Even then it’s not completely passive. Like I said earlier, real estate is illiquid, and with real estate you really have no control over the money. You have control over what the house looks like, the upkeep of the house, but when it comes to the neighborhood, when it comes to the economy, when it comes to rents, that is really outside of your control. You buy a house in a neighborhood that becomes a bad neighborhood, your investment loses value, your rents go down, and you couldn’t do anything about it.
Allen: When it comes to passive trading, you actually have full control over all of your money all the time. Your money is liquid all the time. Meaning, if you want it, you take it all out. You can sell everything, let your options expire, and it’s liquid, it’s cash. Or, you could keep it, and keep compounding it, making it growth month, after month, after month. And either, you can let the account grow, or the money that you get from selling options can be used as income, as cashflow. Because, when you sell an option, you get that money in your account right away. If I were to sell an option today for $100, that $100 would be in my account today, and I can actually take it out and use it however I want. Because, that is the price that I sold the option at.
Allen: There are some passive traders who are retired, and their houses are paid off, they’re doing well, they have enough savings. What they really want is more monthly income. So, they use their accounts and they sell options on their stocks, and every month whatever they make, they take it out and they enjoy it.
Allen: There are other passive traders who are just getting started, so they’re younger. Or, they’re worried about retirement, and so their main focus is to grow their retirement accounts, or their savings, or their investment. And so, whatever gains they make, they leave it in their account so that the account can grow exponentially, it can compound. Their gains can compound. If they make five percent a month, if you start off with $100,000 and you make five percent a month, if you do simple math, simple interest, then you have a 60% gain, and that account would be worth $160,000.
Allen: But, if instead you compounded, then in the first month you make a five percent gain. Your account is now worth $105,000. But, in month two you make another five percent gain, your account is not worth $110,000, it’s worth more than that. By the end of the year after 12 months, your account is not $160,000, but it is a huge amount, though we have to figure out with a calculator. Because, it was compounded month after month. We have these passive traders who are just compounding their accounts.
Allen: Then, there are those that want to have their cake and eat it too. These are the passive traders who want both. They want growth, and they want income. If that’s you, that’s fine too. You can leave a portion of your gains in your account, and you can remove the rest and enjoy it as income. Because, it’s your account, it’s your money. You can take it out whenever you want. Nobody can tell you what to do with it. There are no restrictions of when to take your money out.
Allen: It’s really an amazing form of trading, and investing, and once people hear about it their first thought is that it might be too good to be true. That’s what I thought at first as well. But, through this book, and through the stories that I’m going to share with you, and the examples, there are people all over the world doing this right now every single day. That’s why I wrote this book, to get more people introduced to this concept, to get more people introduced to this way of living. Because, the current status of retirement in this country is insane. It’s not working. 100 years ago everybody had a pension fund, and they were taken care of. They would work their whole life, and then their company took care of them, or the government, payroll pension.
Allen: But, that all changed. Now, we are all responsible for taking care of our own retirement. For most people in this country, that scares them to death, because they don’t have enough. To help these people, the monstrous industry of Wall Street was born. Unfortunately, Wall Street looks out for itself more than it looks out for the investors. We have a whole chapter coming up on that, about how Wall Street is actually ripping us off. And that, the only way currently to really get ahead financially through investing, is to do it on your own, and to do it in a simple way.
Allen: My mantra is to keep it simple. If there’s anything complicated, then I don’t want any part of it. I want everything to be as simple as possible, because simple always works. The more complicated you make things, the more things break, the more things can break. And so, let’s keep our trading simple, let’s keep our investing simple, let’s keep the strategies that we use simple. But, very importantly, we have to have the percentages on our side. We have to have the odds in our favor. Just like the casino in Las Vegas. The casino makes money because the odds favor the casino. Wall Street is nothing more than the largest casino in the world. If you want to prosper in this casino, you have to have the odds on your side. With this book, I aim to show you exactly how to do that.
Allen: I am excited for you. I am excited, especially if you’ve never heard of passive trading before, or selling options, or dividend stocks, or investing. Because, it’s a whole new world, it’s an exciting world, and you’re going to meet people in this book that have taken advantage of this situation, and have really changed their lives for the better. Because, they were common ordinary people, just like you, who were having trouble financially. But, they decided to take action. They moved forward cautiously, they used their common sense, they started out small, and they got bigger. I wish the same for you.
