Routine is important. Admittedly, I don’t always have the strictest regimen by any means (I’m working on it, OK?). But one thing I do religiously is my daily Wordle.
If you’re not familiar with this little cultural phenomenon, Wordle is the latest wordy brain game that seemingly everyone and their brother plays. (Which is why The New York Times bought it from its creator for something along the lines of seven figures. #cha-ching!)
As you get older, it’s good to keep your mind working. So, I play Wordle every day. It just takes a few minutes, and I guess it gets my mind working in the morning. But really I play it because it’s plain old fun to solve puzzles. It’s my morning dopamine hit.
And, thus, we transition the conversation to option trading.
Daily Option Trading
The stock market is an ever-changing game. Layer options on top, and you have the greatest puzzle ever created. Daily option trading is good for the brain. It keeps you always thinking. Always problem solving. Option trading is strategy. My old boss used to refer to it as “mental masturbation.” OK, that might be a creepy description, but you get the idea.
The rules of the game are constants: A call is the right to buy the underlying asset at the strike price on or before expiration. A put is the right to sell the underlying asset at the strike price on or before expiration.
Outside that, it’s just a gloves-off brain battle. Like Max said, “Let the wild rumpus begin!”
Option Trading Strategy
That said, much like any other game, there are factions of prevailing strategies people have found to work. Different schools of thought, if you will. John and I have worked hard to take our years of playing this game and distill our learnings into our teachings to make the game easier and more rewarding for you. To create our brand of option trading strategy based on best practices we’ve picked up from a collective six decades of working with these tools and conversations with literally thousands of traders on what works.
The biggest thing is methodology. Just as I always start my Wordle with the same word (It’s “THINK.” It has 4 common consonants, rules in/out a less-common vowel, and subconsciously puts my mind in the right place to, well, think.), I start my option trading the same way each time too. I use the methodology that I condensed into what I call the MTM Trading-Plan Checklist.
If those 11 steps in the checklist are just too many, I can simplify it further into even fewer steps:
- Optimize the strategy to the forecast
- Strive to improve
When you break a thing into steps and give each step it’s fully deserved attention, you do that thing better. Plain and simple. Methodology not only ensures you do everything you need to do, but it can also help you avoid adding thoughts that shouldn’t be there (which us ADHD folks have a hard time not doing. SQUIRREL!). And this relieves you of stress—something traders perform better without.
For any trader who has ever felt unsure or undisciplined (that’s you; that’s me; that’s every trader who ever hit the “Confirm and Send” button), it’s probably the result of not having a tight enough game plan or system. But rest assured, your trading—in fact, ANYTHING—can be systemized.
I once talked to the president of a reasonably large company. As you can imagine, he traveled a lot for work. For the longest time, he always booedk his own travel. If you travel for business a lot (which I do a fair amount of), I know you can understand this. Business travelers like things a certain way. (I personally prefer seat 21D when flying in a Boeing 737. It’s an aisle seat in the exit row, thus there’s more legroom).
The thing is, though, booking travel is time consuming. So, one day, he broke down and put his preference hierarchy into steps. Something like:
- Check prices on United, Southwest and American (he’s in all their frequent flyer programs).
- Pick the cheapest. But if prices of two or more airlines are within $5 of each other, choose United first (to maximize points for status), then Southwest, then American.
- Book non-stop if possible. It’s OK to pay up to $100 more to fly non-stop.
- On days with no meetings, choose a flight between 7 am and 9:30 am if possible. (Before 7 is just too early. For flights after 9:30, you sit in traffic too long on the way to the airport.)
- Prioritize the exit row (love that extra leg room!).
- Next priority is an aisle seat (no climbing over people to go to the bathroom).
- etc. etc…
You get the idea.
Bottom line is, you can (and should) put your trading into a tight plan. And when you do, the game gets easier to play. …and more rewarding (both in dollar terms and dopamine hits). Playing a game more strategically just makes it a lot more fun.
Get that brain working and enjoy!
Founder and President
Market Taker Mentoring, Inc.