As you might have gathered from previous posts, I’m interested in financial independence. Towards that end, I’m learning about options trading. This type of speculation ought to augment a more traditional buy-and-hold investment strategy: to make it one’s only investment vehicle is like betting your life savings on horse races. Whether that opinion is correct, I’m not terribly interested in debating investment strategies right now.
I am interested in the effect that practicing an option strategy has on one’s emotions. If buy-and-hold bond or equity investing is like drinking coffee to wake-up in the morning, options trading feels like mainlining methamphetamine (as far as popular culture has led me to believe, regarding the effects of the latter substance). If the assets underlying an option contract is volatile enough, it’s possible to gain and lose hundreds of dollars multiple times per day. I’ve never been a pathological gambler, and perhaps that’s why I find this experience so foreign to my previous financial adventures.
Despite the heady rush of watching an options contract flap about like a boat in a hurricane, it is only money, and if you’ve developed a prudent investment plan, the flapping options should be pretty harmless at worst and a windfall at best.