2 Decades of Put Selling Experience in 8 Minutes (Options Trading)

Hey guys, in this video we're going to talk about selling puts. I interview coach Patrick, which is one of the coaches in my Discord community, and we have a free webinar on August 29th at noon, where we will be discussing a lot about option trading, covered calls, wheel strategy, managing portfolios, and much more. Now, before we watch the video, coach Patrick is not a YouTuber or anything like that. He's a coach within my program, and he uses some terminology that is potentially dangerous for YouTube, such as he uses the word guarantee. I just want you to understand nothing is guaranteed in life. Making a lot of money is extremely difficult. Most people are not even profitable trading options, despite all the YouTube videos out there. So, I just want you to understand nothing in this video is advice or, you know, us selling that this is easy or, you know, getting rich is possible overnight. We're simply sharing some of the experiences that we have had in our, you know, combined two decades almost of experience. So, please be careful. Some of the terminology he uses is not YouTube friendly, so just hope that you understand that going into the content. So, with that being said, let's go into the footage that I had with Patrick. >> Similar to kind of covered calls, I wanted to understand where do we see most students getting into hot water? Because from my perspective, I see students selling puts on stocks I don't want. Chasing the premium. >> That's [laughter] right. Yeah. >> Yeah, what's your take? >> 100%. That's the number one, right? They they chase premium is what I call it, right? And so, they're like, you know, "Well, Pat, why are we selling puts on Amazon and only making 2.5% a month when I can sell puts on this biotech company and and make 9% a month?" >> Mhm. >> Well, well, you know, I I'm a lot more confident in Amazon, right? And so, I don't know about this biotech startup company. It could be out of business in 6 months, right? So, and again, that's where people get into trouble, right? And so, not only do they get into trouble that way, but then it comes down to the sizing, right? So, then if they are going to play a high spec play, they they they get too heavy in the riskier strategy. And I'm like, "Look, I don't have a problem with you throwing some mud up against the wall, but don't do it big, right? Like maybe 1% of the portfolio or something, right?" But they're they're sizing up 15% of the portfolio in some risky play, and then I see they've only got 5% in Walmart. I'm like, "Well, wait a minute. That should have been reversed. You should have been 10-15% in Walmart and under 5% in the riskier play, right? I get it. You're trying to chase more premium, but again, that's what gets us into troubles, right? So, you know, that's number one. I think number two, and it's again something I try to avoid, is, you know, really try to avoid stocks that are in downtrends. Right? Like if if if if we're selling puts, I I mean, yeah, it could be a great company, but if we end up taking assignment on that and that thing drops another 20%, you know, the the covered calls get more difficult at that point, right? We won't get into that here, but it just the wheel will start to break down a little bit, right? And so, um it just becomes more tedious to do what we're trying to do if we're trying to chase a stock on the way down. Um so, I think >> sorry to interrupt you. On the webinar, we're going to be discussing the wheel. Why do we teach the wheel so much? Why? Like, can you explain why this is a core strategy for us? >> Yeah. Well, it's a core strategy one because one, it's giving us margin of safety, right? So, when we start our process with selling puts, we're already giving ourselves margin of safety, right? So, somebody that doesn't know about options, they would be like, "Oh, I like Walmart." Or I like Amazon, or whatever the stock is, right? Well, they don't know about options. So, what do they do? They buy the stock at the market price, right? Well, with the wheel, we obviously start our process by selling puts, which is basically we're getting paid to get to to buy the stock at a discount, right? And so we're already ahead of the game because, you know, we're already getting that margin of safety within the strategy, right? And then on the opposite side, when we are selling covered calls, again, we don't know what a stock's going to do, right? So when we're selling a covered call, and if a stock is just going sideways or maybe slightly down, right, we're still generating cash flow into our portfolio versus somebody that's just buying and holding, nothing's happening, right? They're not making any money, they're not losing any money, right? Or they are losing a little bit of money, right? Cuz they didn't sell any covered calls and the stock's going down a little bit, right? And so we're just throwing the premiums into the mix on top of potentially owning the stock, right? So it's already giving us kind of that margin of safety. Right? And so that's kind of the big thing that a lot of people don't understand of what we're trying to do with the wheel is we're essentially utilizing the portfolio as an asset. We're either leveraging our cash or we're leveraging our shares to generate cash flow. Right? And so over time that cash flow is going to add up, right? And I liken it to I I you know, I liken it to real estate, right? If I if I buy a house, do I care about the value of the house every day? I do not. >> don't. >> [laughter] >> I I only worry about is there a tenant in the house paying me rent, right? And so the key thing with this strategy, and again, going back to you know, what we talk about a lot about picking the right stocks, I'm not worried about a really good stock like an Amazon, a Google, a Walmart, stuff like that. I'm not worried about those stocks going up over time. And so I understand that I sold the put, it goes down, I buy the shares. Yes, I could be a little bit underwater on the shares at first, but remember what I'm doing. I originally collected premium by selling the put, so I leveraged my cash to generate cash flow. I now own the asset cuz I had to pay for it, right? And so now what am I doing? I'm not going to be someone that just has a rental property with no tenant in it. I'm now going to leverage the asset to sell covered calls to collect cash flow while I wait for the stock to recover, right? And so we're giving ourselves a lot more probability of making money over time because we're collecting all of that extra premium against the asset. And then again, just because the stock's down a little bit at first, I don't care as long as I know I'm in a quality stock because I'm comfortable over time it's going to be worth more than what I paid for it, right? And again, that gets into the psychology that we were talking about. >> I hope that you enjoyed some of Patrick's thoughts. Patrick is one of the, you know, awesomest, best coaches. Awesomest is not a word, but he's one of the best coaches that has been with me for many years. We have successfully coached so many students, and on August 29th at noon, Patrick will be discussing all the strategies that we both utilize in students' portfolios, how we're helping scale student portfolios, and he has something very special to announce during the webinar as well on how you guys can learn more about some of the coaching that I myself have as well as he has. So, we'll be discussing many new topics, and on the webinar you will learn so many strategies, managing strategies, psychology, common mistakes, and that's pretty much it. That's the bulk of what we're going to learn because we work with people every single day. I take one-on-one Zoom calls, Patrick takes one-on-one Zoom calls. We're kind of like a tag team within my coaching program. I have two different coaching options in my one-on-one coaching. People can get just me, which of course, I'm traveling. I'm in Italy at the moment. I'm going to be in Lake Como pretty soon, today actually. And yeah, of course I'm busy, and sometimes my rates can be a little bit expensive for some people. So, when you look at my coaching program, I have two different options. I have coaching with just me, and then coaching that includes me and some sessions with Patrick as well to free up some of my time. So, that's why I'm showing Patrick on this YouTube channel because I want to share some of the wisdom that he has had over the past, you know, several years. We have coached together, you know, several dozen students and we have had lots of success. So, I hope that you have enjoyed this video and if you're interested in signing up for this free webinar where we will discuss much more of the topics that we just discussed in this video and, you know, different topics in general, leap options and I'm I'm rambling at this point. Just go ahead and sign up for the free webinar and I'll see you there.