SEEK LIQUIDITY

“A cash-secured put can be used to have a fake limit order to buy the stock while collecting cash. I'm selling the put, so if that person wants to sell the stock to me, I will buy it. If the stock goes down enough to my target price, which I'll base on a P ratio or a dividend yield, I'll end up buying the stock. And if it doesn't, it doesn't matter. I get to keep that premium too.”

“The only barrier to entry when it comes to adding options to the investing you're already doing is knowledge. They say the more you learn, the more you earn, and that is about as true as it can ever be when it comes to investing, and especially with options. You don't have to know everything there is to know, but you have to start somewhere. Start small, practice, and build on those skills.”

“A covered call is when I own a stock and I sell what's called a call option. I'm selling that person the right to buy the stock from me at a specific price, which is usually a higher price. I'm getting this extra premium for just simply putting in a limit order. I can create this kind of fake dividend cycle every two weeks in a lot of stocks.”

“When we look at stock prices, risk is measured by something called standard deviation. Basically, what it means is it measures how big price swings are. When we diversify, that smooths that out. But options enable us to take that yet a step further... we can actually use options on that ETF and further tip the scale in our favor by reducing the standard deviation and squeezing a little more juice out of it and improve our returns over time.”

“We call it the wheel because it rotates from one trade to another, and it's a continuous cyclical process. Once I sell a covered call and the option expires, great, I sell another one. For those times when the stock goes up and I sell the stock, I'll allow my stock to be called away from me. And what I'll do is then I'll sell a cash-secured put, giving somebody the potential to buy it back. I'm always cycling through either of those two trades.”

“Because I was a liquidity provider, I understood how liquidity providers think. So I was able to middle markets and get better fills because I was able to understand my opponent. The market maker is not trading directionally, but you may be. So the only thing you're really fighting the market maker for is the fill price. If you understand how market makers think, you can get better fills, which will benefit you in those less liquid names.”

“Options are like fire, you can use it to heat your house or to burn it down. It's kind of sage advice. Fear is a good emotion—or maybe respect for options—because if you don't know what you're doing, you can end up in a whole bunch of trouble. But if you do, man, I think it can be life-changing.”