Has Anyone Become A Millionaire By Trading Options?
Did you know billionaire Mr. Warren Buffett had use options too? So yes, there are lots of people who become millionaires by trading options.
- Warren Buffet also used options too!
- In April 1993, Buffett shorted 30,000 contracts (the equivalent of 3 million shares) of out-of-the-money Coca-Cola put options for $1.5 per piece. These options had an expiration date of 17 December 1993, and the exercise price was $35.
- He then added 20,000 more contracts since. By shorting the put options, Buffett got paid $7.5 million in cash upfront. If Coca-Cola stays above $35 per share on Dec. 17, he keeps the cash. If Coca Cola drops below $35, he can effectively purchase the stock at $33.50 ($35-$1.5 option premium), which was a great price anyway. It’s a win-win situation.
- In the end, Coca-Cola was below $35 and he kept the cash
- Buffett did the same thing for Burlington Northern Santa Fe during the third quarter of 2008.
- Jim Fink has traded options for more than 20 years and generated personal profits of more than $5 million https://www.investingdaily.com/analyst/jim-fink/ (some reviews of his course https://underpaidoverworked.com/jim-finks-options-for-income-scam-or-for-real)
- Karen who managed millions for her customer and SEC claimed she used options to defer losses to earn extra incentive fees from its client https://www.thestreet.com/investing/karen-the-supertrader-s-winning-strategy-relied-on-fraud-sec-alleges-13593247
Obstacles to Millionaire Option TraderIf they can become millionaire, then why can’t you be one too? It is because options trading can help you to become a millionaire easily and lose millions too.
- Stock Market will crash (when you went long)
- See how a beginner Chris tried and moved away from options https://firstname.lastname@example.org/i-lost-1000-trading-options-950ac84d3be9
- Many people who earned money luring newbies into their program
Options trading is very risky and can be very emotional. Although trade can go well for you most of the time with little profit, all it takes is one big loss to exceed your previous gains. (This is very common to everyone, just read the forums!)
Most of us have a "poor" mentality towards money. There can be lots of reasons for this behavior, such as lack of interest, confusing messages, too much information, and not enough education.
Mentality and Being In the Market
Young people are making a mistake by not investing in the stock market. In this article, we will share the success stories of people who become millionaires by trading options. According to the survey conducted by Gallup,
- Only 37% of young Americans ages 35 or less owned stocks between 2017 and 2018.
- However, 61% of the people that own stocks were above 35 years of age. When you open an investment account, it gives you access to the world’s biggest money-making vehicle.
- For account opening, you don’t have to be rich. There are lots of stock companies that allow you to open an account at a minimum amount. What you have to do is just set up an automatic monthly transfer.
Success Story of Ramit Sethi and Tips by Him to Become a Millionaire
One example of growing money slowly was Ramit Sethi. He shared his success story and tips for youngsters.
If you want to be a millionaire, invest right now. If you feel you are getting younger, you are thinking wrong. Imagine if you have started investing $10 per week five years ago, where you would have been now? So in options trading, think long-term and start investing right now.
When we are young, we make excuses. You can never become rich by making excuses. If you are in the early 20 or 30 still, you can set aggressive investment goals. What can be excused? The first one could be,
“There are so many stock companies and different ways to buy stocks, and so many people are giving different advice.”
All of these factors feel overwhelming. Another excuse is, “I have a lack of knowledge in the stock market, so I might end up losing all my money?” When there are lots of other options available, why should I invest in the stock market? I have only a small amount to invest, so how can I pay a big amount of fees? So, stop making excuses and move forward.
What “Self-Made Millionaires” Trading Options Don’t Want You To Know?
We have heard that almost 90% of options traders lose money in trading options. For short-term options traders, this number will be low. History is full of persons who made lots of money from options trading. There are very few elite traders who stick to proven methods and become a successful millionaire.
Why it’s so easy to lose when you Trade Like the Rest of the People?
When you are new to options trading, the worst thing that can happen to you is winning your first trade. Yes, you read it right. As a newbie, you want to get addicted to winning all the trades. Some become brokers. The first rule in options trading is to never lose big money. When you are trading options, see who is on the other side of the order? The chances are there might be a specialist on the other side who is running an algorithm on a supercomputer. Your chances of knocking them are the same as to knock out Muhammad Ali in a fight. Trade frequently and trade on a short-term basis.
What Can You Do Differently?
As it is mentioned earlier, almost 90% of the options traders lose money in the long run. So, how can you become a millionaire by trading options? You should be different from others. Your strategies should be unique. First of all, understand bullish strategies. Try to understand those catalysts that cause prices to fluctuate dramatically. It is better to start with valuations instead of stories and chart patterns.
After that, bring your math into trade, and keep your positive expectations up all the time. A short-term trading option is all about positive mathematical calculation. Try to buy as much time as you can. It will increase the probability of successful trade. If you are using spread, price out both sides of the trade while making a bearish bet. Never overpay in options trading. If you do so, it means you are making the biggest sin.
3 Secrets Must Be Followed To Become a Successful Options Trader
Secret Number 1: Trade Small Position
As an options trader never put more than 1-2% of the total account value on any trade. It is the simplest secret, and everyone can practice this. Never have more than 50% of your account into 1 single stock at one time. As an options trader, try to bring this down to 10%. So, never put too much money in a single trade. If you end up losing, you might quit options trading after blowing up your account.
Secret Number 2: Ability to Trade Often
This is probably not as important at the start when you have little capital. However, to make active trading worthwhile when you got a big portfolio (e.g. 100k and above), you probably need to have trades that you can trade instead of laying as cash and eroded by inflation.
Secret Number 3: Trade Longer Terms
If you want to be a successful options trader (instead of a paper trader or backtesting), remember that in real trading, there are fees in trading (e.g. commission fees, slippage). Trading too frequently end up in expensive fees, so try to protect yourself from the loss and trade longer terms.
So, don’t trade big, trade longer-term options with more time to adjust; you will have fewer chances of losing money.
Has anyone become a millionaire by trading options? Yes, lots of people become millionaires by trading options. But they have started to invest in early age. They don’t make excuses. They have proper plans for it. They have thought and act differently.
They don’t put all their money in one trade. Successful traders have invested in long-term options instead of short-terms. So, yes, you can also become a millionaire by options trading.
Some successful options traders suggest following 2/10 formula because it protects you from losing lots of money. It is said that people learn from bad experiences rather than talking. So, some will learn after losing money. Some of the options traders will quit options trading. And some will stick to it and will make lots of money.
Sky Hoon. Read Full Bio
Website Owner, Twitter-er
He has been trading since 2008. He started this blog to share the journey about option trading. He dabbled in stocks, bitcoin, ethereum (in Celsius Network), ETF (lazy Dollar Cost Averaging) and also built websites for fun. He used this as a platform to share my experiences and mistakes in trading, especially options which I just picked up.