TRADE OPTIONS

“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.”

“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.”

“I think more and more, we see some of these big OTC takers and traders, at least looking to take less counterparty risk than they have in the past. I mean, you have, like, even, you know, block fills, like big US based, Chicago based, reputable market maker, OTC desk, declaring bankruptcy out of nowhere, like, a month ago. Those risks are present no matter who you're dealing with. And anytime you as a business can reduce that risk, you're going to try to do it.”

“Once you have a trade expiring in a year, the market maker needs capital on that exchange for a year. And the trader has some capital and some positions on the exchange for a year. This is very difficult to wrestle someone away, from an existing exchange for another exchange once all of that is set up, which is why, you know, like, a lot of the other sort of Asia based centralized exchanges tried very hard to get into options and didn't make huge inroads.”

“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.”

“It shows how difficult it is to actually replicate a network effect in options. It's much more sticky because you have, you know, very long onboarding cycles, a very high bar for institutions to use, and, you know, once they're onboarded, like, to take incremental risk to go to another exchange. This is very difficult to wrestle someone away from an existing exchange for another exchange once all of that is set up, which is why a lot of the other centralized exchanges tried very hard to get into options and didn't make huge inroads into the market share.”

“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.”

“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.”

“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.”

“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.”

“Similar to what I described there with the seven year timeline between the introduction of perps to crypto in 2016 to really hyperliquid beginning to get serious traction in 2023 and 2024, I think we're about seven years behind when Deribit started to do volume for the first time too. And I think that market is about to get a lot bigger. I think we're in the early innings of, like, that sort of uptick in on chain options adoption following off chain, like the 2023 moment for pubs.”

“The major things that Deribit brought was, like, a real time order book. They actually used the central limit order book for market makers, and that, you know, made prices not so opaque. And it brought it more transparently, which I think is nice. And it was the first time we could make an IV surface for Bitcoin and actually, like, price it, and people could see that. I think that really led the game in a lot of pricing and a lot of risk in portfolio management.”