Allen: Whatever your goals are in life, whatever your dreams are. Whether it’s a new house, a new car, paying off your debt, paying for your kids’ college, going to see the grandkids. Large or small, whatever your dreams are, whatever your goals are, they are achievable. If other people have done it, you can do the same. With passive trading there are no limitations. All you need is a laptop, and an internet connection, and you can literally be passive trading anywhere around the world.
Allen: If you don’t have a lot of money to start with, that’s okay. You can still start. The smallest trade takes only $100. If you have a lot of money, that’s okay too. Because, you can literally do this with hundreds of millions of dollars, and it will not affect the market. That’s why Wall Street, fat cats on Wall Street use strategies that we do. People like Warren Buffet, he uses the same strategies that I will be teaching you. If they’re good enough for him and his billions, they’re good enough for me. One of Warren Buffet’s quotes that I’m going to paraphrase is that, “If you do not find a way to make money in your sleep, you are going to work until you die.”
Allen: Now, that is a very heavy quote, and I would like you to think about it for a few seconds before you move on. Currently if you have no way to earn money, earn income other than your job, your business, or just sticking your money into a mutual fund, you will continue to work until you cannot work anymore. The sad fact is, Warren Buffet says you’re going to work until you die. But, the sad fact is, that’s not true. Because, most people cannot work until they die. Health wise, they just cannot. Once you get to a certain age, nobody’s going to hire you. Once you get to a certain age, you’re too frail. Once you get to a certain health status, maybe you cannot work, maybe you become disabled, or your mental faculties are not all there.
Allen: And so, the time for you to take action is today. That’s why I’m so happy that you’ve picked up this book. I hope that you read it, I hope that you understand, you take the time to understand what it is, to learn the strategies, and to reach out to us and ask questions. If you need help implementing this, my team and I are available to help you.
Allen: Another advantage of passive trading is probably the biggest advantage, that is overlooked by a lot of people. That, you are actually making money all the time, while you sleep, while you’re awake, while you’re at the beach, and your trades are working in your favor all the time, no matter what you’re doing. And so, you’re earning income no matter what.
Allen: Currently as I write this book, as I type these words, my options are losing value. They are decaying, and I am making money. To me, that is the most freeing feeling, that I do not have to work for my money. If I do not go to work, I will still make money. Now, if you’re working a job, that’s very hard to understand. But, that is what true freedom is. Where you can make money, you can live your life, and not be limited.
Allen: Most other active investments will not make money if you’re not doing them. If you’re a day trader and you’re not day trading, you are not making any money. I don’t want to be glued to the screen. I do not want to be watching the financial media. I do not want to be trading. I love trading, and I’m very grateful for everything trading has given me. But, I would rather be doing other things. For me that is helping other people, playing with my family, playing with my kids, spending time with my wife, going on different trips. One of my guilty pleasures is going on long drives. I live in Texas, so we have lots of highways, and lots of open roads. Whenever I’m feeling in the mood I will just hop in the car, and go for a long drive for an hour or two, and come back. If I was working a regular nine to five, or if I was a day trader, or an active investor, couldn’t do it.
Allen: Another cool thing is that options lose value even when the markets are closed. That includes weekends and holidays. If you sell an option, it’s going to make you money even when the option is not being traded. The price of the option is the same. It cannot go up and down in value, nothing can happen. But, the value of the option will decrease because of what’s known as time decay, every day that option gets closer to expiration. And so, the value of that option gets lower, and lower, and lower.
Allen: I know passive trading has made an immense difference in my life, I know it’s made an immense difference in the hundreds and thousands of people that I have trained. I hope that it sincerely makes a difference in your life. All you have to do is follow the steps that we’re laying out in this book, and the results speak for themselves. If you do not have the money right now, you can start off with what is called virtual trading. Virtual trading is where you get a fake account, well you get a real account but it has fake money in it. And, you can put on trades as if they were real. That gives you practice, it gives you experience, and it gives you what’s known as a track record. If you trade this way for six months, and you show that you have made money month, after month, after month, after month. Not only will it give you confidence, but you can take that track record and show it to someone else that actually does have money, and does not know how to do this for themselves.
