Chief Investment Strategist, The Freeport Society
Editor’s Note: At 10 a.m. Eastern this morning, Freeport Society friend and trading master Jonathan Rose hosted a special Masters in Trading Summit. This event was so popular that Jonathan has agreed to rebroadcast this presentation tonight at 8 p.m. Eastern. Register here so you don’t miss it. During his time with you tonight, he will show you the secret he’s used to successfully trade options to become a millionaire before he turned 25.
Hello, Fellow Navigator.
From the American dream to the American PIPE dream…
You don’t need me to tell you that homeownership is increasingly unobtainable for a rapidly growing number of Americans. The headlines are screaming it every day.
High mortgage rates, unaffordable property prices, stagnating or declining wages, and higher cost of living are all adding up to a generation or two of lifelong renters.
It’s a sad state of affairs on many levels. Not owning your own home is bad enough… but this situation is also thwarting those renters’ wealth-building efforts.
Owning a home has long been part of a good financial strategy. Afterall, home equity makes up a significant portion of a family’s wealth. Typically, you couple this with buying and holding stocks for the long term.
But thanks to kamikaze government spending, reckless and idiotic policies, and a Federal Reserve with less financial sense than a 2-year-old, most Millennials and Gen Z’ers have had their options (and opportunities) slashed in half.
Actually, scratch that. They’re damn well screwed.
Because even long-term investing is far less reliable than we’ve been duped into believing. As I showed earlier this week, there can be stretches of well over a decade in which the stock market spins its wheels, going nowhere.
Most recently, we saw this starting in 2000.
A buy-and-hold investor unlucky enough to buy at the top of the tech bubble at the turn of the century had to wait until 2013 to see a return on that investment. And adjusted for inflation, they didn’t see any return until 2015.
That’s a long time to wait, whether you’re just starting out or nearing retirement.. A rough patch like that at the wrong time puts you well behind the eightball in building wealth… and it might literally mean you aren’t able to retire, or at least not at the lifestyle you imagined.
Look, I’m not suggesting that you don’t buy and hold or that you sell out of all of your buy-and-hold positions. That is still a valuable part of any wealth-building effort. In fact, we have a portfolio of strong blue-chip stocks we call the “Rich Man’s Supercurrency” in our flagship newsletter, The Freeport Investor. (You can learn more about these in this video.) Besides, I’m a big believer that you should always have at least a little skin in that game.
But I am a bigger believer in spreading your bets. It always makes sense to keep a good-sized piece of your portfolio in shorter-term trading strategies. And for the younger generations, this is now more important than ever.
That’s the rationale for my Freeport Alpha trading service. Investing versus trading isn’t an either/or decision for me. I choose both. So should you. So should anyone with the goal of building wealth.
But Is the Risk Worth It?
I get it. There’s this perception that trading is risky.
But really, is it?
I could just as easily argue that long-term investing is the riskier bet. Buy-and-hold investors in the S&P 500 lost half their money in the 2000-’02 bear market only to turn around and lose half their money again in the 2007-’08 meltdown.
I’ve seen plenty of companies go bankrupt over my 25-year career, including the company I love to hate most, WeWork.
Long-term buy-and-hold investors lost everything in that stock, whereas nimble short-term traders could have cut their losses early and lived to trade another day.
So yes, even under normal conditions, it makes sense to keep some of your capital in shorter-term trading strategies. In an Age of Chaos, it becomes downright mandatory.
Why I Love Options
Every good trader I know uses options on at least some of their trades, and with good reason. Options add almost infinite new dimensions to your trading and open doors that simply don’t exist with other instruments.
To start, options have a wildly asymmetric return profile. When you buy an option, your loss is limited to the price of the option. But due to the inherent built-in leverage of options, your returns can be hundreds or even thousands of percent in a short period of time.
(There’s a caveat here: If you trade complex trading strategies, your risk of significant loss increases… but for simple long positions in options, your risk is limited to your initial investment.)
The high probability of having an option expire worthless makes them a poor choice for a large, oversized position. But it makes them really well suited to smaller “rinse and repeat” trades. You can afford to have a few drop down to zero so long as your gains on the winners are large enough to compensate.
The same embedded leverage also allows you to trade outsized positions while only putting up relatively small amounts of capital. Remember, one options contract covers 100 shares of stock. So, with a relatively small number of options, you can control a potentially very large underlying position.
And finally, if you believe as I do that volatility will be trending higher in this Age of Chaos, options provide all sorts of new ways to potentially profit. Volatility is a major component of options pricing, and a spike in volatility can often mean a spike in options prices… and opportunities.
Up until now, I’ve kept it fairly high level, explaining why options are a great trading vehicle. But if you want some actual trades to act on, I recommend you have a look at what our Freeport Society friend Jonathan Rose is up to.
Jonathan is the guy I personally turned to when I needed an options recommendation in Freeport Alpha, and he’s in the trenches five days a week looking for profitable options trades.
You can see what he’s doing, completely free, at MastersinTrading.com. But if you really want the good stuff, I recommend watching the encore presentation he’s making tonight at 8 p.m. Eastern. Simply click here to register.
Options aren’t for everyone. And if you lack experience trading, options really can be risky. But that’s exactly why you need an expert like Jonathan in the trenches with you.
The alternative for those robbed of the opportunity to build wealth through homeownership… or those robbed of retirement because of the fickle nature of long-term investing… is far worse.
To life, liberty and the pursuit of wealth,
Charles Sizemore
Chief Investment Strategist, The Freeport Society
P.S. In Jonathan’s encore presentation at 8 p.m. tonight, he won’t just be teaching you about how to trade options safely and profitably. He’ll be teaching you how to find the opportunities you can trade. After more than 25 years as a market maker and options trader – who trained 100 professional traders how to trade options – this is the man you want in your corner. Don’t miss his free encore event tonight.