The Arete Options Playbook Part l

Intro

What’s up – I hope you are all doing well. As some of us might know, I am a huge practitioner of options for a couple of years now; seen all the good and bad. I have sat on this topic for too long, several months passing by seeing yet more misinformation and misguidance proliferate in many video ad sales letters, click baits... feeding on the human greed. As the creator of Arete I felt like I owe it to myself to write this piece for the betterment of all the new beginners picking up options – whether as another source of income or to further strengthen your investment portfolio.

This should be extremely useful for newer option traders and investors; I hope you have the attention span to read through it all.

Before I get onto the main piece, I wish to set the tone – I write this with good intentions. I believe in self-learning, educational courses and knowledge sharing. And to all the content creators and marketing gurus out there, I entirely respect the hustle…not the content (ironically) of certain components though. There is a fine line between practical / applicable knowledge and snake-oil salesman vibes. Again, nothing against the person, but stepping in on the misinformation. And if you happen to be one of those peeps – you know this, deep down inside as much as you claim not to. Unless genuinely ignorant, there is definitely heaps to improve on in terms of setting more accurate expectations.

The Final Straw

What pulled the trigger was an ad I saw from a marketer (on 29th March’22) sharing a screenshot claiming that selling the $SPY $460 naked put option can generate US$300/week which translates to US$14,400/year. She compares that with a 3% raise on a $60K salary (translating to $1,800 a year).

$14,400 vs $1,800 is a no brainer. However, this assumes $300/week consistently for all 48 trading weeks in a calendar year (along with many other variables which are too technical to discuss). I initially had wanted to test this trade over a span of many 10 weeks, but in just 1 week the trade went bust. Rip. $SPY eventually closed at $452. And TLDR, you either fork out $45,000+ or take a short term $500 loss per contract. Either way in just 1 week this trade had lost.

It's one thing to make people think twice about leaving their job but it’s a complete d*** move to potentially get people to buy into your idea at the expense of falling even deeper into the rabbit hole, while you pocket 4-5 figs off them.

My gift to you

If you haven’t already realized, this post was written for help you aspiring beginners out there who constantly ponder “this is too good to be true”.

I want to help you avoid the pitfalls, give you enough emotional leverage to make a change in your life, peel down the layers and share the key information which you should know, and by doing so, indirectly reveal the misinformation the gurus are sharing.

There are two ways to approach this: either prove their methods and teachings to be risky/incorrect by highlighting the pitfalls which they casually omit OR share valuable insights from my experience which beginners/intermediates can take back and apply. I chose the latter because it provides actionable steps for my readers, while the former simply tells them that a certain method does not work. One has a clearer call to action, while the other simply informs the reader what to avoid but doesn't really show them what the potential next steps are. As you become more knowledgeable, I will leave it to you to look back at this post and deduce this misinformation by gurus by yourself.

Are you able to process this? Yes.

If you passed secondary school math it immediately qualifies you as cognitively capable enough to process whatever math calculations that is needed in Options. Most people have it in them, they just don’t really think about the logic behind what they learnt, due to the nature of which it is taught, especially after a bootcamp, which usually does not encourage any form of follow up action to transform the knowledge picked up into Applied Knowledge. Acta non verba, my friends.

Here's to a better community…

The Main Dish

I spent a huge amount of time learning about options and tried to distill my knowledge down into a helpful guide. This should especially be useful for newbies and growing options traders.

While I feel I’m a successful options swing trader, I'm not a guru and my advice is not gospel. This will hopefully be a good starting point, teach you a lot, improve on your existing skills (if you already know the basics), and make you a better trader.

I plan to keep typing up more info from my notebook, expanding this guide, and perhaps editing this post every now and then.

I added details of good and bad trades I made. Some painful lessons learned are now included. I also tried to organize this better as it got longer than I had intended. Is this passion? Flow state perhaps.

This guide has gotten so big it is too long for one blog post, so now it’s two parts. I’ll cross-link each post so you can easily jump between.

Part 1 - Beginner, training, and concepts focused.

Part 2 - Advanced beginner, Intermediate, and Advanced strategies.

Download my originally intended 5 pager turned 13 pager document below.

Godspeed and hope you benefit,

Mr. Arete.

Comprehensive Options Overview - My Journey with Options Part l.pdf

Download PDF • 247KB