Allen: Because, right now people go crazy over minuscule returns. They’re desperate. People are desperate for earning money. If you can show somebody that you can make 10% a month, or five percent a month, that is incredible. And, people will happily give you money to trade for them, even if you have none of your own. And, you can share in the profits.
Allen: Virtual trading also helps because you can, even if you have your money, even if you have a lot of money, virtual trading helps because you can get started with no risk. So, you don’t have to put your money at risk in order to learn. You do it slowly, slowly. You put on some trades, get the hang of it. When you become consistent, that’s when you start investing your own money. You start off slow, start off with a small amount, increase it as it goes along, and eventually you’re off to the races.
Allen: It’s not like starting a business. If you go out and you buy a franchise, or you start a business, you have to put up all the money upfront. Then, there’s a great risk that it might not be successful, and you might fail, and lose all your money. You might even be in debt after all that, and you have to be working hard to the bone to make that business succeed. If it still doesn’t, then you’re out of luck. You lost time, you lost money, you might have even gotten hurt. All those resources, you don’t get back. This is a business, this is a way to generate income and growth, that has no risk to start. You could start today with no risk at all, and practice, and do it, and learn. What other income producing activity can you say that for? There are very few out there that are actually legitimate, and this really works.
Allen: When things aren’t simple, that’s when they get scary. Now, take a look at Wall Street. They keep us, or they try to keep the average person confused by using very large language, very unique language, they try to intimidate, and they try to put the message across that we are not smart enough to handle our investments on our own, that we need them, that we have to give them our money because we cannot do it, because they’re smarter than us, because they’re more educated than us, because they focus on the financial markets all the time for a living. And so, there’s no way that we can compete with these people, or do as well as they would do for us.
Allen: But, when you look at it, when you look under the sheets, when you look under the covers, nothing could be further from the truth. Yes, there are very complicated strategies that some of them use. But, they don’t use them for our benefit, for the individual investor. They use it for their own benefits. The most complicated, the largest, the best strategies are used for their own companies, for their own banks, and investment firms. Unless you are already very, very, very wealthy, they do not want your money in their investments.
Allen: And so, we as individual investors are left with financial planners, and investment advisors, who tell us to put money in mutual funds, index funds, ETF’s, because that is the only thing they know. But, those have limitations, and even then they try confuse us, and make us dependent on them for the proper advice. Because, we don’t know, understand things like diversification, and asset allocation. Even the words asset allocation, is just a more complicated way of saying, “What do you own? What investments are you in?” That’s what a normal person would say. But, a financial planner would say, “What is your asset allocation?” Just to make themselves seem smarter than they really are.
Allen: When it comes to education, the great thing about passive trading is that you don’t need any. You don’t have to go to Harvard to understand what we’re going to be doing. Anybody with a brain can understand passive trading. That is my goal, to make it as simple as possible for anyone to understand. We have teenagers who are using our strategies to make very good money for their parents. Can you imagine? If a teenager can do this, so can you.
Allen: I don’t care if you didn’t go to college, I don’t care if you haven’t been a successful investor in the past, if you lost your money in all different types of investments. I don’t care if you’ve never invested money before. All of that changes thanks to passive trading.
Sounds like you are going to go into using covered calls and cash secured puts. I always thought the return using these methods was small but consistent. You are telling me that the return can be quite substantial without a lot of time and without a lot of emotional stress. I am very interested in learning more!
There is no one size fits all strategy. The one(s) you use should be based on your risk temperament, the time you have to devote, the amount of capital, etc.
I also thought that using this technique required a lot of capital, but you mentioned starting with as little as $100! I look forward to reading/hearing more!
Allen, I’ve sold covered calls for almost 20 years. I made a lot of mistakes early on and now I’m doing pretty much your system. Selling calls on “safe” dividend stocks. I’m also selling puts on safe stocks I want to own. If I end up getting exercised I have a stock I can sell calls on. In other words, It’s a great podcast. The only thing I disagree with is saying that the money you get is yours to use. I don’t think the money is really yours until the option expires or you buy to close.
The credit you get is yours. You can withdraw it from the account or use it for another trade. The amount that you have at risk will need to stay in the account until the trade is over.
How do I get a çopy of the passive trading book. I’m interested.
It is still at the editor. Hoping to have it done soon.